Taipei Times (TT): Can you comment on Yuh Tong Hotel’s (鈺通大飯店) financial performance last year, as Chinese tourists accounted for a considerable share of its clientele?
Yuh Tong Hotel chairman Huang Kuo-fang (黃國芳): The hotel slipped into the red in June and failed to reverse the situation for the entire year following a sharp decline in the number of Chinese tourists. We saw the number of Chinese tourists slumping 80 percent last year while overall guests shrank 40 percent.
The downturn wreaked havoc on hotels in southern and eastern Taiwan, as they heavily depend on group tours. Hotels in northern Taiwan fared better because they saw a significant increase in independent tourists from Japan, South Korea and Southeast Asian nations.
As a result, our revenue fell about 30 percent with significant operating losses, compared with a modest profit in 2015. Occupancy rates plunged from 70 percent to under 30 percent late last year.
TT: Do you expect the situation to improve this year given the economic recovery in Taiwan?
Huang: Yuh Tong aims to break even this year with an increase in business and domestic travelers. We hired a sales manager last month to boost visitor numbers.
I do not expect a rebound in the number of Chinese tourists. They might dry up after next month, according to some reports.
The outlook is bleak for the tourism industry in Chiayi. The Travel Agent Association earlier warned that more hotels might be forced out of business after May due to continuing cash problems.
Royal Phoenix Hotel (崧園陽光酒店) stopped preparations for an opening after failing to honor checks. Tsun Huang Hotel (尊皇大飯店) has been up for sale for a while. Fullon Hotels & Resorts (福容大飯店) has put the construction at its Chiayi property on hold. The delaying tactic makes sense as utility bills alone require millions of New Taiwan dollars a month.
Several gift shops in the Alishan scenic area failed to honor debt payments to a tea vendor, who happens to be my friend. This all lends credibility to pessimistic views. The government’s policy and attitude have significant influence over the tourism industry.
TT: What can Yuh Tong do to enhance its business?
Huang: We aim to diversify our sources of customers and cut dependence on Chinese tourists. They accounted for 30 percent of our total customers last year and might drop to 10 percent or single percentage digits this year.
We have won contracts to accommodate baseball teams from Japan, South Korea and China during their training in Taiwan. We are also reaching out to other groups.
We are considering whether to court domestic students. The move would definitely drive up guest numbers, but would bring down room rates.
Yuh Tong held room rates relatively steady at NT$2,400 per night last year, despite the soft market. I intend to stand by the strategy this year. I do not want to participate in cutthroat competition even though some facilities in Chiayi reportedly offer daily room rates of less than NT$2,000 to attract guests. The figures are unacceptable for me.
TT: The supply of hotel rooms in Taipei has grown faster than the number of visitors, making the market increasingly crowded. Does the imbalance also apply to Chiayi?
Huang: It is the same here. A new hotel opened three months ago and two more are to follow later this year. At least 400 hotel rooms will join the market in Chiayi. The number would be higher if facilities in Chiayi County are factored in.
Evergreen International Corp (長榮國際), the hospitality arm of Evergreen Group (長榮集團), might open a new outlet by the end of this year across from the National Palace Museum Southern Branch.
The pressure is building for room rate adjustments. Yuh Tong can weather the pressure if it can boost guest numbers. We plan to achieve that goal by cooperating with travel agencies and online booking operators.
That means group tourists would account for more than 50 percent [of our guests] this year.
If we can accommodate a tour group each day, we can have 20 percent of the rooms filled, significantly easing the pressure for price cuts.
TT: Does Yuh Tong plan to reach out to travelers in Southeast Asia?
Huang: We saw a considerable increase in the number of tourists from Thailand, Indonesia and Singapore, but their numbers remain modest.
Independent travelers from Asian nations usually spend four days in Taiwan, during which they visit northern, southern and eastern Taiwan and skip Chiayi.
If they spent an entire week in Taiwan, they could spare time for Chiayi. The length of travel is the decisive factor.
We do not have employees who can speak Southeast Asian languages.
Domestic guests contributed a tiny share of our clientele, suggesting ample room for improvement. To that end, we have enlarged our Chinese restaurant capacity to boost banquet sales. Food and beverage sales last year generated 60 percent of the hotel’s revenue although revenue at the Western-style restaurant declined amid the decline in travelers.
The Chinese restaurant fared better, thanks to an increase in banquet demand. While Chinese restaurants grow increasingly competitive, banquets require relatively lower costs.
We expect occupancy rates to return to 50 to 60 percent following a series of promotions and adjustments.
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