Thai hotels, as a major victim of the coronavirus pandemic, will continue to suffer from low RevPAR, which Fitch Ratings expects to recover in 2021-2022 from the trough in 2020 but to remain below the 2019 level.

A slow recovery in the number of inbound tourists, amid a weakening global economy, will remain a key challenge in the next two to three years.

Cash preserving and cost saving have become survival factors in light of this tough operating environment.

Fitch expects Thai hotels’ average RevPAR to drop by more than 60% in 2020.

A sharp recovery is unlikely in hotel room occupancy (OCC) and average daily rate (ADR) as the country’s reopening to foreign tourists should be on a gradual basis.

We expect most hotel operators’ EBITDA to be negative in 2020, improving slowly in 2021-2022. The top-three listed hoteliers’ profit margins narrowed dramatically 1H20, despite efforts to scale down costs.

The hoteliers have indicated their ongoing capability to reduce monthly costs and expenses by 20%-30% from the base-2019 level, which would translate to a lower break-even OCC by about 10%-20%, varying by company.

A deterioration in earnings is likely to double financial leverage by end-2020.

Deleveraging to pre-pandemic levels should take at least three to four years, assuming no large capex spend.

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