Bangkok hotel market q1 2010


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Bangkok hotel market q1 2010

  1. 1. c o l l i e R s i n T e R n aT i o n a l | THailanD The Knowledge Report B a n g Ko K l U x U RY & U P P e R s c a l e H o T e l M a R K e T | 1 s T Q U a RT e R | 2 0 1 0 executive summary The Bangkok hotel market had a good Q1 2010 on the back of a return of robust tourism figures highlighting the enduring appeal of Thailand and its capital city. The future of the market remains uncertain due to the significant new supply of hotel rooms MaRKeT inDicaToRs coming online in 2010 and the following year. This year will herald the greatest addition of new supply of Luxury and Upper scale hotels to Bangkok in its history. Expected supply will continue to 2009 - Q1 2010 be significant through 2011-2012. This is likely to squeeze occupancy levels which in turn will lead to pricing pressures. sUPPlY Recent developments regarding “red shirt” protests have also cast a cloud on the horizon. While as of March 31 they have remained almost entirely peaceful, indications are that they have already DeManD started to adversely affect the hotel market. Thailand’s political instability and outbreaks of protest risk being endemic in the long term and RaTes threaten the prospects for the hotel market in terms of future planning and Bangkok’s development and expansion as a MICE destination. occUPancY The recent growth in tourists coming from India and Middle East has allowed for an underpinning of off peak season demand and Indian tourists are more immune from the upheavels associated with Thailand’s political situation. This can positively affect the Bangkok market but with the resorts, especially Pattaya, being the main beneficiaries.
  2. 2. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market HoTel classificaTion While the Thailand Hotels Association (THA) categorizes ho- produced a classification based on the quality of the hotel as seen tels with a star rating, many hotels do not abide by star rating. through the eyes of the hotel management companies and on the Therefore in this study, Colliers International Thailand have British Hospitality Association classification. Basic oveRview of HoTel classificaTion Budget - hotels with limited to no facilities. Rooms are simple Luxury - spacious and luxurious accommodation throughout with basic furnishings with sizes ranging from 12 to 18 sq m. the hotel, matching the highest international standards. Interior design should impress with its quality and attention to detail, Economy - comfortable, well equipped accommodation, with comfort and sophistication. Furnishings should be immaculate. an en-suite bath/shower room. Reception and other staff aim Services should be formal, well supervised and flawless in atten- for professional presentation that at and offer a wide range of tion to guests’ needs, without being intrusive. The restaurant will straightforward services, including food and drink. demonstrate a high level of technical aptitude, creating dishes to the highest international standards. Staff will be knowledgeable, Mid scale - hotels are usually of a size to support higher staffing helpful, and experienced in all aspects of customer care, combin- levels, and a significantly greater quality and range of facilities. ing efficiency with courtesy. Reception and the other public rooms will be more spacious with a number of restaurants. All bedrooms will have fully en suite For the purposes of this report the use of the word “hotel” shall bathrooms and offer a good standard of comfort and equipment, refer to the Upper Scale and Luxury hotel ratings that are the such as a hair dryer, telephone and toiletries. subject of this report. Hotels below these will be mentioned by their particular category. Upper scale - a degree of luxury as well as quality in the furnish- ings, decor and equipment, in every area of the hotel. Bedrooms will also usually offer more space and be well designed with co-ordinated furnishings and decor. The en-suite bathrooms will have both bath and fixed shower. It will contain a high enough staff to provide services like concierge and porter service, 24-hour room service, laundry and dry-cleaning. The restaurants will provide high quality cuisine. 2 collieRs inTeRnaTional
  3. 3. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market Zoning collieRs inTeRnaTional 3
  4. 4. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market Zoning The centre of Bangkok contains the lion’s share of Luxury and The Southern CBD includes the area bounded by Si Phraya, the Upper scale hotels in the city due to it being the heart for both south side of Rama IV, Sathorn and the eastern side of Charoen- business and tourism. krung. It is primarily a location for offices with limited shopping facilities and reasonable entertainment areas that partially rival Sukhumvit road up to Phrom Phong has its own distinct iden- Sukhumvit. tity due to the location being the main night life entertainment area in the city for foreigners. As these entertainment facilities The Riverside is the biggest player in the Upper scale and extend some way into many of the sois, a large number of Luxury segment due to its attractive location. However supply is hotels are also located away from the main Sukhumvit road. limited in this market and no Mid-scale hotels can be found in Even within this road many sois have there own micro-identities the area. The Thonburi side of the area is considered as the same such as soi 4, 7, 8, 11 and 22. market as the hotel shuttle boats that regularly ply between the two banks are an added attraction for most tourists. The Northern CBD has its borders defined by Phetchaburi to the north to Chalermahanakorn Expressway down to Rama VI but The Western area contains the old city as well as the backpacker also including the area up to Ratchadapisek south of Sukhumvit. area located in Bamglampoo. Whilst this area is awash with This area contains most of the large upper scale shopping malls hotel rooms, there are no Upper or Luxury scale hotels located as well as offices. The emphasis is on a mix of business travelers here and as such is not considered in this report. and family tourists. 4 collieRs inTeRnaTional
  5. 5. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market HisToRical sUPPlY HisToRical sUPPlY fRoM 1995 Source : Colliers International Thailand Research Supply of Luxury and Upper scale hotels in Bangkok continued ply grew more quickly with over 1,000 rooms added each year to grow after the Asian Financial Crisis in 1997 due to the ever after that and the trend is set to continue for this year and next. increasing number of tourists visiting the city possibly spurred on As of Q1 2010 there was a total supply of approximately 14,200 by the weakening of the Baht. About an average of 400 rooms rooms. per year were added from 1998 to 2006. However after this sup- collieRs inTeRnaTional 5
  6. 6. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market lUxURY & UPPeR scale HoTel in BangKoK BY YeaR & locaTion, 1995 – Q1 2010 Source : Colliers International Thailand Research Supply in Northern CBD has shown the biggest movement in the mentioned . In terms of the Luxury/Upper end the area still lags past 15 years from approximately 1,100 rooms in 1995 to more behind the CBD and Riverside areas but has shown rapid growth than 3,400 rooms in Q1 2010, a near three fold increase. While in the latter part of the last decade due to Sukhumvit’s mild the Sukhumvit area is the darling of the Mid scale and Economy gentrification and continuing popularity. scale range, these are not covered in this report as previously BReaKDown of lUxURY & UPPeR scale HoTel RooMs in BangKoK BY locaTion in THe YeaR 2000 Source : Colliers International Thailand Research In the year 2000, the total supply was located in four areas and 35% was concentrated in the Riverside area followed by Southern CBD area with 21%. 6 collieRs inTeRnaTional
  7. 7. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market sUPPlY of RooMs BY Zone – Q1 2010 Source : Colliers International Thailand Research By the year 2010, most areas have expanded their market share operation of international flights from Suvarnabhumi Airport. at the expense of the Riverside. The lack of available land in This is also the reason why there was a reduction in the North- this small area will constantly hamper growth and in some ways ern area’s market share as international airport operations have existing hotels on the Riverside can capitalize on their exclusiv- shifted from Don Muang Airport. ity. The Eastern area has emerged on the radar screen due to the collieRs inTeRnaTional 7
  8. 8. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market sUPPlY BY Zone Source : Colliers International Thailand Research While in every area Upper scale hotels have a greater supply, containing more Luxury hotels whilst the older CBD area of Silom their proportion in relation to Luxury hotels reflects the char- contains a much greater share of Upper scale hotels. acter of each area. The Northern CBD contains the high end shopping malls comparable to what Oxford Street is to London The particular nature of Sukhumvit means far more Upper scale or Orchard Road is to Singapore. Therefore many Luxury hotels hotels in comparison. The distance of the Eastern area and are located there. The Riverside is also known as a prestigious Northern area from the centre explain why no Luxury hotels are area due to its scenic location and again Luxury hotels make located in this area. up a large slice of the hotel market there. The Southern CBD is split between the eastern part of Sathorn road and Rama IV 8 collieRs inTeRnaTional
  9. 9. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market fUTURe sUPPlY fUTURe sUPPlY of lUxURY & UPPeR scale HoTel BY YeaR, 2010 - 2013 Source : Colliers International Thailand Research More than 1,650 rooms are scheduled to be completed in 2010 Sukhumvit area will dominate new Upper scale supply in 2010 which represents an addition of 12% to total supply in 2009 . with the opening of Sofitel Bangkok Sukhumvit, Four Points by Around 2,500 will also be supplied in the Mid scale category. Sheraton and Park Plaza Bangkok Asoke altogether accounting Two hotels in the Luxury end of the market are due to open their for approximately 760 rooms. doors in 2010. The Siam Kempinski (306 rooms) located at the back of Siam Paragon, is scheduled to begin operations in Q2 2010. The 198 room St. Regis Bangkok will open its doors from October 2010 and is located on Rajadamri Road. collieRs inTeRnaTional 9
  10. 10. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market fUTURe sUPPlY of HoTel RooMs BY gRaDe anD YeaR, 2010 - 2013 Source : Colliers International Thailand Research Thailand’s political problems have directly impacted the tourism with a total of 9,400 rooms scheduled from 48 projects by 2013, market in 2009 – 2010, especially Bangkok. In the long term 50% of them are in the Mid scale category followed by Upper however, many investors still remain optimistic regarding future scale and Luxury hotel, with 27% and 23% respectively. potential and are still interested in developing hotels in Bangkok fUTURe sUPPlY of HoTel RooMs BY gRaDe anD YeaR, 2010 - 2013 Source : Colliers International Thailand Research Sukhumvit is the popular area in the future, representing 36% of Sukhumvit has meant that it has attracted a significant number all future supply for Bangkok. Many developers have selected to of boutique style hotels that challenge the existing perceptions develop hotels in this area due to the convenience to the BTS of hotels in the higher categories. Many in the area are indepen- provided along Sukhumvit road which is suitable for tourists and dent, non branded hotels. This represents an interesting invest- business people alike as well as the lively nature of the Sukhum- ment niche for the foreseeable future. However the Northern vit road and its many interesting sois. The eclectic nature of CBD continues to be the main focus for Luxury scale projects. 10 collieRs inTeRnaTional
  11. 11. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market DeManD - occUPancY RaTe aveRage occUPancY RaTe of lUxURY & UPPeR scale HoTel in BangKoK BY gRaDe, Q1 2010 Source : Colliers International Thailand Research Average occupancy rates for Upper scale hotels is significantly pete as people opt for lower rates in exchange for a less luxurious higher than Luxury hotel for Q1 2010. Increasing price sensitiv- experience but still world class facilities. ity from visitors has made it difficult for Luxury hotels to com- occUPancY occUPancY RaTe of lUxURY & UPPeR scale HoTels, 2005 - Q1 2010 Source : Colliers International Thailand Research Occupancy rates declined steadily for three years from 2005. as a result of the “yellow shirts” blockade which left large num- This was the result of growing instability including the 2006 bers of international travelers stranded. Since then occupancy coup as well as a number of health scourges. The nadir for rates have improved. occupancy was at the end of 2008 with the closure of the airport collieRs inTeRnaTional 11
  12. 12. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market DeManD DRiveRs focUs Tourism inTeRnaTional PassengeRs To sUvaRnaBHUMi aiRPoRT MinUs THose in TRansiT Colliers International Thailand Research Source : Airports Authority of Thailand At present the best tourism arrival figures come from the At the end of Q1 protests were taking place in Bangkok that Airports Authority of Thailand regarding passenger numbers. were on the whole peaceful. It was impossible for anybody to However it is difficult to ascertain how many remain in Bangkok predict how these protests would end. Thailand has often faced or simply travel directly to another location such as Pattaya, Hua periods of difficulty in past both internally and externally. It is Hin, Phuket or Samui. Therefore the figures can only be used as interesting to note that according to the Tourism Authority of a rough guide to overall trends. It is hoped that in the future a Thailand about 60% of arrivals to the country are repeat visitors. more detailed breakdown can be provided as was the case in the This compares to just 17% for Malaysia. This is of vital impor- past. tance as it creates an emotional connection with Thailand and as such many will return when the situation is safe. The student The numbers show that demand is back following the travails backpacker who arrived 15 years ago in Banglampoo may be vis- at the end of 2008 and later in 2009. The recent figures for the iting with his or her family today, staying in a Luxury hotel and peak season (Q4/Q1) reveal that tourism numbers are approach- in the future may wish to retire and buy a property here. For ing the levels they were in the 07/08 peak season. For Thailand many foreigners Thailand represents a part of their lives rather the tourism industry is one of the proverbial phoenix from the than just the next holiday destination. ashes. 12 collieRs inTeRnaTional
  13. 13. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market eURoPean visiToRs nUMBeR of ToURisT aRRivals To THailanD fRoM selecTeD MaRKeTs in eURoPe Colliers International Thailand Research Source : Office for Tourism Development The Scandinavian market has risen dramatically in the provider of visitors to Hua Hin so their impact on the Bangkok second half of the last decade but has fallen even faster due to the market is not so important. Steady falls occurred in the UK and current events in Thailand. The Scandinavians are a significant German markets. off PeaK DeManD geneRaToRs One of the key challenges facing hotels in most of the world is this, Bangkok can also take advantage as many visitors are often how to fill up rooms during the off peak season. Often MICE attracted to the big city atmosphere. Two of the most rapidly events are encouraged during such fallow periods. The other growing markets are in South Asia (India, Pakistan etc) and the focus is on markets that buck the trend when it comes to Middle East. seasonal tourism. Although the resort markets benefit more from collieRs inTeRnaTional 13
  14. 14. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market nUMBeR of ToURisT aRRivals To THailanD fRoM THe asia Pacific Region Colliers International Thailand Research Source : Office for Tourism Development The latter half of the last decade witnessed a significant growth that South Asians in general are more resilient to disturbances in travelers to Thailand from South Asia and the Middle East. that affect other markets and have also posted robust econom- This pattern continued last year despite serious drops in other ic growth figures in the midst of a global recession.This is in markets in the Asia Pacific, notably Japan. This would imply contrast to the more sensitive East Asian market. 14 collieRs inTeRnaTional
  15. 15. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market nUMBeR of ToURisTs visiTing THailanD fRoM selecTeD MaRKeTs Colliers International Thailand Research Source : Office for Tourism Development The figure shows the seasonal variations between the Middle Although these figures represent Thailand as a whole, the two East, India and Germany, the latter chosen because of its over- markets are not known for visiting resort destinations except all comparable tourism numbers and that it reflects the general Pattaya, close by to Bangkok. It can therefore be assumed that pattern of demand from western countries. The period of lowest Bangkok benefits from these markets more than other parts of tourism activity occurs in the months of May, June and July. This Thailand for the low season. One downside is that the spending is a period where the European summer holds more attractions power of the South Asian market is relatively low and demand with usually limited holiday periods prior to the August and for Luxury / Upper scale hotels would be limited with Mid and September school holidays. However for the Indian and Middle Economy scale hotels benefitting the most. Eastern markets this is the period when the population seeks better climates away from the searing pre-monsoon heat in India and the scorching summer temperatures in most of the Middle East. Interestingly, while the heavy rains in Bangkok deter many would be travelers, they represent a lesser drawback for those living in arid desert lands. low cosT caRRieRs The emergence of low cost carriers (LCCs) such as Air Asia and stated. Less than 10% of international passengers arriving to Su- Tiger Airways in the region has been a growing trend that is set varnabhumi Airport disembark from the LCCs. The number of to continue. While the initial flights were predominantly short passengers arriving from LCCs has risen from nearly 80,000 in hops, the carriers have looked further afield for longer range 2007 to over 132,000 in 2009. The ability of the LCCs to pen- hauls to countries such as Australia and India. To some degree etrate growing markets such as India and the Middle East are key the existence of cheaper alternatives has led to added demand. to them positively affecting tourism numbers. However the effect of the low cost carriers should not be over collieRs inTeRnaTional 15
  16. 16. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market RaTes aveRage DailY RaTe BY gRaDe 2005 - Q1 2010 Source : Colliers International Thailand Research Hotel rates have fallen since their peak in 2008 reflecting the use of the internet to find rate information for hotels and visitors global economic downturn as well as the aftermath of the are becoming more price sensitive as a result. The Upper scale airport closure and violent incidents during the Songkran festival hotels showed a greater tendency to drop rates in the form of in 2009. Hotels were compelled to cut rates due to stiff competi- special offers. tion for customers. This trend was exacerbated by the growing aveRage DailY RaTe BY gRaDe & locaTion, Q1 2010 Source : Colliers International Thailand Research Luxury hotels in the Northern CBD area command the highest Sukhumvit which is likely due to the importance of the location rates due to its prime location for tourists and business people. being a more significant factor in choice than the hotel itself. The special attractions of the Riverside area account for the The Northern CBD has a far greater difference as there are num- higher rates compared to that of Sukhumvit. The price differ- ber of prestigious hotels with high room rates and a number of entials are smaller between Luxury and Upper scale hotels in more functional Upper scale hotels offering competitive rates. 16 collieRs inTeRnaTional
  17. 17. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market RevPaR RevPaR BY gRaDe Source : Colliers International Thailand Research There has been a slight uptick in RevPAR driven by increased Available Room) should also be taken into account, especially occupancy outpacing drops in rates. It can also be implied that from the Luxury/Upper scale sector which provide a greater array the greater the occupancy the more non-room revenue streams of facilities. Hotels are facing increasing challenges in squeezing are being generated such as from food & beverages. Although as much revenue as they can from its property. RevPAR continues to be main performance metric for hotels, the use of others such as GOPPAR (Gross Operating Profit Per collieRs inTeRnaTional 17
  18. 18. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market foRecasT The hotel market is set for strong headwinds in the next few In the event of protracted or regular upheavels in the country years due to the significant amount of supply coming on stream and Bangkok in particular, Colliers International Thailand fore- over the next few years. This assumes that the political situation sees the possibility of developers reconsidering current plans in Thailand remains stable, which in light of the ongoing pro- to reflect changing conditions and long term optimism being tests in the city centre cannot be taken for granted. replaced by caution. invesToRs focUs The issue of abundant supply of the Luxury hotel segment in the Larger scale hotels should consider reducing the number of res- next few years should cause pause for thought on investors wish- taurants and focus on other peripheral revenue generating outlets ing to enter this market. Movement into the Upper scale range such as specialist spas and health clubs. Thailand may follow the still offers promise but the acquisition of economical land in a trend in the west by subcontracting out F&B and other outlets to reasonable location would weigh heavily in any decision. specialist operators. Future investors should also judge between focusing on special- ized products such as smaller scale boutique style concepts which would allow the hotel to focus on a niche market or develop properties large enough to benefit from economies of scale such as in targeting the MICE market , use of banqueting halls or even aiming for the serviced apartment market. oPeRaToRs focUs Even with high occupancy, hotels will have to continue with the trend of falling prices as consumers become more price savvy due to the copious amount of information on the internet and the range of hotels rooms at all price levels being available. Food and beverages continue to be a significant revenue stream and hotels will have to be more proactive and inventive in maintaining this from guests and non-guests through the promotion of MICE and other revenue generating activities such as anniversaries. The need to attract niche markets is becoming increasingly prev- alent. The growing markets in the Middle East and India can be further broken down by country or region. The South East Asian market spurred by low cost carriers and short term decision making can be targeted with long weekend getaway packages. The nurturing of niche markets and the development of innova- tive revenue generators will focus the minds of operators in these challenging times. 18 collieRs inTeRnaTional
  19. 19. The Knowledge Report | 1st Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market collieRs inTeRnaTional THailanD 480 offices in 61 coUnTRies on 6 conTinenTs ManageMenT TeaM Us$ 1.9 Billion in annUal RevenUe 1.1 Billion sQUaRe feeT UnDeR ASSET MANAGEMENT ManageMenT Wasan Rattanakijjanukul | Manager 15,000 PRofessionals Nukarn Suwatikul | Manager CONSULTANCY Napart Tienchutima | Manager COMMERCIAL / INDUSTRIAL /RETAIL Narumon Rodsiravoraphat | Senior Manager FACILITY / PROPERTY MANAGEMENT Viroj Piromthong | Management Advisor Bandid Chayintu |Associate Director conTacT infoRMaTion HOSPITALITY DEPARTMENT Jean Marc Garret | Director THailanD: INVESTMENT Patima Jeerapaet Antony Picon Nukarn Suwatikul | Senior Manager Managing Director Senior Manager | Research RESIDENTIAL Surachet Kongcheep Patima Jeerapaet | Managing Director Manager | Research RESEARCH & ADVISORY Antony Picon | Senior Manager Surachet Kongcheep | Manager Colliers International Thailand VALUATION Nicholas Brown | Associate Director Bangkok Office : 17/F Ploenchit Center, Klongtoey Thanussorn Aukkrararerksaponk |Manager Bangkok 10110 Tel: 662 656 7000 Fax: 662 656 7111 Email : Pattaya Office : 492/2 Thappraya Road, Nongprue, Banglamung Chonburi 20150 Tel: 6638 364 411-2 Fax: 6638 364 414 Email : This report and other research materials may be found on our website at Questions related to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by colliers international for advertising and general information only. colliers international makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. any interested party should undertake their own inquiries as to the accuracy of the information. colliers international excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. colliers international is a worldwide affiliation of independently owned and operated companies. collieRs inTeRnaTional 19