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Hotel Investors Look Beyond Bangkok

26 Apr 2010 0

Hotel investments in key tourist destinations like Phuket and Samui have become more attractive than Bangkok as global players are considering return on investment more carefully, according to leading hotel investment and consultant firms.

“Local hotel investors understand the political problems and see this as an opportunity to invest in hotels, whilst offshore investors are generally taking a wait-and-see approach. Interestingly, Thai tourist destinations outside of Bangkok, such as Phuket and Koh Samui, remain of high interest to international hotel investors, as the demonstrations are largely seen as limited to Bangkok with only a minor effect being seen in Phuket and Koh Samui, at this stage,” said Andrew Langdon, senior vice president of Jones Lang LaSalle Hotels.

According to its recent research, there is a very large hotel supply due to enter the market in Thailand, particularly Bangkok. The capital will see over 9,300 rooms enter the market between now and 2015, of which more that 75 per cent is in the four and five-star market, and 64 per cent of this new supply will be located in the Sukhumvit and Phloenchit, Rajdamri, Siam Square areas.

In Asia, Thailand remains in the top five tourist destinations and will continue in our opinion to remain so. Thailand remains a firm favourite with tourists due to its shopping, good value destination, service quality, and accessibility.

This is confirmed by the high number of repeat tourists, who make return visits to Thailand.

“Hotel investment throughout Asia peaked in 2007 at slightly more than US$12 billion (Bt384 billion) worth of hotels sold. This was significantly up from 2006 at some $6 billion of hotels sold. As you would expect, 2008 and 2009 saw the value of hotel transactions fall drastically due to the global financial crisis to some $2.5 billion. In Thailand we have historically seen very few hotels sell, as many investors prefer to develop hotels and hold,” Langdon said.

“In the second half of 2009 and going forward this year, we are seeing many hotels become available for sale, although asking prices in most case are not realistic. However we do expect to see a number of significant hotel transactions throughout Thailand, especially in the resort destinations of Koh Samui and Phuket.”

Hotel Trading performances for the year to date up until the end of March was very strong with strong increase in rates and occupancies leading to 20 per cent to 25 per cent increases in REVPAR. “However given the political demonstrations, we expect to see trading performances for Bangkok hotels suffer in the short term.”

Langdon added that Thailand, particularly the resort destinations of Phuket and Samui, is of continued high interest to foreigners.

However, the problem the Thailand hotel investment market is facing is investors are now very much global players. They are yield driven and at present hotel yields are by comparison more attractive in America, Australia and Europe than they are in Asia and Thailand.

In Bangkok, Samui and Phuket there are still active hotel investors on the market. “It is rare for prime hotel properties to come on the market, and provided some form of normality can be restored, we believe there are local and overseas hotel investors that will buy into attractive opportunities when available.”

In terms of new investments, there are partially completed hotel properties in the Sukhumvit area, but this is mainly due to the effects of the global economic crisis, not Thai politics or the situation in Thailand’s hotel market. Research shows higher star category hotels in Bangkok are well supplied. However, leading hotel investment firms are still aware of brands and investors that are keen to enter the resort markets and the capital with new investments.

Thailand is also still a leading repeat destination with a high rate of repeat visitors. Capital cities such as Singapore and Hong Kong do enjoy greater arrivals than Bangkok, but Thailand’s resort markets outperform Vietnam.

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