Friday, December 5, 2008

It could be worse than sars, tsunami

The tourism industry could well be even harder hit by the closure of Bangkok's two airports than by either the Sars epidemic of 2002-2003 or the 2004 tsunami disaster, according to JPMorgan Securities (Thailand).

The company yesterday released its research on impact assessment of the airport closures and the political demonstrations, saying that Thailand's tourism receipts account for almost 9 per cent of overall current-account receipts and are equal to about 6.5 per cent of gross domestic product (the third-highest in emerging Asia).

Meanwhile, 6 per cent of the labour force - 2.42 million individuals - are directly employed in the sector.

Assessing the potential macro impact of a tourism slump during the high season period from November to March, JPMorgan notes that annual tourism-related revenue has a large seasonal bias in the first and final quarters. The quarterly GDP growth series in the graphic highlights the impact of previous tourism downturns during the Sars crisis (2002-2003) and the post-tsunami period (2005).

The company said the current situation could potentially have a larger impact than either of the two prior episodes, as travel normalised rapidly after the Sars outbreak came under control, while tourism flows were diverted from the tsunami-hit South towards other regions of Thailand, mitigating the overall impact.

The current occupation and closure of the two Bangkok airports prevent access to a large number of long-haul travelers who transit through Bangkok to other provinces, while access via the direct Asian flights to Phuket, Samui and Chiang Mai may be spurned by Asian visitors wary of the security situation.

Assessing the impact on the corporate sector, JPMorgan sees the direct impact primarily in services-related activities such as hotels and restaurants, and exporters of perishable products/electronics (that rely on air freight), with indirect impact on the banking and retail sectors.

Tourism revenues will be hit hard. The ensuing travel advisories from various countries could take the occupancy rates of the four- and five-star properties to a far lower ratio than the depressed 50-per-cent level of late.

Food manufacturers will also be hit. The sector will be

negatively affected via a slowdown in the restaurant services sector.

Reference : Picture by Agron


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