In the third episode of The Future of Travel, David is joined by Bill Barnett, Founder and Managing Director of C9 Hotelworks and founding advisor to the Phuket Hotels Association; and Anthony Lark, President of the Phuket Hotels Association and former General Manager of Amanpuri and Trisara.
In a lively conversation, Bill and Anthony argue that tourism stakeholders across Phuket need to come together and reshape the island’s destination narrative. They believe that the mass tourism of recent years is not sustainable in a post COVID-19 world; travellers of tomorrow will find little appeal in places with thousands of people and instead will seek out destinations that offer escapism from the world. They also argue that, to survive, Phuket hotels will need to rely far less on OTAs as their de-facto sales and marketing strategy, instead taking greater accountability for their own business and brand perception.
David Keen 0:07
Hi, this is David Keen. At QUO, we’ve worked for the last 20 years with many of the world’s best-known travel brands. During this unprecedented global crisis, our world of travel has changed, possibly irreversibly. This series will see us speak with many global leaders to understand how they see the future of travel.
David Keen 0:44
Welcome, Anthony Lark president of the Phuket Hotels Association, longtime resident of Phuket and former general manager of Aman Puri, and Trissara in Phuket, and Bill Barnett, the Founder and Managing Director of C9 Hotelworks, and the founding advisor to the Phuket Hotels Association, and all things maven on Phuket itself. Gentlemen, and good friends of QUO and of mine. While we could begin the conversation with a discussion on the repercussions of the virus, and its economic impact. Let’s start with what’s happening in Phuket. What’s happening, Bill, on the ground?
Bill Barnett 1:37
I think certainly this is a timely call, in terms of today’s messaging because Phuket hotels have been ordered shut by the government. The airport has currently shut down as well. And in terms of on the ground, there’s one bridge off the island which is the Sarasin bridge that has been shut down as well. That said, life goes on in the island, I mean I was here during the tsunami as well and one of the interesting things was even after the tsunami happened, life goes on, you know, in terms of the day to day things on the island. So, I think that’s what’s interesting here is there is a pulse to what’s happening and tourism basically has been shut down. There’s no equivalent event that we can imagine that’s happened for this long period of time. So, it certainly is unknown territory.
David Keen 2:24
Anthony how is the mood on the island?
Anthony Lark 2:26
The mood on the island is a very strange one. We have lots and lots of young hoteliers and general managers of hotels, never having faced or navigated a situation where they’ve been told to close with a couple of days’ notice, with literally tens of thousands of stuff hanging in the balance.
The humanity side of that alone is a very stressful thing, let alone the seclusion and isolation issues that one gets when one is forced to stay in or is restricted in where one goes. So there’s a pensive, quite worrying feeling amongst the locals and expats who live here, but there’s also a good positive and jovial spirit to the way people are helping each other, there’s a lot of support and communities here, the hospitals are doing a great job, the local government authorities are also doing a great job with trying to contain it as well so there’s the positive and the negative, I guess just like anywhere.
Bill Barnett 3:33
I think one thing they would just add scale to it, Phuket’s got 88,000 registered hotel room, so it’s got about a quarter of a million hospitality workers in hotels, which would probably represent at least probably 25% of the entire population of the island. So certainly, in terms of a lead economic indicator tourism and hotels are a key to how this island moves.
David Keen 3:55
One would say, the key shortage.
Anthony Lark 3:57
Certainly, yes. David – if I may interrupt – one of the things that worries a lot of the kids here is that, if and when all of the hotels have shut down, and will continue to close over the coming days. A lot of the kids who are here have come from other provinces in Thailand. And if they’ve been asked to stand down for two or three months, as a lot of the hotels are doing. They can’t physically get home, you can’t travel out of Phuket, if you’re on this island at the moment, because they’re trying to restrict the movement of people. So that’s one of the things.
David Keen 4:35
What, in your very experienced opinions, are the immediate economic repercussions? What are your biggest fears and what do you believe will happen over the next two to three months?
Anthony Lark 4:53
Well, I think, just like all destinations, whether you’re talking about Phuket or the Maldives or Bali or the Caribbean, for that matter, we are all literally for the first time in the same boat as businesses slide, as unemployment around the globe takes over, in the next few months we’re going to see massive unemployment. Well, you know discretionary, luxurious things like travel are going to fall, so when the virus starts to become less of an issue, the economic impact of this is going to become real. And I think we’re worried about that.
Bill Barnett 5:34
I think David, perhaps a bigger thing we worry about are the staff, this is a business run by humans and you know at the end of the day, for the line staff which represents majority of the hospitality workers they work on daily wages, they go from month to month. It’s the actual spending power, whether they have mortgages, whether they have car payments or worse, whether they have food.
I think the other element that also comes into play is the mental aspect of this, certainly there’s so much fear out there, and it’s trying to allay those fears because no matter what you’re thinking, people don’t know what’s going on, we don’t know where the bottom of this crisis is. During 911, we knew where the crisis happened, during the global financial crisis, in the tsunami, the wave hit and then we had the after effect, but we were still trying to find the bottom, where is the bottom of this crisis? And that’s what people also are looking at, aside from the financial side. Certainly, from a mental standpoint, how do they handle this isolation, this self-distancing? And while they’re facing these financial problems. So, you have to look at how that’s affecting the line staff because that’s the most important thing.
David Keen 6:35
I understand. Given the length of the crisis and the depth of the economic repercussions of the crisis, we would be short sighted not to think that the comeback, or the recovery is not in any way going to be the same this time.
Anthony Lark 6:59
Clearly not. I think none of us are foolish enough to believe that when the aircrafts are in the air again, and people can physically get here, that suddenly things will bounce back to the way they. We all know that that’s not the case. And I think that hotels and airlines, and families are reassessing the way that they travel, and I think we’ve got to adapt to what will be a very different world.
Bill Barnett 7:29
I think kind of wrapping under that though, when we do frame what the recovery will be, and there has to be a thesis towards how this recovery will work, you know, Phuket is a ying and yang market, as two types of tourists, mainland Chinese in 2019 represented 36% of international arrivals, right? You know, we understand that, July, August are high travel months for those, we’re having dialogues already with Chinese operators, so we do expect some traction by the middle of the year again.
One advantage, I think with airlift you say, airlift is everything, you can’t stay there if you can’t get there and there’s 33 Airlines which fly to Phuket, you can say are those carriers still going to be alive in 2020 by the middle of the year? And these are low cost carriers, and I think that’s one of the advantages of the airlift scenario is it’s not relying on legacy carriers, aside from Thai Airways or anything else. The China Airlines, which is the immediate recovery market really relies on smaller carriers which are flexible and these airlines are already operating in China. So, I think in terms of framing how this is going to go we can say the Chinese will come back, certainly in some numbers by the middle of the year.
And the other thing we look at on the other side of the yin and yang is that, Phuket also has a large Snowbird cast of tourists, right? The Russians come from the months of October to March, April. That’s going to be the next cycle, so I think we can go back and we can learn something. It’s not going to be like the cycles are all gone. I think we can learn something from the cycles because what’s going to come short term, which will be likely where we’re going to see some kinds of Chinese delivery and also for the longer term, by the time we get to November, or the fourth quarter of this year we’re going to see Snowbird traffic come again.
David Keen 9:03
Do you really believe that?
Bill Barnett 9:07
Absolutely. Absolutely, absolutely. I think that’s a near given, I think it’s going to take a few years to recover to where we were but I believe that cycles will come back. I believe that we’ll see China come in because, for the Chinese Phuket’s main advantage is door to door travel time and we’re already getting word from people in the Maldives that we’re seeing Chinese bookings starting to pick up again in July of this year already. So, people are already looking at things, you saw the picture yesterday in the media of the Chinese outdoor the tourism attractions. So, if we think that there will be people traveling so they’re not in the numbers, but there are going to be tourists.
One thing that Phuket doesn’t do well is the domestic segment. Domestic segment for Thais is less than 10%, I think that’s something this destination has to work on, because there has to be filler material coming in during those time periods. I think more telling for me was that word in from Singapore, the Changis Terminal 2 is closing for the next 18 months, and Changis Terminal 2 is really leveraged on regional carriers so that certainly is a negative impact.
David Keen 10:09
In terms of the destination itself and in terms of the reception of that destination and the evolution of the destination. Barely is making reference to legacy or traditional structures of travel, be it snow bad or be it the Chinese. Does the destination itself have to evolve in order to attract these typologies or these demographics, or any others right now?
Anthony Lark 10:43
Most definitely. I think one of the things that we’re going to try to do together as a group. And as an industry here, is to really take a very close look at the way our business has been operating and the way this island is perceived overseas, as a destination, the brand of Phuket has changed over the years. I think it’s a great opportunity right now to really look closely at the destination and refocus Phuket’s image.
I think when it comes to the aspirational travel in the future, a lot of families a lot of couples are going to be looking at different ideas, and the mass tourism appeal of a lot of these places is not the most attractive because, frankly, no one’s going to want to spend a lot of time in places where there’s thousands of people. The smaller and more intimate the destination, the more attractive it’ll be. Phuket’s got 27 beaches, only four or five of them are big busy beaches, clean air, great access, there’s 100 islands off the coast here. I think Phuket’s got a lot to offer. I think as an industry, we’re going to sit together and start to refocus on the destination brand values.
David Keen 11:56
One of the principles that we’ve been working on and we’ve been discussing with other guests on the podcast is this idea of analog and digital, that pre-viruses analog and post-virus is digital. Do you see a major change in methodology on the way people are going to travel? What they’re actually going to be looking for, Bill?
Bill Barnett 12:20
I think nobody knows that answer, in some ways it’s really rhetorical because at the end of the day nobody really knows that, you can conduct focus groups or what you think is going to happen.
I think it’s interesting if we kind of take a line of thinking we know is going to be interesting. I’ve been talking to people about breakfast buffets today and saying, do you think people will go back to the breakfast buffet? There’s a counter culture with escapism, I mean certainly in the Maldives, why are people looking at the Maldives from China now? Because they think it’s escapism. I think certainly that’s going to change the way people think about things.
I think for hotels, they’re going to have to go back and evaluate the very core systems because, you know again Room Services back in a big way. Hotels were being designed where they had small rooms, now maybe we’re going back to big rooms, maybe it’s going to be, you know, traditionally, and, in a way it’s almost cyclical because 15 years ago in Phuket people went to tropical destinations to get away from people. Laguna Phuket, which sits on our doorstep, was a destination resort when people wanted to get away. The last few years we’ve seen people who wanted to come out and be local, but now we’re seeing people go the other way again.
So, in certain ways we can say it’s a new world but it’s also a world that we’ve been in before because this escapism or this individual need to be away from people has happened before in terms of that was defined as a luxury vacation so I think in certain ways, maybe we’re going back to where we’ve been before.
David Keen 13:41
How is Phuket going to survive over the next 12 to 18 months without MICE?
Anthony Lark 13:48
That’s a very good question. Well I think MICE, unlike many other destinations, the MICE business in Phuket really wasn’t the backbone of our resort’s income. It was mostly leisure travel, but the MICE business is a very important part of it. I think that we’ve got to be more creative, I think hotels have got to be selling different MICE ideas, I think, the buyers of MICE will be also looking at buying different products. The traditional, large hotels may not be the first choice for big companies wanting to do incentives for their employees for instance.
Bill Barnett 14:28
I think statistically David, Phuket hotels range from, generally speaking in midscale to upscale tier, probably 4 to 8% of their business is MICE depending on the property so, it’s not the largest segment. It was a segment which was helping Phuket become non seasonal, and it was business which certainly propped up room rates and low season, so I think it’s an important segment.
We’ve also seen a lot of hotels which invest a lot of money over the past 12 to 24 months in new MICE facilities, but I think of any of the slack segments and hotels, which are the most damaged, it’s the MICE segment. You know, without a doubt that’s been set back a few years in terms of that none of us really know what the new MICE driver is going to be, you know when is that business going to come back and what is it going to look like. It’s an important space but I think it’s an evolving space.
Anthony Lark 15:15
David if you don’t mind me saying that if you were in a pretty good position when it comes to that, compared to places like Las Vegas you imagine what Las Vegas will be going through with their mass conventions and huge volumes of people running through 3000 room hotels, I mean, they’ve got some digging to do.
David Keen 15:36
Bill, what is your opinion on the impact of the virus on the OTA and booking mechanisms, with reference particularly into Phuket brands, as we know, will have to become more distinctive, they’re going to have to become stronger, supply completely outstrips demand. And the individual products or the brands themselves are going to be communicating in a much more forceful, purposeful manner. What’s impact is that going to have on the OTA?
Bill Barnett 16:08
I think one thing in Phuket is that the wholesale market continues to be the major provider in Phuket, with the emerging markets. Wholesale is still larger than OTAs, where OTAs are important here are the independent hotels and that’s the hotels which need the OTAs business and OTAs have somehow become the de facto sales and marketing department of independent hotels. I think what independent hotels have to do now is they can’t rely on OTA, just to fill because it’s a cup which runneth over, right? So, I think how they manage that process and they understand they’ve got to go back and say: there’s 200 other hotels relying on OTA business, how am I going to be different? So, it becomes all the better case to have a better Sales and Marketing a better branding strategy, a better high-level approach to DNA and everything else. I think they’re going to go back and — they can’t rely on the OTAs the OTAs aren’t like a god up there who is going to give and take away. It’s, you know, they’re in charge of their business going forward, so that’s a dynamic change.
David Keen 17:11
And do you feel (inaudible) about loyalty?
Bill Barnett 17:14
Loyalty again, this is a resort destination in terms of the loyalty programs, again for the Marriotts and the IHGs, people earn those points on business days, they burn them in terms of their resort stays. It’s not a huge factor in terms of what’s driving business to this resort destination. I think there’s a case of loyalty or is it’s a case of recognition. And I think how people have recognition, I think people will be looking at recognition on how they have a personal choice and choosing a hotel, which may be based on new factors. That checklist of what people thought it was before in terms of “I want the spa and what this and that”, maybe they’re now looking at security, maybe they’re looking at safety, now they’re looking at cleanliness. That whole list of how people are going through and how they want to be recognized as well it’s different. So, it’s a different checklist.
David Keen 18:02
Anthony finally, in terms of the nimbleness, the flexibility of the perception of Phuket. The perception of the island itself has grown into something, you know, fairly traditional, fairly very sad. How nimble, can that perception, be and how much does it have to move?
Anthony Lark: 18:27
I think it has to move quite a bit. The perception of Phuket Island in most of the large cities both regionally and long haul has been eroded in many ways, due to the onset of more hotels and more business and more boats and more marinas and more people. The original attraction of this beautiful little island where you can get, you know, chicken and rice on the beach or the Singha beer for 30 baht is longer. But I think that we’ve lost the narrative of the way in which this island is being perceived. And I think that the Tourism Authority of Thailand the hotel associations and Convention Exhibition Bureau people, all of us have to come together and form a true alliance, so that we’re all operating really on the same page and reshaping and reforming the narrative of what this brand destination really stands for in the future. You know, it should be a lot more about sustainability and nature, people, food, families and less about mass tourism, so I think we’ve got a lot of work to do but I think we can focus to do it.
David Keen 19:39
Anthony Lark, Bill Barnett, thank you very much for being on the QUOcast and on the series The Future of Travel. We wish you all good health and be safe. Thank you very much.
Bill Barnett 19:53
Thank you, David.