Tourism to gain from central bank cut

Thailand’s policy rate cut is expected to benefit the tourism industry, letting business operators invest and upgrade their services to improve competitiveness, while tourist spending could increase.
The Bank of Thailand on Wednesday unexpectedly cut the interest rate by 25 basis points to 2.25%.
Sanga Ruangwattanakul, president of the Khao San Road Business Association, said the reduction would help to improve the economy, and the tourism industry in particular.
He said operators now have a lower borrowing burden and can invest more to improve or expand their businesses, after being hesitant during a high-rate environment.
“People can cash out their savings to spend or invest, while more jobs can be created, resulting in growing economic circulation,” said Mr Sanga.
The baht, which has appreciated against the US dollar since last month, should be weaker as a result of the rate cut, he said, easing foreign tourist sentiment.
Suksit Suvunditkul, president of the Thai Hotels Association’s southern chapter, said the strong baht has yet to significantly impact the number of arrivals and their spending.
Tourists still view Thailand as an affordable destination, even though they have experienced price increases for goods and services here.
Mr Suksit said he believes the central bank will be able to keep the local currency in an acceptable range.
“Our currency swing should not hurt the tourism industry at the same level as when the currencies of source markets were previously affected,” he said.
For instance, hotels lost a lot of Russian tourists during the Russian financial crisis in 2014, as the ruble fell sharply.
Mr Suksit said the last time the tourism industry actually benefited from the foreign exchange rate was during the economic crisis in 1997, after the government introduced a floating exchange rate, making foreign currencies rise against the baht.
Hotels in Phuket are expecting strong occupancy of at least 80% and higher room rates in the near term, he said.
Mr Sanga said forward bookings on Khao San Road remain slower than expected, at only 40% in November.
He said the government should offer more tourism campaigns, including a larger tax reduction for hotel bookings.
To prepare for cool season celebrations, the government should collaborate with private operators to promote upcoming festivals, preparing venues, transport and security for tourists, said Mr Sanga.