Introduction

Chapter 1
Introduction
1.1. Background
The hotel industry is obviously the basic activity of international tourism. It is very important to
the overall economic sector and plays an important role in most countries in providing facilities
for the transaction of business, for meeting and conferences, for recreation and entertainment.
In that sense hotels are as essential to economies and societies as adequate transport,
communication and retail distribution systems for various goods and services. Through their
facilities, hotels contribute to the total output of goods and services, which makes up the
materials well - being of nations and communities. According to the World Trade Organization
(WTO), since 1960s, the world had more than 32 million hotel beds. This total hotel capacity is
very unevenly distributed, since developing countries possess less than 10 percent of this
hotel potential.
This sector has close relationship with tourism sector. The development of tourism sector will
improve the hotel industry operation and vice versa.
The composition of this sector of activity is also diversified, ranging from international chains
with tens of thousands of beds to small hotels with a few rooms. But as far as international
tourism is concerned, the hotel industry is clearly dominated by the big hotel chains.
In Vietnam, since 1986, when the Vietnamese government enacted a new policy “ doimoi “,
especially after the lifting of US embargo, more and more foreign travelers have visited
Vietnam, contributing to the development of the Vietnam tourism industry. Vietnam tourism
industry is growing rapidly. It is expected to contribute substantially to the Vietnamese
economy in the coming years. The hotel industry will play a major role in this sector. In 1994,
there were some 200 hotels and guest houses with approximately 4,000 rooms in Hanoi and
4,399 rooms in Ho Chi Minh city
1
. However the quality of most hotels does not reach the
standard required, especially by foreign guests. It is difficult for foreigners to find a “ suitable
room “ in Vietnam. Most of hotels in the nation also lack training and experience as well as
accommodation and facilities available. Besides, with very high growth rate in hotel industry in
the last years, Ho Chi Minh city is running into trouble now. Nearly 4,000 rooms were added in

1995 alone, causing a oversupply status in the hotel market in Ho Chi Minh city. Now the hotel
market is oversupply but lacking international standard rooms in big cities as well as Vietnam
as a whole. An average occupancy rate was reduced from 80-90 percent in 1994 to 40-45
percent in 1996.
Although a shortage of quality and surplus of quantity of hotel rooms in Vietnam due to delays
in finalizing major hotel projects, room supply is also expected to grow 20 percent annually.
The number of visitors is still expected to increase to 2,3 million in 2,000. Therefore, the
strategy for hotel industry in Vietnam is very necessary to ensure that the supply of hotel
rooms can meet the demand in terms of quantity and quality.
1.2. Statement of the Problems
1
Saigon times 10/1994
From the background, there is a need to find ways to adopt the development strategy for hotel
industry in Vietnam. What are problems and difficulties of Vietnamese hotel industry. What are
the lessons for Vietnam hotel industry from other countries in the region. How does Vietnam
hotel industry implement to cope with its problems and develop its operation in the future?
1.3. Objective of the Study
The proposals of this study are as follows:
• To identify key performance measures in hotel industry in Asia countries.
• To analyze hotel industry in the selected Asian countries in order to identify high
performance countries.
• To analyze how the industries have achieved high performance, with intention to draw the
relevant experiences for Vietnam.
• To analyze the development of hotel industry in Vietnam.
• To provide customers’ perception of Vietnamese hotels.
• To analyze the gap between high performing hotel industries and Vietnamese hotel
industry.
• To suggest the lessons for Vietnam to develop its hotel industry in the coming years.
1.4. Scope of the Study
The study focuses on the major problems and difficulties which are faced by hotel industry in

Vietnam now. This study does not include tourism industry as a whole and some relative
sector such as restaurant or service industry.
The study focuses on examination the development of hotel industry of Singapore, Thailand,
Indonesia and South Korea. Based on these analysis, the study tries to find some lessons for
Vietnamese hotel industry.
1.5. Methodology
This study requires:
1.5.1 Primary sources of data collection
1. Primary sources: data were collected by direct interviewing managers of some selected
hotels and directors of government offices: Vietnam General Department of Tourism,
Hanoi Tourism Office, Research Institute for Tourism Development, Tourism Margazine,
Hanoi tourism company, some hotels in Hanoi and from survey of international travelers.
2. Primary information
Interview with government officers
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Four government offices are selected to interview: Vietnam General Department of Tourism,
Hanoi Tourism Office, Research Institute for Tourism Development, Hanoi tourism company
and Tourism Margazine. The information collected from these interviews is:
• Assessment of strengths and weaknesses of Vietnam hotel industry
• Information on the challenges and opportunities of Vietnam hotel industry in the next 5-10
years
• Policies and strategies for tourism development in Vietnam in the past and in the future
Interview with Vietnamese hotel managers
10 hotels were selected to interview including 1 joint - venture, 3 state - owned and 6 private
(mini) ones
The information selected from interviewing is:
• The difficulties and problems faced in hotel operations
• The factors influencing their operations
• Evaluation of the performance of their own hotels
Interview with Thai hotel managers and officers

The information selected from interviewing is:
• The role, responsibilities and authorities of Thai Hotel Association, Tourism Authority of
Thailand and Board of Investment in improving hotel and tourism development?
• The relationships between Thai Hotel Association, Board of Investment and Tourism
Authority of Thailand in hotel development?
• What are influences of Thai Hotel Association , Board of Investment and Tourism Authority
of Thailand to the hotel industry development of Thailand in recent years?
• What are the tourism and hotel policy of Thai government, Thai Hotel Association and
Tourism Authority of Thailand?
• What are the influences of Vietnam war to Thai hotel development?
• Who establish the promotion campaign in developing tourism and hotel industry? What are
the main objectives of these promotion campaign?
From survey international travelers
150 foreigners were chosen from 13 hotels in Hanoi, of which
− 50 foreigners in 2 joint - venture hotels.
− 50 foreigners in 5 state - owned hotels.
− 50 foreigners in 6 private hotels.
The information selected from this survey is:
• The evaluation of foreign visitors on quality of hotel accommodation, facilities and services
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• Their satisfaction on price, employment skills and marketing activities in Vietnamese
hotels
• Their evaluation of external factors which influence on hotel development
1.5.2 Secondary information
• Statistics on status of the development in the hotel industry in Vietnam, such as
occupancy rate, number of rooms in different categories, number of visitors and hotel
investment including both domestic and foreign sources
• Organization of hotel industry and its linkages with tourist department, tourist destination
and travel agencies
• Government policy, such as policy of tourism authority, policy of travel agencies and policy

of local government.
• Management and labor skill of hotel industry
• The major issues and problems and the ways competent agencies plan to handle the
strengths and weakness of their approach
• Overview and strategies of hotel industry in Singapore, Thailand, Indonesia and South
Korea.
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1.5.3 Research Framework
Figure 1.1: Methodology of the Study
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Research objectives
Literature Review
Information and Data
Analyze the development of hotel
industry in Vietnam
Draw valuable lessons for
Vietnam hotel industry
Analyze the gap in hotel
development between Vietnam
other selected countries
Conclusion and
Recommendations
Evaluate the current situation of
Vietnamese hotel industry
1.6 Organization of the Study
This study is organized as follows:
Chapter 1 provides an introduction including the background of the research, the objectives,
the problem statement, the methodology and scope and limitation of the study.
Chapter 2 contains a description and analysis of the development of hotel industry, its
operation as well as difficulties and strategy in Thailand and some other countries in the

region.
The valuable experiences are drawn from their experiences to apply in the hotel industry in
Vietnam.
Chapter 3 analyses Vietnamese hotel industry situation in terms of hotel industry profile, the
strengths and weakness, opportunities and constraints of VN hotel industry, government
policy in hotel industry development and development trend of hotel industry.
Chapter 4 provides foreign customers’ perception of Vietnam hotel industry
Chapter 5 analyses the gap between the hotel industry in Vietnam and other Asian selected
countries. The necessary lessons for Vietnam are drawn in this part.
Chapter 6 provides the conclusions and recommendations for further study.
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Chapter 2
The Development of the Hotel Industry
in The Selected Asian Countries
2.1 The Development of The Hotel Industry in the Asia-Pacific Region
This section briefly overview the hotel industry development in the whole region. Based on
relative performances of different countries in the region, four countries were selected for an
in-depth study to provide references to the tourism authority in Vietnam.
2.1.1 The Situation of The Asian Hotel Industry
“ Asia-Pacific ascendancy “ is an economic description of the rapid rates of growth achieved
by a handful of countries in the vast region (Japan, Hong Kong, Singapore, South Korea,
Malaysia, the Philippines, Thailand, and Taiwan).
The health of the Asian hotel industry continues to be slowed by the world recession.
Nevertheless, Asian hotels have done well in adapting their marketing strategies to cope with
the difficult times. The main issues is that hotels were planned for in the days of the pre-Gulf
war optimism are now beginning to come on stream. They face the problems of high costs and
low yields, which means long-term problems with profitability efforts to attract and develop the
intra-Asian traveler market are continuing-an effort which many hoteliers believe is vital to the
future success of their market.
In line with the segmentation of the tourism industry itself, the Asian hotel industry has

changed to meet demand. There is now a wider choice of hotels available in more destinations
at better prices than ever before. Hotel groups are seeking to expand their presence in order
to develop market share and distribution, thus lowering unit costs and raising efficiency levels.
Some of the trends taking place:
1. The growth of Asian Hotel chains: Home-grown groups like Century International, Shangri-
La, Regent, Omni, New World, ANA, Southern Pacific Hotels and Dusit Thani are now
becoming common names around the region where once names like Aheraton and Hilton
used to dominate. This trend is likely to continue.
2. The growth of franchise operations: Operations like Best Western and Choice, which once
were entirely United States and European oriented, are now spreading out in South-East
and South Asia, providing a marketing franchise alternative to hotel owners who only want
distribution but no management help.
3. The growth of Asian hotel owners: the owners of many of the Asian hotel groups are also
real-estate barons in their own countries. Many of them are cash-rich, and have used their
connections to buy hotels in Europe, the United States, Australia, and New Zealand. The
strength of currencies like the Japanese yen, Singapore dollar and Malaysian ringgit
coupled with the real estate sumps in many of the industrialized countries has assisted this
trend.
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In the heady days of the late 80’s, hotel developers were divided into two main camps-winners
and winners. The rules change in the 90’s. Occupancy rate is falling, room rate growth is slow
and sophisticated competition come on-line. In this decade, there will be winners and losers.
Many of the opportunities which lie ahead will focus on converting the losers into winners.
These opportunities are not just for management companies, but also for shrewd investors
with an eye toward undeserved and hence, undervalued hotel assets. Nearly any hotel will
eventually make a good investment-albeit often for the second or third owner.
For years, the real estate play in the hotel sector made mockery of the business of marketing
and managing hotels. Now that much of the real estate play is sitting on the bench, its back to
basics. Values now become a function of a property’s ability to generate sustained cash flow.
The nineties challenge developers and operators to create value in sold and competitive

markets where the salvation of unchecked real estate appreciation is nowhere to be found.
The late eighties were marked by generally strong occupancy rate levels and significant real
growth in average room rates, but reality has quickly stepped back into most markets. This
reality has and will expose a lot of the excesses of the previous period, meaning over-
developed or misdirected projects. The result is a good number of costly hotels which are
poorly positioned, branded, marketed and managed. In a sense, the physical hardware of
these hotels is currently undeserved by the software in place.
Some of these hotel are independent, some are managed by smaller chains. In each case, a
change toward the optimal positioning, branding, marketing and management will enhance
cash flows and create immediate value.
In most cases, owners are interested in saving face. Other investors and bankers with options
are typically interested in getting out. Management companies that can respond to these
needs with flexibility will find no shortage of opportunities in the coming years. This flexibility
will include a modular approach to typical management contract and representation services
and a willingness to trade a long-term contract for a participation in the creation and realization
of value through a property sale.
But opportunities are not only directed toward management companies. Investors with an eye
for undeserved assets and willingness to act discreetly will quietly reap rewards. Best of all
worlds will be those investors and management companies that act in tandem to turn
properties around an participate in the upside through exercising options or participating in
appreciation.
2.1.2 Reasons for Choosing Four Countries
In the last few years, total rooms supply was increased very fast in Singapore, Bali and
Jakarta (Indonesia), Bangkok and Phuket (Thailand) than Tokyo and Shanghai. Hotel industry
in Singapore developed with highest occupancy rate, while occupancy rate of hotels in
Thailand was reduced to lowest level compared to other countries in the region. Occupancy
rate in Indonesia was similar to Japan and China (Appendix F - Table 1).
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Moreover, in recent years, four countries namely Singapore, Thailand, South Korea and
Indonesia contributed an important role in developing of the region. The Gulf war in 1990 less

impact on the economic development of these countries. Each countries has different
characteristics in economic development as well as tourism and hotel development. Each
countries now faces different problems in its tourism and hotel development.
Thailand is country with basically stable, the last coups having little effect in the country.
Tourism and investment led to a boom in the 1980s. The downside of tourism is that Thailand
faces the worst AIDs crisis in Asia (Adams et al., 1991). Still, tourism development continues
as it did in the 1980s, with hotel room supply set to double to 40,000 in Bangkok alone in 1992.
Meanwhile, tour operators are shifting emphasis to northern cities and resort islands. There
appears to be no environment planning policy and this will have severe negative affects on
tourism in a decade’s time.
Beside Thailand, Indonesia is the dominant power in the six-nation ASEAN. It has a population
of 175 million, abundant natural resources, and unique physical environments. The economy
is doing well and Indonesia is seeking a greater role on the world stage (Adam et al., 1991).
The country earned US$ 1.89 billion from tourism in 1990, and tourism is being targeted by
the government for employment creation. “ Visit Indonesia Year “ increased tourism beyond
about 3.5 million persons in 1993. There is interest in setting more educational training for
tourism (Schwartz, 1991).
South Korea is one of the strong economy in the world. Its per capita income is now over
$5,000 and the country’s growth rate is one of the highest in the world. In 1990 1,5 million
South Koreans traveled abroad. However, domestic travel has been less buoyant because of
unsettling political reforms and the threat of North Korea collapsing, with the prospect of
thousands of North Koreans heading for the South (Adam et al., 1991).
Singapore is a densely populated city-state with 2.7 million people living on an island no larger
than 300 square miles. Recording the second-highest standard of living in Asia (after Japan), it
has a per-capita GDP that exceeds that of United Kingdom. Part of the reason for Singapore’s
economic growth is the fact that it has a lucrative tourist industry, which attracted 6.4 million
visitors in 1993, more than twice its resident population. Singapore shares the same
distinction as other popular tourist destination such as France and Spain. The tourism industry
in Singapore is strongest in the Asian countries. Singapore government plans development
process of tourism industry with high successful level. In general, Singapore government

contributed an important role in the development of hotel and tourism industry in Singapore.
Thus, although facing many problems and crisis in the recent years, these four countries are
still developing with fast level. Their tourism and hotel industry contributed strongly on the
development of Asia. The lessons and experiences will be drawn from them are very
necessary for Vietnam hotel industry in its development process. This is the reason why these
four countries are selected to serve as references for hotel industry development in the
country
2.2 The Development of The Hotel Industry in Thailand
2.2.1 An Overview of Thai Hotel Industry
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Thailand, a nation of more than 55 million people, is one of the developing world’s most
dynamic economies. A favorable economic climate in the 1980s propelled the Thai economy
into achieving one of the highest growth rates in the world with an average annual gross
domestic product of 10 percent from 1986 to 1990
2

Tourism plays an increasing and crucial role in the growth of the Thai economy as the country
shifts from an agricultural base to a more industrialized and service-based economy. Tourism
is Thailand’s largest source of foreign-exchange earnings, with receipts accounting for about 5
percent of country’s GDP. Since 1965 Thailand was among the three major tourist
destinations in southeast Asia in the same category as Japan and Hong Kong. Many
observers believe Thailand will be an important hub for traveling through Asia, particularly to
Vietnam, which is just opening to tourism. In 1994 total visitors visited Thailand was more than
6 million, of which 59.4 percent were East Asia. Total revenue collected from visitors in this
year was $ 3,722 million. In 1996, the top five arrivals, categorized by quantity and country of
residence, were dominated by Asians. They were led by the Japanese. The other four were
Korean, Chinese and Taiwanese, followed by the biggest none Asian group the Germans
3
.
Compared to the world's top tourist destinations such as France, Italy and Spain, each of

which hosts 27-50 million visitors a year, the Thai tourist economy-accommodating 5 million
international tourist, cannot be considered to be very large. Measured in relation to GDP,
however, Thailand's tourism income is significant, i.e. about 5.4 percent of the country's GDP.
Compared to tourist arrivals in countries endowed with the world's wonders, such as Egypt
(with 2.6 million tourists) and other Asian countries, such as India (with 1.8 million tourists), the
Thai tourist industry has clearly been an economic success. A much lower cost of doing
business, a destination that’s growing in demand, and the ability to get reasonably good rates
is a mixture that give more and more foreign and domestic investors the ability to operate in
this industry. Thailand also occupies an advantageous geographical location because it is a
convenient stop-over or transit point between Europe, Australia and the Far East.
The success of Thai tourism cannot be explained solely by the attractiveness of the country's
natural and historical resources, but has been brought about by skillful management and
representation. According to the INTRAMAR 1990-1994 World Destination Minister Survey of
1450 travel agents in 40 cities in 26 countries throughout the world, Thailand ranked first in
three positive attributes: warmth and friendliness, inexpensive place to stay, and interesting
night life.
However, Thailand seems lose some its competitive advantage now. Its positive image began
to decline in the minds of visitors, primarily from the negative publicity surrounding its ongoing
image problem over AIDs, the sex industry, and environmental neglect at some destinations.
Consequently, tourists were avoiding Thailand in favor of Singapore, Malaysia and Indonesia
(especially Bali). From 1989 to 1990, visitor arrivals in Indonesia increased from 1.6 million to
2.2 million, Malaysia increased from 3.9 million to 7.5 million, while Thailand only increased
from 4.8 million to 5.3 million. In addition, Thailand ranked second, after India, in terms of
sanitation problems and health hazards, according to the World Destination Minister Survey
1990-1991
Hotel industry is an essential and critical component of Thailand’s tourism industry and the
national economy. However, the hotel industry in Thailand had not been developed yet until
1960s. In 1940s there were only nine " first class " hotels in Bangkok, of which only four, the
2
“Far Eastern Economic Review”, Asia Yearbook 1992 (Hong Kong: Review Publication Co. Ltd), p209

3
Tourism Authority of Thailand’s January-August 1996 statistics
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Oriental, the Ratanakosin, the Suriyanonda and the Trocadero could be considered up to
standard for international travelers. Two decades later another six more hotels were built, with
the Oriental, the Erawan and the Plaza being the major ones serving the trade. In the late
1960s and early 1970s the hotel boom radically changed the Bangkok skyline with high-rise
hotels. Among the first class hotels that were built during that time were the Siam
Intercontinental, Dusit Thani, President, Sheraton and Indra Regent. In 1990, there were 20
leading hotels in Bangkok, with number of rooms was 9,588 rooms. In 1994, four new hotels
opened increased number of hotel rooms to 10,315.
Thailand’s domestic hotel industry is strong, including Dusit Thani and the famous Oriental,
and operators based in other countries show increasing interest. Recent “ immigrants ‘ include
Colony Hotels and Resorts (on Phuket Island), Comfort Hotels (through a master franchise),
and the Grand Hyatt Erawan Bangkok. Even if they have a Western name, all hotels in
Thailand are owned at least 51 percent by Thai interests.
Thai hotel industry is influenced by many factors. The first is the development of tourist
attraction. Thailand has a significant advantages over other countries such as Singapore or
Hong Kong in having beautiful and variety landscape with offer more tourist attractive for
travelers. The second is political environment. Thailand is country with high stable political
environment and this is one of the incentives that attracting more and more tourist arrivals in
recent years. Stable political environment also gives more incentives to attract foreign
investors so improves hotel industry development.
Thailand is also a country with high economic condition. High economic condition means high
population income, more leisure times of residents and high domestic tourist demand. These
will improve the development of hotel industry in both quantity and quality.
Market liberalization is other factor that influences both good and bad to hotel development in
Thailand. Since the early 1960s, Thailand's economy policy has been implemented in a series
of five year plans. The seventh plan, covering the period from 1992 to 1996, emphasized
liberalization as a key factor for improving the economy. The policies include encourage

competition, reducing restrictions on private sector activities, and transforming the
government's role from one of intervention and control to one of support and supervision.
Further liberalization of monetary, fiscal and capital market policies are also included within
the seventh plan. This policy can cause both bad and good. On the one side, this policy can
improve competition and give business more responsibilities and self control so that it can
improve business operation in the nation, that include hotel industry. But on the other side,
liberalization lead to less control of government, lack of planing. Because of self developing,
hotel industry tends to develop in big cities with high demand rather than small city. In the
future, this leads to overbuilding in big cities and lack of accommodations in other small cities.
The officers of planning department of Tourism Authority of Thailand said that Thai
Government is other factor affected to the development of tourism and hotel industry. The
Government weak and less control economic operations in the nation. It has not gone to any
great lengths to support tourism promotion. It also has not passed any laws governing tourist
related establishments, such as guides, taxi companies, hotels, restaurants, and gilf shops.
However, government still affect the development of hotel industry. Government regulates
investment activities, marketing campaigns so affect tourist attraction and the growth of hotel
rooms.
2.2.2 Organizational Structure of Thai Hotel Industry
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1. Public sector
The many facets of tourism are reflected in the various government or semi-government
organizations in charge of tourism related matters and activities not in the hand of, or
delegated to, the private sector. The major public organization dealing with tourism as an
entity is the Tourism Authority of Thailand (TAT). Directly attached to the office of the prime
minister, it maintains continuous liaison with the Budget Bureau, the National Economic and
Social Development Board, the Board of Investment (BOI), the Department of Technical and
Economic Cooperation, the Ministry of the Interior and various other government agencies.
Regular meetings are held by the recently established NESDB sub-committee on Tourism
industry development in which the above agencies and the private sector associations are
represented. The particular responsibilities of these organizations are represented as follows:

The roles of Tourism Authority of Thailand (TAT)
TAT mainly deals with the promotion of tourism and the cooperation of tourism activities.
Generally, TAT has the following particular responsibilities:
• To promote tourism and travel industry, including occupations of Thai citizens in the tourist
industry.
• To make Thailand known for its natural beauty, ancient monuments, antiques, history, arts,
culture, sports, technological development and other activities for the purpose of
encouraging tourism.
• To promote facilities and safety of tourists
• To promote good understanding and friendship among peoples and nations by means of
tourism.
• To initiate development of tourism, infrastructure and other facilities for tourists.
The roles of Board of Investment (BOI)
The BOI is the principal government agency responsible for providing incentives to stimulate
investment in Thailand. The BOI also conducts extensive investment promotion activities both
in Thailand and abroad.
The hotel industry was given a boost by the Board of Investment starting in the early 1960s. The
designed plan, accessories, and equipment of a promoted hotel must be approved by the
Board. An new hotel building projects is allowed by BOI.
The roles of Ministry of the Interior
The Ministry of Interior issues the hotel operating license for entrepreneurs.
2. Private sector
Most of the hotel enterprises are under private sector. They are organized as members of Thai Hotel
Association (THA). This organization has not organized themselves sufficiently well to have
disciplinary powers over their members. A truly effective is THA would set standards for all
members and has the power to penalize or exclude those people or companies which do not
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come up to those standards. It also defines the classes of hotels in Thailand. THA is giving the
guidance, assistance and exchanging experiences to its members. THA also improves the
coordination between hotels in the area in training, education and construction of facilities,

accommodations and services, to exchange experiences and professional skill in operation of
hotels and to attract much more foreign tourists.
Thus, TAT only provides information for enterprises, and BOI provides investment conditions and improves
enterprises to invest in hotel business. THA provides experiences and guidance for hotel
business. If enterprise wants to run hotel business, it has to be present it’s hotel project to
local government (People’s Committee). After that, this projects has to allowed by Ministry of
the Interior. Ministry of interior will give the license for that enterprise.
2.2.3 The Development of The Hotel Industry in Thailand
The development process of hotel industry will be analyzed through three indicators: The
number of tourist arrivals, the growth rate of hotel rooms and occupancy rates.
The development process of Thai hotel industry is showed in the Figure 2.1, 2.2
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1959
1961
1963
1965
1967
1969
1971
1973
1975

1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
Year
Person
-10
0
10
20
30
40
50
Percentage
Tourist arrivals Change
Figure 2.1: Growth of tourist arrivals in Thailand 1959-1996
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0
10000
20000
30000
40000
50000
60000

70000
80000
90000
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
Year
Room
0
10
20
30
40
50

60
70
80
90
Percentage
Number of rooms Occupancy rate
Figure 2.2: Growth of hotel rooms and occupancy rates in Bangkok 1959-1996
(Source: Tourism Authority of Thailand)
3.2.3.1 The Hotel Performance in Period 1950-1960
In this period, hotel industry had been not developed yet in Thailand. A large number of
tourists passed Thailand because of the lack of suitable hotel accommodations offered. At the
end of 1950s, there was only 61,571 visitors came to Thailand. The study conducted by the
Checchi company in 1961 pointed that of the total 189,000 international air travelers who
came to Bangkok airport in 1959, only one-third visited Bangkok and 120,000 were in-transit
international passengers who did not care to take a look at Bangkok
4
(Appendix F).
2.2.3.2 The Hotel Performance in Period 1960-1970
Despite the lack of promotion, tourism growth in the early 1960s was impressive. The average
increase in the number of visitors to Thailand in four years from 1960 to 1963 amounted to
33.8 percent annually. This striking growth rate was the result of the TOT's concentrated effort
for the tourist promotion program. Another reason behind this significant annual increase in
arrival figures was the introduction of jet service for international flights in the early 1960s.
Facilities were improved at the Don Muang airport in 1962 to accommodate the expected
heavier flow of air traffic. In addition, there was a marked increase of American and European
tourists due to the improved economic conditions in USA and Europe. The expanded
American involvement in Vietnam war with brought with a brief generation of soldiers who
spent their leave period in southeast Asian tourist spots also contributed to this rapidly growth
rate of tourist arrivals in this period
5

.
4
The Tourist Industry in Thailand - CHANSAK FUANGFU - 1974, p 20, 21
5
The Tourist Industry in Thailand - CHANSAK FUANGFU - 1974, p 92
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0
50
100
150
200
250
300
350
400
450
500
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
Year
Person

0
5
10
15
20
25
30
35
40
45
50
Percentage
Tourist arrivals Change
Figure 2.3: Growth of tourist arrivals in Thailand 1959-1969
0
1000
2000
3000
4000
5000
6000
7000
8000
1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969
Year
Room
0
10
20
30

40
50
60
70
80
90
Percentage
Number of rooms
Occupancy rate
Figure 2.4: Growth of hotel rooms and occupancy rates in Bangkok 1959-1969
(Source: Tourism Authority of Thailand)
As a result, hotel rooms in Thailand grew rapidly in this period. A part from the few top
establishment which are operated by professional man, often foreigners, the majority of hotels
were run by amateurs seeking a quick return, others function as family enterprises. A major
customers were the tour groups from Europe, Japan and American with high income so the
demand of high standard hotel rooms was high. This was also the period of strongly
increasing by businessmen and soldiers.
Because at the end of 1950s, hotel rooms increased slightly, so the strongly increasingly of
tourist arrivals at the beginning of 1960s led to the shortage of hotel rooms. This improved
hotels’ managers to build new hotels in order to meet demand. Figure 2.3 and 2.4 show that,
from 1960 to 1961, hotel rooms increased about 40 percent. Occupancy rate increased from
62 percent in 1960 to 65 percent in 1961. The average growth rate of hotel rooms from 1960
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to 1963 was 16.62 percent while the average growth rate of tourist arrivals was 34 percent so
the average occupancy rate was near 68 percent in this period.
However, the average annual growth rate of visitors declined over the following six years
(from 1964 to 1969) to 16.02 percent. This decline may perhaps be broadly explained by the
generally less favorable circumstances in the world's political and economic spheres,
especially the negative economic effect wrought by the Vietnam war in 1965
6

.
Besides, the hotel rooms growth rate was still very high, with average levels was 32.06 percent.
Only in the year of 1968, although target was only 2000 rooms, the actual figures 7984 rooms
was 300 percent over the target
7
. Especially in 1966, hotel rooms in Bangkok increased 95.82
percent over 1965. With this strong increasingly in hotel rooms, in the late 1960s, the hotel
boom radically changed the Bangkok skyline with high rise hotels. The occupancy rate was
reduced strongly from 90 percent in 1963 to 40 percent in 1967, before was increased to 50
percent in 1969. The occupancy rate in the period 1963-1969 was decreased by 6.7 percent
annually.
Thus, at the end of 1960s, along with the strongly reduction of tourist arrivals and the
increasing of hotel rooms, the hotel booming occurred in Bangkok. This results in keen
competition among the entrepreneurs in the hotel industry. In this period, it was very difficult to
achieve profit and only the hotels with good management could operate at a reasonable profit
in time of stiff competition.
Broadly speaking, there were two main reasons for hotel boom in Bangkok at the end of
1960s:
1. The reduction of tourist arrivals growth rate
In the early of 1960s, the political and economic environment was favorable and it improved
the rapidly development of hotel industry. However, at the end of 1960s, the negative
economic and political effect wrought by Vietnam war in 1965 led to the strongly
decreasing of tourist arrivals. The government did not control the hotel development so the
hotel rooms growth rate was very high result into oversupply of hotel rooms. This led to
the hotel boom in Bangkok at the end of 1960s.
2. Policy of Thai government
Under the promotion of the industrial investment Act B.E.1962, the BOI had granted
promotional certificates to 60 enterprises to operate in the hotel business. The promotional
status allowed hoteliers the main privileges of importing building and furnishing materials
free of tariff duty and of a 5 year income tax holiday. These benefits can amount to

considerable cash savings and place promoted hotels in a much better position over the
un-promoted ones. This may have been one of the reasons behind the hotel building rush.
As a result, the BOI suspended the issue of promotion certificates for hotels in Bangkok
and Thonburi area in 1970 due to the excess supply for hotel rooms
8
.
2.2.3.3 The Hotel Performance in Period 1970-1980
6
The Tourist Industry in Thailand - CHANSAK FUANGFU - 1974, p 20
7
The Tourist Industry in Thailand - CHANSAK FUANGFU - 1974, p 93
8
The Tourist Industry in Thailand - CHANSAK FUANGFU - 1974, p 95
-16-
In four years from 1970 to 1973, the average growth rate of tourist arrivals was recorded at
22.6 percent annually. This increase was mainly due to the TOT's effective promotions, both in
and outside of the country. The growth rate during these years was also helped greatly by the
World Exposition in Osaka, Japan when a great number of Europe visitors stopped to
Bangkok. Also, the Asian game were held in Bangkok in December 1970 contributed to this
increase. In addition, a major factor which influenced the high growth rate of visitors was that
almost all international air services between Europe and the Pacific had to pass through Don
Muang Airport in Bangkok
9
.
Beside the increase of tourist arrivals, the hotel rooms growth rate was suddenly reduced
strongly in this period due to effects of hotel building at the end of 1960s. The average growth
rate of hotel rooms in Bangkok was only 2.63 percent from 1970-1979, while international
visitors grew 13.65 percent. This led to a shortage of hotel rooms at the end of 1970s. As a
result, the occupancy rate was increased strongly from 50 percent in 1969 to 80 percent in
1970. Average occupancy rate was 72 percent during 1970-1979 while during 1960-1969, it

was only 66 percent (Figure 2.1 and 2.1).
However, the booming in high class hotel in Bangkok happened in this period wrought by the
promotion privileges from the BOI’s policy. The BOI had set a requirement that a promoted
hotel must be a first class hotel. In other words, the designed plan, accessories, and
equipment of a promoted hotel must be approved by the Board. Its management and
operation must be within the standards recognized worldwide, or first class hotels. In contrast,
the lower grade hotels lacked the facilities that the international travelers preferred and the
proficient management that the business required.
2.2.3.4 The Hotel Performance in Period 1980-1990
Thailand had a favorable economic climate in the 1980s so it achieved one of the highest
growth rates in the world with an average annual gross domestic product (GDP) of 10 percent
from 1986 to 1990.
At the beginning of 1980s, the growth rate of tourist arrivals was only 9 percent annually.
Because of the decline of tourist arrivals, although hotel rooms grew gradually, the occupancy
rate also was lower than in the years of 1970s.
At the end of 1980s, tourist arrivals grew 18.6 percent annually and hotel rooms rate was only
increased 5.5 percent from 1984 to 1990, so occupancy rate was increased to 90 percent in
1988 and 87 percent in 1989. In four years from 1986-1989, the average occupancy rate was
80 percent. At the same time, average daily room rates was more than tripled from about $ 30
in 1986 to $ 114 in 1990-an increase made possible by a shortage of rooms. Consequently,
the Thai government introduced policies that promoted hotel construction through special
incentives to encourage investment in the lodging industry. Moreover, an successful “ Visit
Thailand Year “ promotion attracted strongly tourist arrivals and improved hotel development
in Thailand during these years
10
.
2.2.3.5 The Hotel Performance in Period 1990-now
9
The Tourist Industry in Thailand - CHANSAK FUANGFU - 1974, p 93
10

Thailand’s Tourism and Hotel Industry - The Cornell HRA. Quatery, June 1993, p 47
-17-
Since 1990, the Thai economy slowed down. The growth rate of GDP was only 7.9% in 1991
compared to 10% in 1990
11
. Some of the factors which contributed to the slower growth rate
were the unfavorable global economic environment, the higher interest rates within Thailand
due to a tight monetary policy. Infrastructure and manpower constraints also adversely
affected the growth in GDP. This economy situation affected to the development of tourism
and hotel industry.
Since 1990, Thailand had to face oversupply in hotel rooms and strong reducing of occupancy
rate and tourist arrivals.
Total visitor arrivals to Thailand was decreased in this period. Various factors contributed to
this decline, include the world-wide economic recession, the Gulf War, poor international press
coverage of the Lauda Air crass, the political uncertainty within Thailand and an increase of
international awareness over pollution and health risks in Thailand. In six years from 1990-
1996, average growth rate of tourist arrivals was only 6.4 percent, much lower than 1980s,
while hotel rooms growth rates in Bangkok was 29.06 percent, much higher than 1980s. This
led to strongly reduction of occupancy rate from 86 percent in 1990 to 44 percent in 1996,
which average occupancy rate was only 57 percent.
At the end of 1991, leading hoteliers were confident that rooms demand in 1992 would return
to similar levels enjoyed in 1989, with room occupancy levels reaching the high 80’s. However,
the quality hotel market suffered a double blow in May, 1992 with the anti-government
demonstrations which resulted in a significant number of hotel room cancellations and lower
potential revenue. Especially, 1992 results remained weak, with some leading hotels reporting
average room occupancy levels of only 30 percent.
There were some reasons affected to the Thai hotel development in this period:
1. Negative image:
Thailand’s positive tourism image began to decline in the minds of visitors, primarily from the
negative publicity surrounding is ongoing image problem over AIDs, the sex industry, and

environmental neglect at some destinations. The risk of contracting AIDs discouraged
many tourists. The pollution’s in and around cities, resorts and beaches in Thailand is also
contributing to the declining of tourist arrivals and hotel development process during
1990s. European tour cancellations were attributed to the high level of pollution in Bangkok
and at some resorts, notably Pattaya. Consequently, tourists were avoiding Thailand in
favor of Singapore, Malaysia, and Indonesia (especially Bali).
2. Persian Gulf war
The Persian Gulf war dealt a serve blow to European and Middle Eastern airlines by forcing
the suspension of some air service to Thailand and causing other flights to be rerouted. In
the first three months of 1991, flights cancellations from Europe reached 20 percent and
from Asia, 15 percent. As many as 20 percent of the tour operations in Thailand went out
of business and cancellations cost the tour trade at least $ 20 million in lost bookings. The
11
Tourism Development in Asia Countries, Pannel Kerr Forster services LTD, 1991, p 45
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overall impact was a 35 percent cancellation of visitors from Japan, Europe, and North
America.
3. Political instability
Since the fall of the absolute monarchy in 1993, Thailand has experienced 10 successful
coups, a number of failed ones, and 14 new constitutions. A bloodless military coup in late
February 1991 resulted in the overthrough of yet another government. A pro- democracy
uprising in late May 1992 resulted in another major blow to the Thai economy and tourism
industry. Bangkok’s premier hotels reported occupancies of 20 to 30 percent in the months
following the government’s crackdown on demonstrations in 1992. Pattaya hotels were
lees than 30 percent full, while occupancies for hotels in Chiang Mai and Phuket ranged
between 30 and 35 percent after crisis due to the combination of low season, room glut,
and fear of violence.
4. Unregulated growth of service department
The over-supply situation has been further aggravated by the unregulated growth in the
number of serviced apartments operated as hotels. These apartments are usually

converted from offices and residential units. Most of the 3120 serviced apartment units
located in Bangkok are rented for approximately one-third the monthly cost of an hotel
room and as such, these units have become an attractive alternative to traditional
properties.
2.2.3.6 Thailand’s Future
There’s no question that Thailand is experiencing growing pains. But there is also no question
that the people are warm and caring and that the government is aware of the importance of
tourism to the Thai economy. Thailand sits in a hub of Asian travel, just as Asia is becoming a
major travel market. Although Bangkok and Pattaya are currently overbuild, Thailand remains
a land of opportunity for hoteliers. Even with all the hotels now in operation or planned, the
overall growth in tourism should proffer success to Thai hotel properties. The government is
proceeding more carefully in developing new destinations as compared to existing locations,
so operators moving into untested venues should enjoy favorable long-term prospects.
Although Bangkok still remains the main gateway to other destinations within Thailand, poor
road infrastructure, increased development activity within the leading hotel market and political
instability remain critical factors in the future performance of the leading hotels.
Thailand’s future economy and political environment is expected to remain uncertain until the
new government begins the process of re-stabilization and is able to regain confidence within
the international business community.
With relative inexpensive accommodations of first-class Thai hotels, an increase in
international flights, a growing economy, and infrastructure improvements, the country will be
able to maintain tourism growth through the 1990s.
The lodging industry required an adequate supply of competent and hospitable personnel for
its facilities and to serve the burgeoning tourism interests of “ The Most Exotic Country in Asia
“. Despite an abundance of labor in Thailand, there seems to be a shortage of competent and
motivated workers to staff the country’s hotels. There are approximately 22 percent who was
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graduated from college, 45 percent of all employees was graduated from high-school only, and
33 percent had less than a high-school education. Therefore, Thailand’s hotel industry also
plan to implement training program for its employees and management as well as improve

hospitality service in the next years.
2.2.4 Conclusion
During the period from 1960 till now, Thai hotel industry has been facing many problems. It
experienced many up and down turn: shortage of hotel rooms at the end of 1950s, the
booming at the end of 1960s and beginning of 1970s, an stability during the period of 1980s
and booming again in the beginning of 1990s. The major reasons led to this situation are:
unregulated of government in building new hotels, unstability growth rate of tourist arrivals,
unanticipated demand fluctuation. However, Thailand’s past difficult experiences showed that
the hotel management demands self-discipline, planning, and marketing to be successful.
Whether it will fulfill its promises as Asia’s biggest holiday destination also depends on the
depth of commitment from the hotel industry and the lessons learned about the results of
inadequate planning. Moreover, government must play a major role in setting new tourism
development strategies and building new hotels.
Thailand's hotel development process also shows that the forecasting tourist arrivals is very
necessary to restrict oversupply state of hotel rooms. The maintaining good image is also
important in improving tourism and hotel industry. In addition, tourism and hotel industry has
close relationship. Tourism policy affects strongly to the hotel development so the
development policy of hotel industry has to be squared with the tourism development policy.
2.3 The Development of The Hotel Industry in Singapore
2.3.1 An Overview of Singapore Hotel Industry
Singapore is a densely populated city-state with 2.7 million people living on an island no larger
than 300 square miles. Recording the second-highest standard of living in Asia (after Japan), it
has a per-capita GDP that exceeds that of United Kingdom. Part of the reason for Singapore’s
economic growth is the fact that it has a lucrative tourist industry, which attracted 6.4 million
visitors in 1993, more than twice its resident population. Singapore shares the same
distinction as other popular tourist destination such as France and Spain.
Although Singapore is a shortage of land estate, it has many advantages comparing with other
countries in the region.
1. Stable political environment:
Singapore’s stable political environment and location within South-east Asia is perceived as an

attractive alternative to Hong Kong for many international companies wishing to establish a
presence in Southeast Asia.
2. Inexpensive destination
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Until 1989, Singapore was a relative inexpensive destination, compared to many major cities. Only
nearby Kuala Lumbur was less expensive than Singapore. Although hotel rates were rising
from their price-warfare levels of 1986-1987, Singapore hotels were very competitive with, say
London, Tokyo, and Paris. Even if the government increases its current three percent room
tax, Singapore will still have modest room tariffs. Singapore is looked upon as a shopper’s
haven
12
.
However since 1990, the competitive advantage of Singapore seems reduce. Singapore is
considered to be less competitive with other regional destinations such as Bangkok and Hong
Kong due to the impact of the strong Singapore dollar and high air fares, with make Singapore
becoming an expensive destination now
13
.
3. Image
Singapore does have a positive image. The country enjoys political stability and offers English-
language facility. It presents a good blend of East and West. It has a multi-racial culture and it
commands a great geographic location.
4. Standards and safety
Intense competition, demands from guests for quality and service, and the influx of international
and regional management chains have contributed to tremendous improvement in hotel
standards over the last decade. Today, Singapore has some of the finest hotels in the world.
Institutional Investor, for instance, voted the Shangrila as the nineth best hotel in the world,
while Business Traveler gave the Shangrila third place. The Mandarin Singapore took fifth
place in the magazine’s rankings, and the Western and Marina Mandarin were given second
and eighth positions for new business hotels in 1987.

While other locations face unrest and terrorism, Singapore has to date no record of such
problems. Singapore’s water and food are of a standard considerably higher than neighboring
cities.
5. Facilities, infrastructure and hospital resources
Singapore’s facilities for guest service are generally excellent, except perhaps its recreational
facilities. It stands in a favorable position in terms of its infrastructure and hospital resources.
In term of costs for either fundamental or discretionary purpose, Singapore is quite
competitive. For example, Singapore’s taxi fares are comparable to bus fares in other parts of
the world
14

Much of Singapore’s attractiveness rests in the fact that it is a clean, green, and efficiency run city-state of
economically advanced standing. It fulfills all the requirements of a contemporary
metropolises, including abundant shopping. Moreover, even if Singapore is not a sufficient
destination in itself, it is excellent starting point for a visit to Southeast Asia, particularly
neighboring Malaysia, Indonesia and Thailand.
12
The Straits Times, November 18, 1989
13
Economic Survey Review 90-93 Singapore, Department of Statistic, Singapore , August 1995
14
Strategy for Hotels in Singapore, The Cornell HRA. Quatery, May 1990, p 75
-21-
The importance of the hotel industry to Singapore can not be overemphasized. While tourism’s direct
contribution to the Singapore gross national product is small (5.7 percent in 1986), its real
contribution in terms of direct benefits is far greater. At an average market value of $200,000
per room, Singapore’s hotel properties were worth $5.4 billion at the end of 1986, representing
a substantial investment in this sector of the economy.
In December 1991, Singapore had a total of 67 hotels in operating, providing 24,102 rooms.
This was just twice the number of rooms in ChangMai, but Singapore accommodates 5 million

tourists, which was total number of all visitors to Thailand. Singapore's hotel occupancy rate
was, therefore, rather high in 1991 at 76.8 percent. In 1992, the occupancy rate in the first
quarter was 78.2 percent but dropped to 73.5 percent in the second quarter, following the May
Incident in Thailand. This was because Singapore lost those customers who booked the
ASEAN tourist package that include Thailand.
Singapore hotels are divided into two sectors: gazettes hotels which belong into government ands
non-gazettes hotels which belong into private sector. However both of these sectors are
regulated by government policies and strategies
As mentioned above, the country has good tourist attractions, high image, efficient facilities for
travelers and competitive price accommodation. These conditions give Singapore more
incentives to attract foreign visitors and develop hotel industry than other countries.
The external factors that influence the hotel development in Singapore are state of economies of
the source countries, exchange rate and relative attraction of competing tourist destination.
Singapore has favor economic condition with high population income, high leisure times. This
increases the tourist demand so improves the development of hotel industry.
Unlike Thailand, Singapore government is strong and it is also important economic mechanism in
Singapore. It takes the initiative in almost every sectors of the economy. The government has
direct investments in two hotels, one of them the Raffless city. Government controls the
operation of hotel industry and gives the planning in improving hotel development. The
government encourages the construction of new hotels to meet expected increases in tourist
demand.
2.3.2 Organizational Structure of Singapore Hotel Industry
The Singapore hotel industry is affected by the following associations:
1. The Singapore Tourism Promotion Board (STPB)
The Singapore Promotion Board was set up in 1964 to develop and to promote tourism and its
related facilities and services in Singapore. Its major activities are:
• Establishes marketing activities and promotion campaigns
• Defines the major customers in each period of marketing and promotion campaign
• Promotes Singapore as a city of festivals and sports and organizes festivals and events for
the enjoyment of tourists and locals

• Implements an overseas scholarship scheme to enable outstanding young Singaporean to
further their education and contribute to the growth and development of the tourist in
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industry. The scheme provides for several overseas scholarships to be awarded each year
for both undergraduate and postgraduate studies.
2. Tourism Task Force
A Tourism Task Force was set up in August 1984 to find ways and means of bringing a larger
number of tourists to Singapore. The Task Force comprised senior government officials as
well as representatives from the STPB and various tourism-related organizations.
Some of the key recommendations made by the Task Force were the enhancement of existing
attractions such as Haw Par Villa and Chinatown, as well as the development of new
attractions, activities and tours to make Singapore a more interesting destination. Some of
these recommendations have already been implemented, while the rest will be implemented in
the next few years.
3. Hotels Licensing Board
In Singapore, the licensing and regulatory functions of hotels are administered by the Hotels
Licensing Board appointed by the Minister for Social Affairs. The Hotels Licensing Board was
established under the Hotels Act which came into force on 10 August 1956.
The main functions of the Board include the regulation of hotels and the issues and renewal of
certificates of registration and hotel-keeper’s licenses. The Board ensures that prescribed
standards of hygiene and safety are duly observed by all registered hotels. It also handles
complaints and conducts investigations into operators of illegal hotels
2.3.3 The Development of Singapore Hotel Industry
The hotel industry performed well during the period from 1980 to 1990, registering double-digit
growth in turnover in each of these years. The growth rate of tourist arrivals, hotel rooms and
occupancy rate occurred in the following figure.
0
1,000,000
2,000,000
3,000,000

4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
1978 1980 1982 1984 1986 1988 1990 1992 1994
Year
Person
-4
-2
0
2
4
6
8
10
12
14
16
Percentage
Touristr arrival Change %
Figure 2.5: Growth of tourist arrivals in Singapore 1978-1996
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0
10000
20000
30000
40000
50000
60000

70000
80000
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996
Year
Room
0
10
20
30
40
50
60
70
80
90
Percentage
Supply of hotel room Occupancy rate
Figure 2.6: Growth of hotel rooms and occupancy rates-Singapore 1978-1996
( Source: Annual Statistical- Report on Visitor Arrivals 1995)
In general, the growth rate of tourist arrivals and hotel supply of Singapore was increased
gradually through the years. From 1980 to 1993, tourist arrivals grew 7.6 percent and hotel
rooms growth rate was increased 9.5 percent annually. There was no suddenly changes in
development process of Singapore hotel industry. As a result, its occupancy rate is high, with
average level from 1980 to 1996 was 76 percent.
2.3.3.1 The Hotel Performance in Period 1980-1990
There was no strong changes in the development trend of Singapore hotels in this period. Hotel
rooms developed accompanying with the increase of tourist arrivals. From 1980-1982, hotels’
occupancy rate was very high with average rate of 84.2 percent. However its occupancy rate
was reduced after 1982 due to the reduction of tourist arrivals. Tourist arrivals reduced 3.5
percent in 1983 and only increased 2.6 percent from 1984-1986, while hotel rooms was

continued to increase to 15.2 percent in 1986. As a result, the occupancy rate was reduced
from 80.8 percent in 1982 to 67.4 percent in 1986.
According to Singapore Hotel Association, in 1998, Singapore seemed to be in the mature phase
of its product cycle. From 1976-1986, the industry faced an overcapacity of rooms from that
period, as supply grew 102 percent and demand growth was just 19.7 percent. Although the
impressive 15.3 percent growth in visitor arrivals from 1986 to 1987 as a beacon of hope for
hoteliers, hotel industry remained cautions.
• One reason for their cautions was the intense rivalry in price, service, and promotional
warfare that followed the expansion in supply.
• Another reason was the 2,197 rooms added to the supply in 1988 and 1989, led to the
oversupply in hotel rooms. The problem, however, is not merely domestic in nature.
• The increase in tourism arrivals in 1989 by 15.4 percent over 1988 once again tightened
the labor market.
Despite the high quality and low price of Singapore’s hotels, Singapore’s market share had not
improved as much as one would expect in the last five years. While other destinations in the
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region (Hong Kong, Thailand, South Korea, Taiwan) recorded double digit growth, Singapore
had only a 5.3 percent growth rate during 1986.
Singapore seemed to be losing its attractiveness and competitiveness despite its comparative
advantages. Even Thailand was positioned to overtake Singapore soon in terms of tourism
potential. One explanation for the apparent decline in Singapore’s relative position was the
gradual disappearance of exotic or unique attractions much sought after by visitors.
Before these constraints, Singapore’s hotel industry devised strategies to improve the developing.
It focused on international market and implemented promotion campaign in order to attract
visitor arrivals and increase demand.
2.3.3.2 The Hotel Performance from 1990 till now
Because of suitable strategy and promotion campaign, despite the tension in the Persian Gulf in
the end of 1990, Singapore’s hotel industry on the whole still performed well. Annual visitor
arrivals for the year topped the 5 million mark of the first time, exceeding the 1989 figure by 10
percent. The increased tourist arrivals enabled the hotel industry to continue enjoying a high

occupancy rate of 81 percent in 1990. An favorable conditions included a significant upward
revision of room rates. Consequently, the hotel industry achieved a growth of 3.4 percent in
1990, ranking in a revenue of some $ 2,000 million in the process.
However, the performance of the hotel industry which depends principally on the size of visitor
arrivals was lackluster in 1991. The number of tourist arrivals was increased only 1.7 percent
over 1990. Its turnover fell by 1.6 percent over 1990 to $ 1,970 million in 1991 and occupancy
rate of hotel room was reduced to 70 percent. There were two reasons:
• The slowdown was attributed to the outbreak of the 6-weak Gulf war in the early part of the
year.
• The weaker economic conditions experienced by Singapore’s major tourist source
countries like Japan, US, UK, Australia and New Zealand. This led to a sharp drop in
visitor arrivals in the yearly part of the year.
However, the hotel industry conducted aggressive promotions and other sales strategies
which reversed the trend in the second half of the year. This led to the strong growth of
visitors in the next few years. From 1992 to 1996, tourism and hotel industry developed
strongly. The average growth rate of hotel rooms from 1990 to 1996 was 16.3 percent and
average occupancy rate was 74 percent.
Although the hotel industry experienced slackening business in 1991 due to the slump in
inbound travel caused by the Gulf war, visitor arrivals had rebounded in 1992. Despite the
uncertainties in global economic prospects, there has been relative stability in the Asian region
which shows greater potential growth. Moreover, by focusing more on the development of
regional tourism, in particular Asian tourism, the hotel industry achieved steady growth in the
past few years.
In 1992, the tourist industry made a strong comeback after a poor performance in the previous
year. Visitor arrivals was increased from 11 percent to reach about 6 million. This increase
was partly attributed to the recovery from the outbound travel slump caused by the 1991 Gulf
war, another partly come from the promotion campaign such as the Visit ASEAN Year and
Asian Aerospace Conference aided in the recovery of the hotel industry.
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