Double-digit increases in demand are attracting hotel investors and developers to Thailand.
GLOBAL REPORT—Following several turbulent years—characterized by high-profile floods and political protests, which reduced both investor and visitor interest in the Land of Smiles—Thailand’s hotel sector is firmly on the road to recovery, with supply and demand fundamentals returning to a more favorable balance.
“Last year, Thailand had a 3.1% increase in supply along with a 13.1% increase in demand, which is great news,” said Naureen Ahmed, marketing and analysis manager at STR Global, sister company of HotelNewsNow.com. “And the demand recovery and pick up we saw in 2012 is continuing into 2013.”
With the floods and protests in Thailand’s past, tourists are flocking to the country to enjoy its combination of culture, cuisine, shopping and affordability in peace. During the first quarter of 2013, Thailand saw in excess of 19% growth in global visitors over 2012, according to the Tourism Authority of Thailand.
Investor and developer confidence is also increasing.
“Since 2011 or so, we’ve had a stability we hadn’t seen for the previous five years, so investors are now a little bit more relaxed about putting up investments,” said Markus Aklin, executive VP of development at Onyx Hospitality Group, which will open 16 properties over the next two and half years, including seven in Thailand.
“Thailand is still relatively cheap as far as investment is concerned,” said Jason Payne, VP of Pattaya property developer Tulip Group, which will add three new hotels to its portfolio in the next two months and at least 10 over the next five years. “There is strong interest from almost all international hotel operators as far as entering into management contracts for good quality properties goes. This interest drives companies like ours to build and develop more hotels.”
Hot markets
So where is most of the hotel development happening?
According to data from STR Global, supply growth is highest in the capital. During 2012, the number of rooms available in Bangkok grew by 4.2%. During the first four months of 2013, this continued at a rate of 3.9%. The fastest growing category is luxury hotels, which increased at a rate of 8.4% in 2012 and 9.3% in the first four months of this year.
Many of the recent and upcoming luxury developments in the capital—rather than being pure, luxury hotels—are also linked to other real estate sectors.
“Not only do these niche products cater to buyers who want a little bit more service than they would get at a condominium, they also help developers get a quicker financial return after building a hotel property,” Aklin said. One example is the luxury Oriental Residence Bangkok, which Onyx Hospitality opened last year, and has both a hotel and a residential component.
After Bangkok, holiday resorts Hua Hin and Pattaya have seen the greatest growth in supply in 2012 and 2013. Looking forward to the next few years, Pattaya in particular is set to become a key area for hotel development.
“Pattaya is witnessing an increasing focus from hotel investors, with a number of new hotels announced over the last 12 months,” confirmed Andrew Langdon, senior VP, Thailand and Indochina, Jones Lang LaSalle.
“I believe that Pattaya will be a hot market not just in 2013 to 2014 but for the next five years at least, as the city is continually changing and reinventing itself,” Payne said. “I would never say the town will attract the true luxury market, but it will become a far more family-friendly destination that will cater to travelers looking for modern, up-market accommodation.
“Having spoken to all the major operators, I’ve discovered that most are looking for properties in the city and have great belief in its future. This will create competition and also raise standards, and I believe rates will, in turn, increase to similar levels to, say, Bangkok,” he added.
Mid-tier segment also on the up
Although the luxury hotel sector continues to be the focus of development, there is also an increasing interest among developers in Thailand’s mid-tier segment, particularly in areas such as Pattaya, Phuket and Koh Samui.
Zinc | InVision Hospitality’s mid-tier Glow brand is growing fast. The company has two Glow properties in Bangkok and one in Phuket, and will open a hotel in Pattaya later in 2013.
“By the middle of next year, we will have six properties in Thailand,” said Zinc | InVision Hospitality CEO Kevin Beauvais. “The values are good, it’s clean and fresh, it’s got a great bed, a great shower and a good breakfast—all the basic fundamentals. We see Glow as a brand that’s really needed in the world, not just in Asia.”
Onyx Hospitality’s Aklin said he recognizes the potential of the midscale sector.
“We are about to open a midscale hotel—Ozo Chaweng Samui—in Koh Samui. It’s a fun, cheerful, 3-star property with slightly lower rates, catering to the younger crowd who want to holiday in Chaweng beach,” Aklin said.
Source: www.hotelnewsnow.com