Bangkok Hotel Market Report Q3 2010


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Bangkok Hotel Market Report Q3 2010

  1. 1. Q3 2010 | HOTELTHAILANDBANGKOK LUXURY & UPPER SCALEHOTEL MARKET REPORT Bangkok Luxury & Upper Scale Hotel Market EXECUTIVE SUMMARY The hotel market continued to show weakness on account of the after e ects of the April/May disturbances and the traditional low season. Middle Eastern and Indian visitors continue to bolster the Bangkok tourism industry which is a welcome support during the low season. However traditional tourist markets, the mainstay of the MARKET INDICATORS Y/Y Upper/Luxury segment, remain in the doldrums Q2-Q3 2010 The focus of attention is on Q4 2010 gures which will provide guidance on whether the Bangkok SUPPLY hotel market has fully recovered; further disruptions permitting. DEMAND Concerns remain as to the nation’s course for the future and whether further protests or sporadic violence occurs. Travel advisories based on the continued State of Emergency continue to be a RATES dark cloud on the horizon. OCCUPANCY Future supply in Q4 2010 and 2011 will further test hotels’ ability to absorb the shocks of the past RevPAR 18
  2. 2. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010HOTEL CLASSIFICATIONWhile the Thailand Hotels Association (THA) categorizes hotels with a based on the quality of the hotel as seen through the eyes of the hotelstar rating, many hotels do not abide by star rating. Therefore in this management companies and on the British Hospitality Associationstudy, Colliers International Thailand have produced a classi cation classi cation.BASIC OVERVIEW OF HOTEL CLASSIFICATIONBudget – hotels with limited to no facilities. Rooms are simple with basic xed shower. It will contain a high enough sta to provide services likefurnishings with sizes ranging from 12 to 18 sq m. concierge and porter service, 24-hour room service, laundry and dry- cleaning. The restaurants will provide high quality cuisine.Economy - comfortable, well equipped accommodation, with an en-suiteBath / shower room. Reception and other sta aim for professional Luxury - spacious and luxurious accommodation throughout the hotel,presentation that o ers a wide range of straightforward services, matching the highest international standards. Interior design shouldincluding food and drink. impress with its quality and attention to detail, comfort and sophistication. Furnishings should be immaculate. Services should be formal, wellMid scale - hotels are usually of a size to support higher sta ng levels, supervised and awless in attention to guests’ needs, without beingand a signi cantly greater quality and range of facilities. Reception and intrusive. The restaurant will demonstrate a high level of technicalthe other public rooms will be more spacious with a number of aptitude, creating dishes to the highest international standards. Sta willrestaurants. All bedrooms will have fully en suite bathrooms and o er a be knowledgeable, helpful, and experienced in all aspects of customergood standard of comfort and equipment, such as a hair dryer, telephone care, combining e ciency with courtesy.and toiletries. For the purposes of this report the use of the word “hotel” shall refer toUpper scale - a degree of luxury as well as quality in the furnishings, the Upper Scale and Luxury hotel ratings that are the subject of thisdecor and equipment, in every area of the hotel. Bedrooms will also report. Hotels below these will be mentioned by their particularusually o er more space and be well designed with co-ordinated category.furnishings and decor. The en-suite bathrooms will have both bath andCOLLIERS INTERNATIONAL | P. 2
  4. 4. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010ZONINGThe centre of Bangkok contains the lion’s share of Luxury and Upper The Southern CBD includes the area bounded by Si Phraya, the southscale hotels in the city due to it being the heart for both business and side of Rama IV, Sathorn and the eastern side of Charoenkrung. It istourism. primarily a location for o ces with limited shopping facilities and reasonable entertainment areas that partially rival Sukhumvit.Sukhumvit road up to Phrom Phong has its own distinct identity due tothe location being the main night life entertainment area in the city for The Riverside is the biggest player in the Upper scale and Luxuryforeigners. As these entertainment facilities extend some way into many segment due to its attractive location. However supply is limited in thisof the sois, a large number of hotels are also located away from the main market and no Mid-scale hotels can be found in the area. The ThonburiSukhumvit road. Even within this road many sois have there own micro- side of the area is considered as the same market as the hotel shuttleidentities such as sois 4, 7, 8 11 and 22. boats that regularly ply between the two banks are an added attraction for most tourists.The Northern CBD has its borders de ned by Phetchaburi to the northto Chalermahanakorn Expressway down to Rama VI but also including The Western area contains the old city as well as the backpacker areathe area up to Ratchadapisek south of Sukhumvit. This area contains located in Bamglampoo. Whilst this area is awash with hotel rooms,most of the large upper scale shopping malls as well as o ces. The there are no Upper or Luxury scale hotels located here and as such isemphasis is on a mix of business travelers and family tourists. not considered in this report.COLLIERS INTERNATIONAL | P. 4
  5. 5. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010HISTORICAL SUPPLY HISTORICAL SUPPLY BY QUARTER Source: Colliers International Thailand ResearchAs of Q3 2010 there was a total supply of approximately 14,700 rooms scheduled to be completed and opened during Q4 2010. This year haswith around 300 rooms added in Q3 of 2010 and about 340 rooms heralded a signi cant addition of new supply in Bangkok. ADDITIONAL SUPPLY DURING THE YEAR 2000 – 2010 Source: Colliers International Thailand Research Remark: E = Estimated supplySince 2007 onwards more than 1,000 rooms were added every year and 1,100 rooms already completed.approximately 1,460 are scheduled to be completed in 2010, with around COLLIERS INTERNATIONAL | P. 5
  6. 6. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010 LUXURY & UPPER SCALE HOTEL SUPPLY IN BANGKOK BY LOCATION Source: Colliers International Thailand Research Remark: E = Estimated supplySupply in the Northern CBD has shown the biggest movement in the past player in the Mid scale and Economy scale ranges, these are mostly not2 years from approximately 3,160 rooms in Q1 2009 to more than around covered in this report. In terms of the Luxury/Upper end the area4,000 rooms by Q3 2010, an over 26% increase. It has already overtaken currently lags behind the CBD and Riverside areas but has grown bythe Riverside area as the greatest supply of rooms. This is not surprising 28% since Q2 2009 due to Sukhumvit’s diverse attractions, ever growingat it is located not only in tourist and shopping areas but also in amongst popularity and access to the BTS.o ces and large embassies. While the Sukhumvit area is the dominant BREAKDOWN OF LUXURY & UPPER SCALE HOTEL ROOMS IN BANGKOK BY LOCATION, Q3 2010 Source: Colliers International Thailand Research The highest number of hotel rooms is located in the Northern CBD area, representing 27% of the total. In the next two to three years the Northern CBD area will still have the biggest share due to many of the future projects being located in the area and supply in Riverside area still remaining static until one new hotel is expected to be completed in 2013. The lack of available land in this small area will constantly hamper growth and in some ways existing hotels on the Riverside may bene t from this exclusivity in the future.COLLIERS INTERNATIONAL | P. 6
  7. 7. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010 SUPPLY BY ZONE, AS OF Q3 2010 Source: Colliers International Thailand ResearchWhile in every area Upper scale hotel rooms are in greater supply, their containing more Luxury hotels whilst the older CBD area of Silomproportion in relation to Luxury hotels re ects the nature of each area. contains a much greater share of Upper scale hotels.The Northern CBD contains the high end shopping malls comparable towhat Calle Florida is to Buenos Aires or Bourke Street is to Melbourne. The Sukhumvit area contains a greater proportion of Upper Scale roomsTherefore many Luxury scale hotels are located there. The Riverside is compared to Luxury ones. The more down to earth nature of this areaalso known as a prestigious area due to its scenic location and again means that fewer Luxury hotels are located here. The distance of theLuxury hotels make up a large slice of the hotel market. The Southern Eastern area and Northern area from the centre explain why no LuxuryCBD is split between the eastern part of Sathorn road and Rama IV hotels are located in these areas. COLLIERS INTERNATIONAL | P. 7
  8. 8. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010FUTURE SUPPLY FUTURE SUPPLY OF HOTEL ROOMS BY YEAR, 2010 – 2013 Source : Colliers International Thailand ResearchNearly 1,460 rooms are scheduled to be completed in 2010 and more especially in Northern CBD area, temporary stopped construction duringthan 5,600 rooms in the next three years are scheduled to be added in the protests at Rachaprasong junction in April and May and this mightthe market. At the end of 2010 one luxury hotel will have been added to lead to delays in completion and opening. Also the overall tourismsupply for the whole year. The Siam Kempinski (306 rooms) located in downturn and future problems in this regard may lead to some projectsthe Northern CBD, began operations in August 2010. slated for 2012 and 2013 not being completed at the scheduled time.The instability in Q2 has directly impacted the tourism market especiallyin the city. Many of the hotel projects under construction in Bangkok, CUMULATIVE FUTURE SUPPLY OF HOTEL ROOMS BY GRADE AND YEAR, Q4 2010 – 2013 Source : Colliers International Thailand ResearchAlthough Thailand has been a icted with a myriad of problems during 20% respectively. As tourists seek value for money and the new growththe past three years, Bangkok still remains a favorite destination for markets in India for example generally focus on the lower pricedforeign tourists and so many investors retain interest in developing categories, the case for Mid scale segment development is a compellinghotels in Bangkok. Approximately 55% of the total rooms are in the Mid one. Developers may consider readjusting their plans to take account forscale category followed by Upper scale and Luxury scale, with 25% and this.COLLIERS INTERNATIONAL | P. 8
  9. 9. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010 CUMULATIVE FUTURE SUPPLY OF HOTEL BY GRADE AND LOCATION, Q4 2010 – 2013 Source : Colliers International Thailand ResearchSukhumvit is the most popular area for developments in the future, challenge and innovate within the high end segments. Many in the arearepresenting 34% of all future supply for Bangkok. Many developers are independent, non branded hotels. This represents an interestinghave selected to develop hotels in this area due to the convenience to the investment niche for the foreseeable future. However the Northern CBDBTS provided along Sukhumvit road which is suitable for tourists and continues to be the main focus for Luxury scale projects due to itsbusiness people alike as well as the vibrant nature of the Sukhumvit road location amongst the most prestigious retail area, o ces, embassies andand its many lively sois. The eclectic nature of Sukhumvit has meant that BTS has attracted a signi cant number of boutique style hotels thatDEMAND – OCCUPANCY RATE AVERAGE OCCUPANCY RATE OF LUXURY & UPPER SCALE HOTEL IN BANGKOK BY GRADE, FOR Q1 – Q3 2010 Source : Colliers International Thailand ResearchThe protest at the centre of Bangkok seriously impacted the number of represents the traditional low season so occupancy is expected to su erforeign tourists, so average occupancy rate in Q2 dropped approximately in comparison. The occupancy rates of Luxury & upper scale hotels50 - 55% from Q1 2010 in both hotel categories and some hotels in the improved in Q3 after the media shifted focus to other con icts aroundarea around the protest site were forced to close. However Q2 2010 the world and the situation calmed. COLLIERS INTERNATIONAL | P. 9
  10. 10. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010 OCCUPANCY RATE OF LUXURY & UPPER SCALE HOTELS BY QUARTER Source : Colliers International Thailand ResearchAlthough Q3 2010 represented a strong bounce from the lows recorded Upper and Luxury scale mainstay markets such as USA, Germany, UK,in Q2 during the protests and rioting, occupancy still remains in the Scandinavia and Japan recorded downturns. This is likely as manydoldrums with a y/y comparison with Q3 2009. It is clear that the after tourists in the quarter make longer term bookings due to the schoole ects of the Q2 events continue with many traditional tourist markets holiday period and many were probably put o by the events thatremaining fragile. In fact while overall tourist numbers are up y/y for Q3, appeared on their TV sets in April and May. OCCUPANCY RATE OF LUXURY & UPPER SCALE HOTELS, Q1 2010 - Q3 2010 Source : Colliers International Thailand ResearchThe Riverside hotels showed the poorest gures for occupancy as the western tourists and the traumatic events of May meant that a far greatertraditional markets in Europe, USA and Japan have not picked up since rebound for Q3 was expected. Now the focus of attention will be on theQ2. Overall, although the numbers are up from Q2, the picture for Q3 is peak season and advanced bookings so far are not promising.very disappointing. Q2 represents the low season for Bangkok forCOLLIERS INTERNATIONAL | P. 10
  11. 11. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010DEMAND DRIVERS FOCUSTOURISM GUEST ARRIVALS AT ACCOMMODATION ESTABLISHMENTS IN BANGKOK DURING THE YEAR 2007 – Q3 2010 Source: O ce of Tourism Development, Colliers International Thailand Research Remark: E = Estimated by Colliers International Thailand ResearchAlthough tourism numbers were strong compared to the previous quarter and Luxury hotel rooms. This can be seen in the disconnect betweenthe gures only showed a small increase in comparison from Q3 2009. fairly positive visitor numbers against that of low occupancy rates forThe bounce back from Q2 2010 provides scant encouragement as a Upper and Luxury scale hotels. However some of these hotels arelarge proportion of this increase came from new markets such as India noticing more reservations from these new markets for Upper andand Iran, which with exceptions, are not traditional occupiers of Upper Luxury scale rooms.RATES AVERAGE DAILY RATE BY GRADE Q1 – Q3 2010 Source: Colliers International Thailand ResearchThe Luxury sector has been more prone to the political situation and narrowed as the tourists now visiting Bangkok are demanding moremany have o ered steep discounts to attract guests and maintain a value for money.reasonable occupancy. The gap between Luxury and Upper scale has COLLIERS INTERNATIONAL | P. 11
  12. 12. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010 AVERAGE DAILY RATE OF LUXURY HOTEL BY LOCATION, Q3 2010 Source : Colliers International Thailand ResearchThe need to retain occupancy has meant that rates are being driven to enter into a price war. The Luxury scale hotels have felt greaterdown in the Riverside and Southern CBD. This may be due to the fact pressure as they have reduced rates to attract customers wishing tothat hotels reduced rates for advanced bookings in the wake of events in economise.May. However the appeal of the Sukhumvit area has meant less pressure AVERAGE DAILY RATE OF UPPER SCALE HOTEL BY LOCATION, Q3 2010 Source : Colliers International Thailand ResearchThe Upper scale hotels were able to maintain pricing except for the are already competitively priced for the product that they o er.poorly performing Riverside area. It would appear that Upper scale hotelsCOLLIERS INTERNATIONAL | P. 12
  13. 13. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010REVPARRevPar is the ADR multiplied by the occupancy rate and is arguably the industry.most important metric for analyzing the current health of the hotel REVPAR BY QUARTER IN BANGKOK Source: Colliers International Thailand ResearchThe twin falls in occupancy and room rates led to a subsequent dramatic segments picked up for Q3 with Luxury hotels making gains by reducingfall in RevPAR by approximately 58% from Q1 2010. This re ects the full pricing to increase occupancy.e ects of the April/May period on the hotel market in Bangkok. Both REVPAR OF LUXURY HOTELS BY QUARTER & LOCATION, Q3 2010 Source: Colliers International Thailand ResearchThe strong recovery in RevPAR was recorded in three areas while the a mix of business travelers in the other hotels. The more re ned natureRiverside continues to languish. The overall poor performance of the of the Riverside area may attract the type of tourist who is more likely toRiverside area is likely in part due to the reliance on tourists rather than be repelled by the events in May in Bangkok. COLLIERS INTERNATIONAL | P. 13
  14. 14. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010 REVPAR OF UPPER SCALE HOTELS BY GRADE & LOCATION, Q3 2010 Source : Colliers International Thailand ResearchAs in the Luxury sector the Riverside recorded poor RevPAR gures for entertainment scene; events occurring in other parts of the city do littlethe same reason as stated above. Sukhumvit’s resilience to the travails to a ect the day to day life there. It is also probable that many of theof the city was evidenced by a robust Q3. In some ways the area is self guests in this area are returnees who are familiar with the ups andcontained with a mix of residential, hotels, retail as well as a lively downs in the city and continue to return.COLLIERS INTERNATIONAL | P. 14
  15. 15. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010FORECAST – TWO VIEWSAt this juncture it is di cult to predict where the hotel market is heading this particular report. Hopefully by the end of Q1 2011 a more clearerin the future. Therefore two opposing forecasts have been adopted for picture will emerge of where the industry is headed.THE POSITIVE VIEWThe tourist represents the eternal phoenix from the ashes. Undaunted by past more bookings will made and tourists will come ocking back to thenatural and man-made disasters, within a year or two they return again country for the high season. While the new supply of hotels will provideto enjoy the wonders of the a ected country. Thailand is no exception. challenging times for the industry, new markets in India, Russia and theThe land of smiles remains despite the events of May and around 60% Middle East are growing rapidly and are also providing strong numbersof tourists to this country are returnees. This is an important number as for the traditional low seasons of Q2 and Q3. The strong growth ofmany are less likely to be fazed by recent events and maintain a close tourism in Asia will soon be witnessed again in Thailand.connection with the country. By contrast the gure for Malaysia is lessthan 20% and so any serious negative event would impact tourism far Bangkok bounced back strongly from the events in May and retains itsmore. The hospitality that Thailand is so famous for cannot be simply strong blend of culture, entertainment and shopping which will continuereplicated. to entice tourists to visit the City of Angels.Although traditional markets are slow in returning to the country this islikely due to fewer advance bookings being made during the events ofApril and May. In all likelihood now that time is becoming a thing of theTHE DARK VIEWThe tectonic plates of Thailand’s tourism industry may be shifting and vibrant nightlife. Manila has built more tourist attractions and has seenBangkok in particular. While the country is bene ting from the stellar numbers rise. Hong Kong still attracts shoppers and theme park visitorsgrowth of the “RIM” markets (Russia, India & Middle East) who accounted from around the world. New cities appear on the radar screen withfor nearly 16% of total foreign arrivals by air in Q3 2010, these new dynamic Saigon and Hanoi in Vietnam and the colonial and culturalmarkets do not represent at the present time strong growth opportunities appeal of Phnom Penh. Time was when a visit to Bangkok brought kudosfor the Upper to Luxury end of the market as many visitors are keen on to the traveler in his or her own country, now the city is not much moremore a ordable, no-frills accommodation. exotic than Benidorm in the eyes of many and other less ventured cities become more appealing as a ‘wow’ destination. With the signi cantThe mainstay of the Upper/Luxury market is now under threat even in amount of new supply coming on stream, Luxury and Upper scalethe longer term. While the appeal of Bangkok remains for European, hoteliers cannot rely on sophisticated, generous travelers returning toAmerican and Japanese tourists, many now may be avoiding Bangkok their establishments. The hotels may hold their noses when the busloadsand head directly for the resorts as many now o er international of baseball hat wearing package tourists following ags enter their doors,accommodation, retail and entertainment facilities that can even rival the but they must embrace them because they are the only means ofcapital. Frequent alcohol bans, cumbersome immigration regulations, survival.armed police on the streets and tra c gridlock are gradually erodingThailand’s and especially Bangkok’s special status among westerntourists.Other big cities are luring tourists more than ever. Singapore as sin city?Hair cuts at the border a distant memory, think now of casinos and a COLLIERS INTERNATIONAL | P. 15
  16. 16. BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 2010COLLIERS INTERNATIONAL THAILANDMANAGEMENT TEAM 480 o ces in 61 countries onPROJECT SALES & MARKETING 6 continentsWasan Rattanakijjanukul | Manager United States: 135 The third largest commercial Canada: 39 real estate services company inADVISORY SERVICES the world Latin America: 17Napatr Tienchutima | Manager The second most recognised Asia Paci c: 194 commercial real estate brandOFFICE, INDUSTRIAL & RETAIL SERVICES EMEA: 95 globallyNarumon Rodsiravoraphat | Senior Manager US$2 billion in annual revenue Over 2 billion square feet underREAL ESTATE MANAGEMENT SERVICES managementBandid Chayintu | Associate Director Over 15,000 professionalsADVISORY SERVICES | HOSPITALITYJean Marc Garret | DirectorINVESTMENT SERVICESNukarn Suwatikul | Senior Manager COLLIERS INTERNATIONAL THAILAND: Bangkok O ceRESIDENTIAL SALES & LEASING 17/F Ploenchit Center,Patima Jeerapaet | Managing Director 2 Sukhumvit Road, Klongtoey, Bangkok 10110 ThailandRESEARCH TEL +662 656 7000Antony Picon | Senior Manager FAX +662 656 7111Surachet Kongcheep | Manager EMAIL Pattaya O ceVALUATION & ADVISORY SERVICES 519/4-5, Pattaya Second Road (Opposite Central FestivalNicholas Brown | Associate Director Pattaya Beach), Nongprue, Banglamung, Chonburi 20150Phachsanun Phormthananunta | Manager TEL +6638 427 771 FAX +6638 427 772PATTAYA OFFICE EMAIL info.pattaya@colliers.comMark Bowling | Sales ManagerSupannee Starojitski | Business Development Manager RESEARCHER: RESEARCHER: Thailand Thailand Antony Picon Surachet Kongcheep Senior Manager | Research Manager | Research EMAIL 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 a liation of independently owned and operated companies. Accelerating