Thailand Hotel Sector Update: An In-depth Analysis of CENTEL, ERW, and MINT
UOB Kay Hian – December 9, 2024
Introduction
The bustling hospitality sector in Thailand is experiencing significant shifts as it transitions from a low season into a high travel season. UOB Kay Hian’s latest report provides a comprehensive analysis of the hotel industry, focusing on key players like Central Plaza Hotel Public Company Limited (CENTEL), Erawan Group (ERW), and Minor International (MINT). As the high season unfolds, these companies are poised to leverage market dynamics, despite the absence of government stimulus measures.
Central Plaza Hotel Public Company Limited (CENTEL)
Financial Performance and Challenges
CENTEL has reported better-than-expected earnings for 3Q24, with a net profit of Bt163 million, marking a 128.5% year-on-year increase and a 121.1% quarter-on-quarter rise. This performance is attributed to strong revenue per available room (RevPAR) growth of 15% year-on-year in Bangkok and 34% in Japan, despite a 4% decline in the Maldives. Total revenue for CENTEL was Bt5.4 billion, reflecting a 3.7% year-on-year growth, driven by robust food revenue, particularly from top brands like Mister Donut.
Operational Insights
CENTEL’s occupancy rates were slightly down by 1.3 percentage points year-on-year, but average daily rate (ADR) increased by 9%. However, the company is preparing for a challenging 4Q24 due to anticipated pre-opening expenses of Bt140m-190m for new hotels in the Maldives. These costs are expected to heavily impact CENTEL’s earnings, leading to a cautious stance from analysts who maintain a “SELL” recommendation, pending the realization of these expenses.
Erawan Group (ERW)
Financial Performance and Market Position
ERW’s 3Q24 earnings fell short of expectations, with a net profit of Bt124 million, a decline of 18.6% year-on-year and 17.8% quarter-on-quarter. Several factors contributed to this, including the Grand Hyatt incident affecting occupancy rates, ongoing renovations at Holiday Inn Pattaya, and the slow ramp-up of a new hotel in the Philippines. Additionally, ERW faced challenges from regional flooding and currency fluctuations, which impacted financial performance.
Strategic Outlook
Despite the setbacks, ERW remains strategically focused on enhancing its market position. The company’s occupancy rates, although down by 4.3 percentage points year-on-year, still exceeded pre-COVID-19 levels. The ADR showed a modest increase of 3.4% year-on-year. With concerns lingering over the luxury segment’s RevPAR, particularly for the Grand Hyatt, ERW is closely monitoring its operational metrics as the high travel season progresses.
Minor International (MINT)
Financial Performance and Strategic Initiatives
MINT reported a robust core profit of Bt2.6 billion for 3Q24, up 16.0% year-on-year, although it saw an 18.4% decline quarter-on-quarter. The company’s revenue reached Bt41.3 billion, driven by strong hotel performance in Europe and Thailand, with RevPAR growth of 9% in Europe and 12% in Thailand. Despite a non-core forex loss from derivative revaluations, MINT’s core earnings remained strong, and the company anticipates currency gains in 4Q24.
Growth Prospects and Recommendations
MINT has been proactive in addressing market concerns by planning to launch a Real Estate Investment Trust (REIT) within the next 12-18 months to repay debts and support reinvestment efforts. The company is exploring various opportunities, including potential investments in entertainment complexes. MINT’s strategic focus on cost reduction and debt management, coupled with favorable interest rate environments, positions it well for future growth. Analysts recommend a “BUY” for MINT, with a target price of Bt38.00, reflecting a 36.9% upside potential.
Sector Outlook and Conclusion
As the high travel season unfolds, the Thai hotel sector remains optimistic despite the lack of government stimulus measures. The return of international tourists, particularly from Europe, Russia, and the US, is expected to bolster the sector’s performance. However, the slow recovery of Chinese tourists remains a concern. Overall, MINT stands out as the top pick among analysts, given its strategic initiatives and strong market position. Meanwhile, CENTEL and ERW face specific challenges that warrant a cautious approach.
Call for Action
The report emphasizes the need for concrete government policies to attract foreign tourists and capitalize on the high travel season. Proposed measures, such as tax refunds for foreign tourists, could significantly enhance the sector’s prospects. As the industry navigates these dynamics, stakeholders are urged to stay informed and adapt strategies to capture emerging opportunities.
