The Thai Hotels Association (THA) is worried that hoteliers in Chiang Mai will wage a price war soon because of a slowdown in bookings in the second quarter.
The THA Northern Chapter said May and June reservations are slowing significantly in the northern capital. In the best scenario, the association expects the hotel occupancy rate in Chiang Mai will stay around 58% in the second quarter.
Although average room rates in the second quarter are still similar to levels in the same period last year, hoteliers are waiting anxiously for last-minute bookings, said La-iad Bungsrithong, president of the THA Northern Chapter.
Room rates for the low season were set last year, so the association is keeping its eyes on small and medium-sized hotels to see if they lower their prices if bookings are very low.
The THA says average room rates in Chiang Mai are quite low compared with other regions, particularly the South. If small hotels play with prices, they will put pressure on bigger hotels.
With 2016 proving to be another challenging year for hotel business in Chiang Mai, the THA is asking hoteliers to add more value to attract clients instead of lowering room rates.
"We think the hotel business in Chiang Mai reached a peak last year when the average daily room rate increased by 8-10% and the overall tourism sector grew by 15%. It may have a slowdown this year," Ms La-iad said.
Tourism business in Chiang Mai has been growing by 15% annually on average since 2011, thanks to an influx of Chinese travellers, who now account for almost 30% of international arrivals to the northern province.
Chiang Mai is estimated to have 40,000 hotel rooms, but only 20% or 8,000 are legally registered. More than half of hotel rooms are run by small local operators in unregistered hotels.
The weak situation may continue in the third quarter if the province cannot maintain Middle Eastern and European tourist arrivals, especially from Spain and Italy. The average occupancy rate is expected to be 75% in the third quarter, down from above 80% in the same period last year, said Ms La-iad.
The THA has joined hands with the Tourism Authority of Thailand (TAT) to woo more domestic travellers to visit Chiang Mai.
Wisut Buachum, director of TAT's Chiang Mai office, said it will hold Hansa Lanna in Rainy Season travel fair at Maya Lifestyle Shopping Center in Chiang Mai from June 6-7.
The event will promote nine activities and travel routes in Chiang Mai, Lamphun and Lampang. Discounts of 10-40% will be offered for hotel stays in the three provinces from June to September.
Tourist arrivals to Chiang Mai are expected to grow by about 10% to 9.13 million this year. TAT projects foreign arrivals will rise by 10% to 2.64 million, while Chinese arrivals should grow by 7% to 750,000.
Mr Wisut said the Asian market would be a key driver to boost tourism growth in Chiang Mai this year.