February 12, 2014 1:39 am JST

Thai tourism, retailers paying the price for drawn-out unrest

TAMAKI KYOZUKA, Nikkei staff writer

BANGKOK -- The retailing and tourism sectors are starting to feel the pain from the political crisis in Thailand as visitors shun the besieged capital.

     A once-packed Forever 21 fast-fashion store in CentralWorld, one of Southeast Asia's largest shopping plazas, now has just several customers on even late Sunday afternoons.

     The neighborhood is occupied by anti-government protesters, forcing CentralWorld to limit the number of entrances and conduct bag checks. The mall would normally be buzzing with Chinese tourists on Lunar New Year holiday but says customer traffic is down 20% on the year. It is extending its seasonal sale to March 2 from the usual end of mid-February, offering discounts of up to 70%.

     Japanese department store operator Isetan's Bangkok location closes an hour earlier than the regular time of 9 p.m. these days because "the political unrest is reducing the number of shoppers and our sales," says a spokesperson at Isetan Mitsukoshi Holdings. Mos Food Services is closing its three Mos Burger shops in Bangkok two to four hours earlier than usual.

     Hotel occupancy rates in the capital's Ratchaprasong shopping district have tumbled from 90% or so to around 30%. Tourists on Khaosan Road, a popular destination among foreign backpackers, are said to have fallen by roughly half to just 5,000 a day.

     Visitors are skipping Bangkok altogether in favor of resort towns, which remain relatively unaffected by the political turmoil, lifting occupancy rates at hotels in Chiang Mai and Phuket. But visitors to Thailand as a whole are forecast to decline 30-40% for the January-March period, according to the tourism agency. This will take a big bite out of the tourism industry, which generates nearly 10% of the country's gross domestic product.

     Many Japanese manufacturers operate far from Bangkok, so their production activities remain almost unscathed. But concerns are growing about automobile sales with the scaling down of a subsidy program for car buyers.

     Toyota, the market leader in Thailand, expects to sell 10% fewer vehicles this year, while second-placed Honda is bracing for a 20% drop, as large demonstrations keep potential customers away from dealerships. Nissan reports that Thai sales tumbled 40% for January.

     With exports still strong, the slumping local sales are not forcing the carmakers to reduce output. But the companies worry about the possible effect on local distribution should the political crisis spread.

     Bank of Thailand Gov. Prasarn Trairatvorakul warns that prolonged political unrest would delay public-sector investments and hurt capital investment and consumption. The central bank has downgraded its GDP growth projection for this year from 4% to 3%.