Chinese tourists to drive regional growth
SET-listed Erawan Group Plc (ERW) is aiming to invest 10 billion baht to expand its hotel business, mainly in Thailand and the Philippines, over the next five years.
The five-year investment plan for 2016-20 is expected to increase the company’s revenue to almost 10 billion baht by 2020.
Of the total investment budget, around 5.5 billion baht will be spent on expansion in Thailand and 3 billion baht for the Philippines. The balance will go towards asset improvement. The focus of the expansion will be mid-scale, economy and budget hotels, said president Kamonwan Wipulakorn.
By 2020, Erawan’s expects its total number of hotels to grow to 95, with more than 10,000 rooms, up from 33 hotels and 5,676 rooms in 2015.
The portfolio in Thailand will increase to 75 properties, with its Hop Inn hotel chain expanding to 50 and the remaining 25 falling under different brand names.
The company further plans to operate 20 hotels in the Philippines, with their first Hop Inn due to open in Manila this December.
“We want to be a leading hotel investor in Asean. Growing our quality hotel portfolio in Thailand and Asean will optimise value to our shareholders and stakeholders,” she said.
In Thailand, Ibis (economy segment) and Hop Inn (budget) will be used as key brands when opening new hotels.
Ms Kamonwan said the Thai tourism industry had the potential to grow both its domestic and international markets. Foreign tourist arrivals to Thailand are expected to reach 41.5 million in 2020, up from the 32 million visitors projected this year.
The sharp rise of Chinese visitors is a key driver boosting tourism in the region. In 2015, the number of outbound Chinese tourists totalled 130 million – a mere 8% of its total population. With outbound tourists from developed countries accounting for around 20% of their populations, China still has room to grow even as its economy cools down.
Ms Kamonwan said Erawan was also optimistic about domestic tourism, thanks to an increase in both provincial border trade and the number of tourist destinations.
For the Philippines, the high level of domestic travel, coupled with the relatively low number of hotel players in the mid-scale and budget segments, has led Erawan to view it as the highest potential destination in Asean, excluding Thailand.
The room rate in the Philippines is currently around 30% higher than in Thailand, though the political risks in the Philippines are lower.
The Hop Inn roll-out in the Philippines later this year will also help the company broaden its hotel network in the future, Ms Kamonwan said. After establishing a presence there, Erawan expects its revenue from abroad to account for 10% of the total in 2020.
In 2016, the company expects its revenue to grow 15% to 4.91 billion baht.
Erawan will issue a real estate investment trust (REIT) worth 1.5-1.7 billion baht this year. The funds will be used to deliver loans, pay out dividends and make future business investments.
ERW shares closed yesterday on the Stock Exchange of Thailand at 3.94 baht, up six satang, in trade worth 31.3 million baht.