Competition Driving Down Hotel Prices in Phnom Penh

Phnom Penh hotel rates are dropping as new hotels open and more tourists skip the capital and fly straight to Siem Reap town, industry officials say.

Tourism Ministry officials say according to their data some hotels have dropped their rates as much as 50 percent compared with September 1998 prices. Rates for tour groups and corporate representatives at some of the city’s top hotels have dipped to as low as $40 to $60 per night, less than half of their promotional rates of early 1997, industry insiders say.

Hoteliers and ministry officials attribute the drop in rates to fierce competition caused by continued hotel development in the capital and the government’s “open-skies” policy that allows airlines to fly direct to Siem Reap, bypassing Phnom Penh.

“There is a lot of competition among hotels, dropping prices a lot,” lamented Krieng Krai, resident manager for Hotel Juliana. “It’s not good for our businesses.”

Some fear the heated competition could lead to a “price war” that would jeopardize the health of the hotel industry. But others say the trend is healthy because it is a result of free market forces, and prices rightfully are getting closer to rates in Bangkok.

“It’s a readjustment of rates,” said Chris Ho, a longtime Phnom Penh hotel operator and general man­ager for the Monorom Hol­iday Villa. “In the past, rates in Phnom Penh were too high. Now it’s getting more realistic and reasonable.”

In Siem Reap, meanwhile, hotel prices reportedly are going up because of increased business.

Additional competition in Phnom Penh could force rates down even further.

New entrants include the renovated 76-room Monorom Holiday Villa, which opened Monday, and the 89-room Best Western Cangi Hotel. Both are on Monivong Boul­evard near Phsar Thmei.

The Ministry of Tourism lists three other hotels totaling more than 750 rooms expected to open this year: the 200-room Olympic Hotel, the 152-room Micasa Cambodia Hotel and the 402-room Phnom Penh Hotel. Altogether, the five hotels would increase the room capacity of the city by roughly 10 percent.

Many say high rates stem in part from the Untac period of the early 1990s as well as the lack of competition. But that has chang­ed dramatically in recent months.

Hoteliers in Phnom Penh acknowledge corporate representatives and visitors in group tours now often are offered rates 30 to 40 percent below officially listed prices.

Hotel Inter-Cont­inental, for example, routinely charges about $100 net per night for business visitors, $70 less than the quoted price, said the hotel’s marketing manager, Patric Fernandez.

Gilbert Madhavan, general manager for Hotel Le Royal, also acknowledged his hotel often charges “about 30 percent” less than official prices.

“The price war started when Sofitel Cambodiana reduced its corporate rates to less than $50 late last year,” said an industry source who asked not to be named.

Sofitel Cambodiana staff conceded rates were reduced to $90 to $100 per night for business visitors late last year, compared with $180 to $190 in previous seasons. But they denied selling rooms for less than $50.

“We reduced our rates to promote the newly refurbished fifth floor. It’s our financial strategy to increase market share,” said marketing manager Grant Gammell, adding the strategy has worked because the hotel’s occupancy rate has increased.

An industry source said occupancy rates at the Cambodiana have increased from less than 30 percent to 60 percent.

Overall occupancy rates for Phnom Penh hotels weren’t available.

Gammell indicated that there is little room to lower prices further. “You can’t go any lower,” he said. “This is the bottom.”

But Nagab­a­yashi Ak­i­hiro, manager of FSUN Tourist, said the prices haven’t bottomed out yet.

“Hotel prices in Cambodia are way too expensive,” he said. “Just because there was no competition in the past, prices were kept high. But now that we have strong competition, the prices should drop.”

as low as those in Bangkok and Vietnam.”

 

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