By  on August 4, 2009

BANGKOK — Retailers in Thailand are confronting the spread of swine flu, which could jeopardize their recovery from weak economic conditions that have curbed consumer spending and cut into tourism.

About four dozen people have died from swine flu in Thailand and another 6,700 cases have been confirmed, making it one of the hardest-hit Asian nations. A major Bangkok paper, The Nation, urged in a recent front-page editorial that public venues, including “schools, theaters, concerts, department stores, supermarkets and offices,” be shut for two weeks to stem the spread of the virus.

“This flu is just beginning to impact Asia,” said Dale Lawrence, director of corporate communications with the Pacific Asia Travel Association here. He pointed to lower hotel occupancy rates and a steady drop in international tourists as proof that fears of the flu, along with economic conditions, are affecting Thai businesses.

Retailers have promised to keep malls cleaner, including more frequent cleansing of restrooms, handrails and elevator buttons, to ease health fears. One of the major hypermarkets, Tesco Lotus, has made antiseptic hand gels available to shoppers and is continuously cleaning the handles of shopping carts. Tutorial schools have been closed for two weeks and 435 Bangkok municipal schools, along with 200 day care centers and 13 vocational training centers were temporarily closed in early July. The city also plans to distribute 2 million face masks and parliament has approved an additional $1 million for distribution of antiviral drugs.

At Gaysorn, an upscale designer mall on Bangkok’s main retail strip, swine flu is being blamed for slower international traffic, which has fallen 10 to 15 percent this year from the normal level of 13,000 people daily. About half of Gaysorn’s shoppers are tourists, most of whom come from Hong Kong, Singapore, China, Russia and India, a spokeswoman said.

Public health fears have yet to dramatically affect department stores or discounters that cater to the local market, said Paveena Chewananth, a retail analyst with Phatra Securities. Upscale malls that depend on big-spending international tourists, such as Siam Paragon, The Emporium and Gaysorn, on the other hand, have seen their bottom lines slip because of fewer tourist visits.

Department stores have seen no growth in the first three quarters of 2009 and are counting on a rebound in the last quarter, Chewananth said. Sales at hypermarkets have dropped 1 percent this year, but convenience store sales increased 5 percent, primarily because locals are doing more shopping closer to home, she said.

An estimated 6 to 7 percent of Thailand’s gross domestic product is based on tourism, said Somphols Manarangsan, a political economist at Chulalongkorn University. Tourist spending is expected to drop to $13 billion to $14 billion this year from $15 billion last year, according to the Thai Chamber of Commerce.

The Pacific Asia Travel Association has forecast the number of visitors to Thailand will decline 10.3 percent this year because of swine flu fears. The Tourism Authority of Thailand had predicted 15 million international visitors would come to Thailand this year, but reduced the estimate to 13.2 million.

Thai Airways said visitors from China, Japan and South Korea have decreased 15 to 20 percent this year and blamed the decline on swine flu fears. In an effort to ease concerns, the airline has identified 36 “common touch” points on passenger seats and in lavatories that are getting extra cleaning. The airline also is handing out surgical masks to passengers.

The swine flu crisis comes as Thai retailers emerge from a rocky 2008, when political protests forced the closure of the Bangkok international airport during the December high season. Antigovernment protests forced most major malls to close in April for up to 36 hours until police could restore order to downtown streets.

Many retailers have tried to lure customers back by boosting their promotion budgets.

“They need to do more marketing,” analyst Suthathip Peerasub said. “They need to do some self-promotions and force consumer spending.”

Downtown sales in the major malls are proliferating, with some discounts as much as 80 percent. A spokesman for the 5.4 million-square-foot Siam Paragon, located in the heart of Bangkok’s shopping district, said the center has boosted promotions targeting foreign tourists.

A regional watch and jewelry show begins at the mall on Thursday and will run through Aug. 16. The center plans to spend $600,000 on marketing and advertising for the event. In addition, more promotions with major credit cards are planned. Tesco Lotus has announced plans to spend $1.5 million on an “Everyday-Low-Price” campaign.

In addition, Thai consumers have received $58 economic stimulus checks from the government, according to a report by Jones Lang LaSalle, the global real estate firm. Some retailers offered to raise the cash value of the checks if they’re spent in their shops.

Jones Lang LaSalle also pointed to a pair of new leases as a sign the market is strengthening. The Japanese retailer The Loft has expanded space in the Siam Discovery Center to 32,000 square feet, and the American fashion brand Forever 21 opened its biggest Asian store at Central World Shopping Center in a 37,000-square-foot space.

Recent setbacks for Thai retailers slowed some expansion. The hypermarket Big C, which opened 12 stores last year, plans to open just two this year, Peerasub said. Central Pattana Ltd., the real estate arm of the country’s biggest retailer, The Central Group, has taken advantage of the downturn and snagged some new properties at bargain prices, she said.

Retail rents, which slid to about $60 a square meter in 2008, are holding firm, according to a June study by Jones Lang LaSalle. With occupancy rates in the downtown retail district around 95 percent, property developers are more optimistic.

But political scientist Manarangsan at Chulalongkorn University said Thailand’s political situation is “worsening” as public demonstrations by red-shirted supporters of former Prime Minister Thaksin Shinawatra against the government resume. Government allies, who protest in yellow shirts and were charged as terrorists after forcing the closure in December of Bangkok’s Suvarnabhumi International Airport, also are angry at the government, led by Prime Minister Abhisit Vejjajiva.

“More riots are quite possible,” Manarangsan said. “And that could have a bigger economic impact than anything else.”

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