Not being familiar with the tree, I don't know if peeling bark is normal or not. If, like paper or river birches, it does get flaking bark as it ages, then it may not be as awful as it appears. If the tree has a good sized caliper to it, then the sapsucker may not do too much damage - if it's still pretty skinny, and if the sapsucker is very persistant, then it may be more serious. I had to take out a smallish - 6-8' tall - maple, which I didn't really like where it was, anyway - after a sapsucker totally girdled it in a band about 6" wide all around the trunk, but it was only a few years old. If I had liked it there, I might have let it take its chances on recovering. If the cambium layer is still intact, the tree may be able to out-grow the damage over the summer, and callus over the holes.

Can you see well enough - with binoculars? - to see if the holes are pretty much continuous around the trunk, or are there untouched patches of bark? If there are untouched patches, and you can get reasonably high up into the tree with a ladder, can you hang one of the holographic bird-scarers - plastic filmmy "tails" that flash as they blow in the breeze - or old CDs, in the tree? They MIGHT scare the bird away. Sorry not to be more helpful, or hopeful...

I know 'sapsucker' is the common name, but do these birds really drill for sap or insects? This is not an answer to your problem, but if it is actually looking for insects, like woodpeckers, maybe the problem is not so much the bird but the insects that it is after. Just a thought....

They drill for the sap and the insects that are attracted to it. It may be no help in this situation, but I used aluminum foil around the trunk of my old holly tree and it worked.