Several Pattaya hotels that are struggling to survive are being pressured by Chinese travel agents to reduce their room rates by 30-40%.
Hoteliers in the resort city have been relying mainly on Chinese tourists after the sharp fall in European tourists, particularly Russians, due to the economic recession in their countries.
Locally run Pattaya hotels have faced an oversupply since last year and the situation is getting worse as room rates are being pushed lower by Chinese travel agents with strong bargaining power.
The Thai Hotels Association (THA) Eastern Chapter said some local hotels, which may not have strong marketing networks and cash flow like big international chains, had slashed their room rates after a lot of pressure.
Many five-star local hotels sell their rooms at 2,200 baht per night to survive, while four-star hotels charge about 1,400 baht and lower-grade hotels charge only 800 baht.
"Many negative factors have dragged down the hotel business in Pattaya since 2014. Room rates are down by 30-40% from 2013," said Sanpech Supabowornsthian, president of the Eastern Chapter.
Last month, the occupancy rate of local hotels in Pattaya stood at 30%, with some seeing occupancy as low as single digits. However, international hotel chains ran around 65-70%.
Chinese travel agents know that Pattaya needs Chinese travellers to fill their empty rooms after the sharp decline in the Russian market since early 2014.
Pattaya has about 2,000 hotels with 136,000 rooms. About 90% of hotels are operated by local operators and the rest by international chains.
Normally, Chinese travellers prefer to stay in two- or three-star hotels, while European tourists like serviced apartments, condominiums and rental houses.
Mr Sanpech said the big jump of Chinese tourists in Pattaya could not compensate for the fall in Russian and European travellers in term of spending per trip and length of stay.
"In our view, it's not possible to see hotel room rates in Pattaya rise in the next few years as long as these negative factors remain," he said.
According to the THA, many commercial banks have stopped providing loans for new hotel projects in Pattaya and new supply is expected to be only 500 rooms from 2015-16.
However, the downturn is attracting some foreign funds and developers to buy cash-strapped hotels that may not survive.
"We can't do anything so far. We have to wait until the market bounces back and Russian tourists return," Mr Sanpech said.
The upgrade of U-tapao airport due to be completed in 2017 with its second terminal is set to increase visitor arrivals.