VZCZCXRO3443
PP RUEHCN RUEHDT RUEHHM
DE RUEHCHI #0163/01 2981401
ZNR UUUUU ZZH
P 241401Z OCT 08
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 0872
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHCHI/AMCONSUL CHIANG MAI 0947

UNCLAS SECTION 01 OF 02 CHIANG MAI 000163 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN ETRD PGOV PREL TH
SUBJECT: TOURISM SECTOR TRIES TO WEATHER POLITICAL STORM AT HOME, 
FINANCIAL STORM ABROAD 
 
CHIANG MAI 00000163  001.2 OF 002 
 
 
------------------- 
Summary and Comment 
------------------- 
 
¶1. The Chiang Mai tourism sector, thought of as one of the 
cornerstones of the local economy, is preparing to struggle 
through the upcoming tourist season expected to be affected by 
both the on-going political instability in Bangkok and the 
financial troubles abroad.  Local hotels and tour companies are 
already reporting low and dropping occupancy and reservation 
rates.  Despite this temporary downturn, the long-term 
investment outlook for Chiang Mai as a tourist destination 
remains positive. 
 
¶2. Comment:  Local businesses in the tourism sector have set 
realistic expectations for what would otherwise be a high-volume 
tourist season given the potential impacts of both crises. 
Nonetheless, struggling through these two crises in the coming 
months may push both the industry and the local government to 
reflect on the resilience of Chiang Mai as a global tourist 
hot-spot.  With an overabundance of hotel rooms and tour 
companies even in the best of economic conditions in Chiang Mai, 
this year's expected sluggish visitor rates may force the city 
to select the long-lasting winners and losers in the local 
tourism sector.  It also highlights the importance of 
diversifying Chiang Mai's provincial economy to make it less 
dependent on tourism and agricultural, both of which are 
seasonal.  End summary and comment. 
 
----------------------- 
A New Dry Season Begins 
----------------------- 
 
¶3. The end of the rainy season in Chiang Mai is a natural 
reminder that the high tourist season is about to begin.  But 
this year, the coming dry season has taken on a whole new 
meaning as on-going, and sometimes violent, political protests 
in Bangkok and troubles in the financial markets signal a 
slowing of tourist rates locally.  According to the local 
Tourism Authority of Thailand (TAT), tour operators and guest 
houses with less than 20 rooms have seen a 30% drop in customers 
since last year.  The TAT Assistant Director estimates that the 
overall drop in tourists to Chiang Mai since last year is just 
under 20%. 
 
¶4. Tourism business owners report that they expect both the 
political and the economic crises to be relatively long-term. 
Regarding the political instability in Bangkok, concerns among 
business owners are focused on first-time visitors to Thailand 
and non-Thai Asian visitors.  Hotels noted that repeat visitors 
to Thailand, who tend to have at least some understanding of the 
political environment here, are less swayed by political 
happenings; and they are relying on them for business through 
this slump.  Tourist operators' expectations regarding volume 
from other Asian markets, namely Japan and Korea, are low as 
these travelers tend to be easily turned away by political 
strife, according to the TAT and local hotels.  Regarding the 
economic crisis, business hotels are particularly concerned as 
business travelers scale back on the number of travelers and the 
cost per person of those who do travel. 
 
--------------------------------------------- ----------- 
Hotels Foresee Low Occupancy, Seek Cost-Cutting Measures 
--------------------------------------------- ----------- 
 
¶5. Chiang Mai hotels are reporting already dropping occupancy 
rates and increases in reservation cancellations.  The Mandarin 
Oriental said that 150 rooms were cancelled in September.  The 
hotel's sales director said it is difficult to gauge how grim 
the season will be as there is no way to estimate how many 
intended but unmade reservations were foregone due to the 
crises.  The Amari Rincome Hotel has faced a 10% drop in 
occupancy compared to this time last year; and the Shangri-La 
Chiang Mai, which opened in late 2007, noted that its occupancy 
rates are lower than expected.  All three hotel chains attribute 
the drops to the two crises. 
 
¶6. To tackle the dropping occupancy rates, hotels are taking 
revenue-generating and cost-cutting measures.  The Shangri-La 
and the Amari hotels are dropping room rates in order to boost 
occupancy.  The Mandarin Oriental, which reports that lower room 
rates will affect the hotel's reputation negatively in future 
years, is maintaining its rates but cutting costs in other areas 
including a hiring freeze, lower discretionary spending, and a 
marketing push for already in-country tourists. 
 
¶7. Hotels and tour companies have realistic expectations for 
this season, and some have even described this twin crises 
scenario as "a blessing in disguise" allowing businesses to 
struggle through the pain all at once.  Despite this temporary 
 
CHIANG MAI 00000163  002.2 OF 002 
 
 
slump, however, tourist officials and businesses remain 
optimistic about Chiang Mai in the long-term as a global tourist 
hot-spot.  According to the Mandarin Oriental sales director, 
"We thought 2009 would be the year for Chiang Mai.  No one 
doubts that Chiang Mai will one day be on the map, but we might 
have to wait until 2010 or 2011 for that. 
ANDERSON