Industry-wide discounting by Phuket hotels cost the industry on the island US$300 million in room revenue in 2009, according to the Phuket Hotel Market Update report compiled by Thailand consultancy C9 Hotelworks.

Room rate cuts averaged 20% across the board last year, leading to the loss compared to 2008 room revenue. Despite tourism arrivals rebounding back to 2007 levels, a key blow to fundamental hotel metrics hit profit margins.

C9 Hotelworks Managing Director Bill Barnett, author of the report, said “the 2 P’s - pricing and pool villas - represented dynamic drivers as average room rates and revenue available per room (RevPAR) declined.

“Bottom lines have been hit as hoteliers scrambled to induce demand and meet increasing consumer pressure for lower rates. Virtually every chain scale tier was affected with the exception of the budget and economy segment,” Mr Barnett said.

The Phuket Hotel Market Update summarized that 2.9 million tourist arrivals visited Phuket in 2009 with a island-wide average occupancy of 64%. Average rates and revenue per occupied room slumped by 20% and 22% versus 2008.

Investment has been hit with the suspension of significant projects due to economic and political concerns shrinking 19% of the new hotel supply. The pipeline now has 31 properties set to open over the next three years representing 4,600 rooms and equates to a 12% rise over the existing market.

“Our research points to a positive upward trend in 2010, pairing a growing critical mass of hotels and demand drivers to capitalize on the global upswing. More Asian airlift and increased spending power from feeder markets maintains potential, while hotel oversupply could undermine long-term fundamentals if not addressed,” Mr Barnett added.

“As Thailand continues to recover from the political driven events of late 2008 and early 2009, market confidence remains cautiously optimistic.”