The Bank of Thailand and the Finance Ministry are currently working together to create a financial assistance scheme that involves asset warehousing. It’s already receiving positive support from businesses in the tourism industry, particularly hotel businesses.
According to the Thai Hotels Association, their members are seeking to enroll their businesses in the program as they continue to experience worsening effects from the pandemic. The THA said that the financial impact of the pandemic has not improved this year compared to last year.
This was determined through a recent survey conducted by the THA.
The survey targeted a total of 198 hotels, with a total accommodation space of 23,499 rooms. 60% of these businesses are not operating. 14.7% were offering only half of their available services, 33.8% were only partially open and also offering only half of their operations, and 11.6% had temporarily closed their doors while the economy is still not improving.
40% currently open with full services and accommodation available.
According to Ms. Marisa Nunbhakdi, THA national president, a number of hotels with combined assets of THB82.4 billion have the strongest response to the survey. These hotels each own properties with values of THB100 to THB500 million, which they can use for the financial aid scheme.
These hotels owed a total of THB32 billion, with 45% of their number owing at most THB50 million.
These are hotels belonging to the middle and upper tiers in terms of values and assets, Ms. Marisa indicated.
The THA President said that the warehousing scheme appeals to these hotels because of the buy-back option offered by the financial institutions.
“This scheme allows hoteliers to preserve ownership for the future because they have an option to buy back the asset at a reasonable price when they regain a healthy financial status,” she explained.
With the asset warehousing program, Ms. Marisa said that their members have an alternative to selling off assets and properties to interested overseas investors. Some foreign investors are reportedly courting hoteliers to negotiate valuable deals for their properties, banking on the returns that will come with the return of foreign tourism to the Kingdom.
Property owners also find the asset warehouse program beneficial to their status, because the banks will automatically clear their existing debts upon “parking” their assets with the financial institutions.
Overall, Ms. Marisa said that 80% of the respondents had expressed agreement to allow banks to hold on to the assets until they gain back financial health. These respondents, however, will lease the assets and continue operating, which the THA President said should be good with the banks.
“I believe banks will not go against this idea because owners are the ones who know best how to manage or select a management team to run the hotel,” she concluded.
The Cabinet of Prime Minister Prayut Chan-o-chan approved last week a total budget of THB100 billion for asset warehousing. This is part of the THB350-billion financial relief package.
Asset warehousing allows owners to relinquish ownership to the banks for a mutually agreed price, while they are suffering from the economic effects of the pandemic. Property owners have 5 years to repurchase their assets, in which they’ll pay back the acquisition price and a rental cost of 1% per annum.