The Telltale Signs of Economic Malaise

July 15, 2021 Edward Dever

In 1998, I was looking out from a 19th floor window of Telecom Tower on Ratchadaphisek Rd in Bangkok towards the plots of land below. It was during a break in one of the interminably long creditor meetings for TelecomAsia, part of the CP Group.

Among the buildings was a plot of land covered in pink taxis, handed back to the taxi company by drivers unable to make a living in the post-1997 Asian Economic Crisis world.

The floating of the baht by the Thai government on July 2, 1997 precipitated a wider Asian economic crisis engulfing, among others, the economies of South Korea, Indonesia and the Philippines. The seeds of Thailand's crisis had, however, been sewn a number of years earlier.

1998 was before widespread mobile phone use in Thailand (and phones with cameras) so I didn't take a photo of the flamboyance of pink taxis below. People didn't take cameras to restructuring meetings.

One interesting aspect of the TelecomAsia group restructuring involved debt associated with the roll out of the Personal Cordless Telephone (PCT) network in Bangkok. This was an ultimately unsuccessful forerunner of today's mobile networks which was popular at that time in Tokyo. It allowed you to use your home phone number as a mobile number with enough handsets for the whole family. Wander the streets of Bangkok and you can still see relics of the network - decommissioned cell sites attached to telegraph poles with the telltale "PCT' logo.

Fast forward to 2021 and another economic crisis - this one brought on by Covid-19.

Taxis are once again being parked en masse as drivers struggle to find fares in a city without tourists and with many workers working from home or unemployed.

As Thailand trials reopening the country with its Phuket Sandbox model for vaccinated travellers as well as ramping up vaccination efforts, it is hoped that these taxis will soon be circulating throughout Bangkok once more. However, with reported daily Covid-19 case numbers over 9,000 for Thailand, the reality is that they may be parked for some time.

Business baffled by gaffes

July 2021

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.

South East Asia Tourism - Darkness Before The Dawn

January 18, 2021 Edward Dever

A year ago, I wrote about Covid-19 and the potential decimation of Asia's tourism sector.

In hindsight, I underestimated the length of time it would take countries to get Covid-19 under control.

In the case of Thailand, a Covid outbreak in the past month centred on markets outside Bangkok, staffed predominantly by migrants, has resulted in a semi-lockdown. Tourist spots which had realigned towards the domestic market have taken a further battering. (How Thailand Was Caught Out)

Thailand has been largely unsuccessful trying to restart international tourism with a quarantine component. (Thailand - No-one Came)

Contrast this approach with Maldives which has been open for quarantine-free tourism for several months. (Maldives Monitors Arrivals)

Across South East Asia, tourism ventures are mothballed or dead in the water. Some companies still operating have opted to give up office space to save costs and are operating from serviced offices.

It is not all gloom and doom. Some OTAs are actively recruiting, seeking to replace some of the staff made redundant last year as they try to position themselves for economies reopening hopefully during 2021 as Covid-19 vaccination becomes more widespread.

There will be plenty of restructuring ahead. Not all tourism players will survive. New players will emerge and everyone will need to adapt to a post-Covid tourism world.

January 2021

Thailand - From 40 Million Foreign Arrivals to Zero

August 10, 2020 Edward Dever

Clear signs of the carnage emerging from Covid19-related travel restrictions.

The closure of two long-standing inbound travel companies in Thailand, Asia World and CBS Travel Asia, is an indicator of the depth of financial calamity faced by destination management companies (DMCs) as a consequence of closed borders and zero tourists.

The comments by AWE sum up the predicament faced by many DMCs:

“Asia World has had no business for the past four to five months and no income because of Covid-19. It seems that tourists will not return to Thailand for a long time, which could be in 2021 or 2022, but nobody can be sure.”

The key to survival is summed up by Asian Trail's CEO:

“It’s all about cash,” said Laurent Kuenzle, CEO, Asian Trails. “Do you have enough to survive, not for three months but 1.5 years? Do you have savings or are you indebted? How much money can you save by reducing expenses, without destroying your company and without losing quality and trained manpower when tourists return?”

Expect more regional closures, particularly those DMCs without recourse to deep pockets to ensure survival.

Thailand’s 60th Tourism Anniversary Turns to Nightmare as Longstanding Travel Agencies Start Closing

August 2020

Nok Air Follows THAI Into Formal Rehabilitation Proceedings

July 31, 2020 Edward Dever

Thai-based airline, Nok Air, has announced it will follow Thai Airways International into formal rehabilitation proceedings.

Nok Air is part owned by THAI (around 13%) and has been unable to fly its 18 international routes due to Covid19 and its domestic routes in 23 provinces are running at around 30% of its normal schedule.

Nok Air claims that only 200 customers are still awaiting refunds.

"Nok Air insisted on Thursday its business would be able to return to solvency despite the airline following Thai Airways' lead and filing a business rehabilitation request with the Central Bankruptcy court."

Nok Air will be just fine, insists CEO

July 2020

Landlord Protection Insurance - Market Starts to Reopen

June 16, 2020 Edward Dever

Two months ago, as Covid-19 related restrictions resulted in job losses and a potential crisis among tenants and landlords, insurance companies suspended issuing new landlord protection policies.

The suspension was a reaction to the likelihood of significant evictions and claims under tenant default provisions of policies. The Government freeze on evictions and other support measures helped minimise the risk of claims.

In welcome news for residential property landlords, some insurance companies are starting to recommence issuing these policies. This allows for some price shopping on renewals. However, new policies are not currently being offered with optional tenant default cover nor, in some cases, cover for theft or malicious damage by tenants.

Among the Suncorp Group, AAMI continues to offer new policies. Suncorp and Terri Scheer policies are still suspended as are policies of Australian Landlord Insurance. Coles Insurance (backed by IAG) has recommenced issuing policies as have companies such as EBM RentCover and Allianz.

Examples:

AAMI Suncorp Terri Scheer Australian Landlord Insurance Coles Insurance

EBM Rent Cover Allianz SGUA

June 2020

Covid-19 and Landlords Practising the Art of Cautious Optimism

June 13, 2020 Edward Dever

Many landlords have been practising the art of cautious optimism for the past few months - crossing their fingers and hoping for the best.

Since the COVID-19 restrictions commenced, residential property landlords have been through three end-of-month payment cycles. Sufficient time to judge the impact of COVID-19.

The impact on landlords would obviously vary depending on the exposure of their tenant mix to industries most affected by shutdowns. Landlords with a tenant mix skewed towards, e.g., healthcare workers and pensioners, would be faring better than those skewed towards hospitality workers.

The current staged reductions of restrictions is no guarantee future problems will not emerge with tenancies. A resurgence in COVID-19 cases and the ultimate withdrawal of support measures such as JobKeeper payments are factors which could still impact residential tenancies. Tenants who have so far resisted requesting assistance may ultimately make requests if their employment prospects do not improve.

It remains unclear whether the Qld land tax rebate will be extended beyond 30 June. For those eligible for this rebate, it is conceivable that circumstances allowing them to access the rebate could arise only after 30 June.

Coronavirus, a recession and renters not paying up — here's why some landlords are struggling right now

June 2020

Qld's RTA - Reporting On COVID-19 Dispute Resolution Requests Is Wrong

June 7, 2020 Edward Dever

Qld's Residential Tenancies Authority has taken issue with claims in the media that there are 30,000 Covid-19 related requests for dispute resolution.

Either in search of clicks or lazy journalism, the article got the figures completely wrong.

While the RTA Covid-19 Hotline has handled 28,042 phone calls since late March, there have only been 1,281 conciliated disputes, with 80% resolved.

The RTA’s conciliation data does not indicate that tenants and landlords are “going to war” as the article states. Rather, where Covid-19 related issues have arisen, the parties are negotiating in a reasonable manner.

The total number of phone calls comprises calls by all parties, not just tenants. As one real estate agent has indicated, they have rung the Hotline multiple times to clarify various issues.

As the RTA states: “The RTA thanks the Queensland renting community for doing their absolute best to work cooperatively and constructively together during these challenging times."

RTA responds: COVID-19 dispute resolution data article

June 2020

Qld Land Tax Covid-19 Relief - How Does It Work?

June 1, 2020 Edward Dever

Qld landholders who pay land tax may be entitled to relief if a tenant's ability to pay normal rent is affected by Covid-19 or you cannot rent the property for the same reason.

If tenanted, you need to provide rent relief to the tenant for at least the rebate amount. For vacant properties, you may apply the relief towards financial obligations. In each case, you must comply with these leasing principles. https://bit.ly/3ck3w1t

You need to access your online OSR account to apply for the rebate. Fortunately, the OSR's online system has resolved the bugs that plagued this system in late 2019.

The relief relates to the property nominated. For multi-dwelling buildings (i.e non-strata-titled), the relief applies to all units, not just the one affected.

The rebate is restricted to 25% of the 2019 land tax liability for that property. It is not a cash bonanza but can cover a rent reduction for a number of weeks.

As you are self-certifying that you meet the requirements, expect the OSR to subsequently audit claims to ensure compliance.

The deadline for applications is 30 June 2020. Without an extension, landholders only impacted by Covid-19 issues after that date may be adversely affected.

To obtain the rebate, you need to add your bank account details to your online OSR account. By doing so, you agree that the OSR may direct debit any future liabilities and, once added, you can't directly delete your bank account details. You need to adjust the end date for those details so they lapse before the next land tax notice is issued. You can them avail yourself of all payment options.

https://bit.ly/3gF99dO

June 2020

Covid-19 and Tourism's World of Pain

May 9, 2020 Edward Dever

A small insight in the world of pain the tourism sector is currently encountering.

"Thousands of hotels in Thailand are crying foul after TUI Group, a global tourism business based in Europe, submitted letters asking to delay repayment on debt that has grown to 2 billion baht (USD 62m)."

"The vast majority were asked to accept 25% of debt within 10 days after signing a new contract, while the remaining debt will be paid when TUI's business is back to normal."

TUI is a gorilla in the world of package tourism. Hotel operators rely on payment of high season invoices (including Jan-Mar) to allow them to get through the low season. The impact of Covid-19 makes this cash flow crucial. Payment of 25% with the balance payable at some point in the future will be of little comfort to hotel operators trying to deal with their own creditors and employees.

The difficulty for hotel operators is that, by not agreeing to TUI's terms, they risk being frozen out of future package deals when tourism recovers. The article hints that the dispute may be escalated to a government-to-government level.

Expect the other large tourism players to be taking a similar stance.

https://lnkd.in/gjV46GT

May 2020