Thai hotels and tourism firms were shocked by the June 3rd collapse of German travel giant FTI, responsible for 100,000 bookings last year. Amid reports of holidaymakers refusing payment demands, the Tourism Authority of Thailand (TAT) is assisting stranded tourists.
Thai hotels and tourism concerns received a jolt this month with the June 3rd collapse of German travel giant FTI. The firm was responsible for 100,000 bookings in Thailand in the last year. An initial tally revealed at least ฿111 million in losses based on credit already extended to holidaymakers who booked with the firm to vacation in Thailand. Amid reports of some holidaymakers refusing payment demands from hotels both on check-out and check-in, the Tourism Authority of Thailand (TAT) this week moved to assist any foreign tourists who are presently facing difficulty because of the collapse.
Thai hotels and tourism-related businesses are still scrambling to react to the shock collapse of German travel firm FTI, the third-largest European tour operator.
The firm was particularly active in Thailand and responsible for 100,000 bookings last year. Many of these bookings were in the South, especially Ko Samui, which is very popular with German tourists. The second area was Bangkok, followed by Pattaya.
Trade survey last week revealed ฿111 million in losses among Thai hoteliers as a result of the collapse of the giant German firm which operated worldwide
An initial survey conducted last week by the Thai Hotels Association revealed that member hotels had an exposure of ฿111 million. ฿92.4 million of this was in the southern provinces, including Phuket and Surat Thani. Bangkok accounted for ฿12.7 million, while approximately ฿4 million was in losses in Pattaya.
The parent company of FTI, which employed no less than 11,000 people, filed for insolvency protection in a Munich court on June 3rd.
Previously, the firm had announced a new consortium of investors in April. However, this had the reverse effect of spooking the market, leading to key suppliers demanding upfront payments. Consequently, it faced a cash flow crisis.
This week, Mr Siripakorn Cheawsamoot, the Tourism Authority of Thailand (TAT) director for Europe, the Middle East, Africa, and the Americas, said that the tourism body is ready to support any stranded tourists.
Response to the closure of the German firm has been remarkably calm even with up to one thousand holidaymakers confirmed as being impacted on Ko Samui
At the same time, there appears to be a remarkably calm response with many tourists taking care of the problem themselves.
This comes despite reports from Ko Samui where last week there were approximately one thousand foreign tourists whose bookings were impacted.
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The Tourism Authority of Thailand (TAT) itself was urged this week to institute some advance warning or alert system for such developments. This came from the Thai Hotels Association.
Later, it released the initial results of its survey on the impact on its members. That process is ongoing.
Consequences of FTI collapse may be more impactful in the long term if Thai firms decide to move away from credit-driven trade with large holiday firms
Thai Hotels Association President Thienprasit Chaiyapatranun revealed the initial financial impact of the giant tour company’s collapse. He predicted that there would be long-term repercussions, particularly on the willingness of Thai hotels to grant credit.
Reports suggest that in the aftermath of the pandemic closure of Thailand’s tourism sector, large tour operators had helped relaunch the trade. Significantly, European tourists were more inclined to book with large operators. They appeared to offer more security and convenience.
FTI was a giant in the industry which acted for tourists across the European Union and also in the United Kingdom.
Many Thai hotels were happy to accommodate foreign tourists from Europe and bill the company afterwards. Indeed, part of the challenge facing the Thai industry now is dealing with advance bookings already made through FTI.
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The collapse of the firm, additionally, will cause many hotels and resorts to move to online booking where payment is made in advance. However, such an approach is more labour-intensive and ultimately costly.
In the meantime, Mr Siripakorn of the Tourism Authority of Thailand (TAT) has asked hotels and tourism firms to report any tourists having difficulty returning home.
Earlier in the week, the President of the Association of the Chonburi Tourism Federation, Thanet Supornsahasrungsi, said his organisation was advising hotels to charge FTI customers when checking in or checking out.
He suggested that it would be difficult to recoup the money from the FTI administrators.
Most tourists who booked with FTS are protected by the German Travel Security Fund. Nonetheless, some travellers were with subsidiaries still in operation
Meanwhile, many tourists are covered by the German Travel Security Fund. Indeed, the situation has been complicated by the existence of subsidiaries of FTI which have not ceased operation.
Certainly, some of these have been busy delivering or reorganising holidays for tourists that are booked. These are mainly tourists who booked with specialist firms operated by the industry giant.
Mr Siripakorn acknowledged that many tourists when confronted with demands to pay again, had refused.
In short, they insisted they had paid their fees to FTI. In turn, the hotels had contracted with the German tour firm and were duty-bound to honour their commitments.
Therefore, Mr Thanet foresaw Thai hotels being more circumspect in the future.
Thai hotels dealing with FTS operated on a credit basis. In effect, they would bill the giant-sized firm after guests had checked out and be paid later
‘Typically tour operators would have a credit duration of 30 days. This is after guests check out or after receiving invoices from hotels to make payments. Hotels work on this principle, based on a long-term trade relationship. They help generate large volumes of guests for hotels,’ he explained.
Germany last year accounted for 730,000 visitors to Thailand or 3% of the market. Fortunately, this travel collapse is occurring during the low season with 1,000 German arrivals on a daily basis. These high-spending foreign tourists are more likely to vacation in the high season between November and April.
Meanwhile, Thailand’s hotel and tourism industry has received an expensive wake-up call.
As well as assessing the lost traffic this year from FTI, the industry will be looking at other large players.
Risk assessments are required. Hence the demand for the Tourism Authority of Thailand (TAT) to alert the industry to any potential dangers.
President of the Thai Hotels Association suggests that many Thai hoteliers may move away from the old-fashioned credit system linked with large tour firms
A travel expert this week said the FTI collapse highlights the need for hotels to be more aware of risk. A risk assessment throughout the year is essential. For many hotels, there is also the additional loss of non-payment of invoices which are now due for previous months.
Mr Thienprasit, the Thai Hotels Association boss, believes that some hotels will move away altogether from a credit-based system.
In effect, this will mean relying on online bookings. Consequently, it will lead to the absence of a guaranteed flow of guests that large foreign travel concerns offer.
At length, many will however continue to accept the risk. They will judge it as part of the ups and downs of the industry.
Large tour firms offer both hotel operators and holidaymakers convenience and ease of doing business at scale. In short, they will continue to be both an attractive proposition although a risk.
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