Medical tourism: Falling oil prices & Middle East tourism
Weak economy has reduced flow of medical tourists to Thailand, reducing revenue at leading hospitals such as Bumgrungrad but govt has 10-year plan to promote sector.
HEALTHCARE & TOURISM
Medical tourism: Falling oil prices, less business from Middle East
Oil slumps. Middle Eastern patients cancel medical treatment abroad. Thai hospitalstocks slide.
Weak growth outlooks in Gulf states in the Middle East have reduced the flow ofmedical tourists to Thailand.
RISE OF MEDICAL TOURISM IN THAILAND
Thailand’s healthcare shares have surged more than 800% over the past seven years.
Between 1.3 million and 1.8 million medical tourists travelled to Thailand in 2015.
Medical tourism generated 107 billion baht ($3 billion) of revenue in 2014, according to the latest Thai government estimate.
Thailand is well-known for cosmetic surgery and sex-change operations.
Sitting at the apex of the industry is Bumrungrad Hospital, which attracts more than half a million foreign patients a year and has a network of 32 referral offices everywhere from Mongolia to Ethiopia.
A reported 67% of revenue came from overseas visitors last quarter, company figuresshow.
Myanmar residents were the biggest source, accounting for 8.4% of total patients, followed by 8.3% from the UAE and 5.9% from Oman.
IMPACT OF FALL IN MEDICAL TOURISM FROM MIDDLE EAST
High stock valuations, however, are starting to look stretched amid the fallingdemand for medical tourism.
The Stock Exchange of Thailand (SET) Health Care Services Index has fallen 2.6% since closing on a record high on April 21.
Healthcare services, however, is still the best- performing industry group in the SET Index, rallying almost 28% over the past 12 months. It trades at 6.8 times its book value, compared with 3.8 for the MSCI World Health Care Index.
SLUMP AT INDUSTRY LEADER BUMRUNGRAD HOSPITAL
Bangkok’s Bumrungrad Hospital, known as the grand-daddy of all internationalhospitals, has slumped 17% since early March after patient volumes from the United Arab Emirates (UAE), its second-biggest source of overseas visitors, fell 20% in the first quarter of the year.
More than one in three foreigners treated at Bumrungrad are from the Gulf states and Kasikorn Securities says declining growth in the region and a rise in competition fromclinics in the UAE, where the government is encouraging its citizens to stay home formedical care, are curbing demand.
Kasikorn Securities downgraded its earning forecasts for Bumrungrad by 8% to 13% in 2016 to 2018 to reflect the weak economic outlook in the Gulf and rising competitionfrom Abu Dhabi’s Al Noor Hospitals Group, according to a May 19 note by analystJitima Ratanatam in Bangkok. The UAE’s economy has been hit by the plunge in oil since mid-2014 and is forecast to expand 2.5% this year, from more than 7% in 2012.
Other Thai hospitals are also under pressure. Chiang Mai Ram Medical Business reported a 41% slump in first- quarter profit. Bangkok Dusit Medical Services, the largest company in the Thai medical tourism sector, was downgraded to neutral from outperform by Credit Suisse Group AG last week.
10-YEAR PLAN TO PROMOTE MEDICAL TOURISM
Recognising the importance of health care to the Thai economy, Prime Minister Prayut Chan-o-cha’s military government has drafted a 10-year plan to promote the sector.
As part of the plan, the staying period for medical treatment for patients from China, Laos, Cambodia, Myanmar and Vietnam has been tripled to 90 days.
Even if Middle East demand keeps declining, growth in patients from Southeast Asian countries with less-advanced medical technology such as Myanmar will support theindustry say some experts.