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Bangkok Hotel Market Report Q4 2010


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2010 was a difficult year for the hotel industry in Bangkok and 2011 promises more of the same for the Upper and Luxury segment. Find out more in this report.

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Bangkok Hotel Market Report Q4 2010

  1. 1. year end 2010 | HOTeLthailandBangkok Luxury & upper ScaLeHoteL Market report Bangkok Luxury & Upper Scale Hotel Market ExEcutivE Summary the Luxury and upper scale hotel market continued to show weakness on account of the after effects of the april/May disturbances and the traditional high season of Q4 did little to raise spirits. occupancy for Q4 was just around 60%, a full ten percentage points below the figure for Q4 2009. markEt indicatorS y/y Middle eastern, Indian and chinese visitors continue to bolster the Bangkok tourism industry 2009 - 2010 which is a welcome support during the low season. However traditional tourist markets, the mainstay of the upper/Luxury segment, remain in the doldrums. Supply Future supply in 2011 and 2012 will further test hotels’ ability to absorb the shocks of the past 18 ratES months. occupancy upper scale hotels are driving rates down to compete with Mid range hotels for the more price revpar conscious tourist and businessperson. Luxury hotels have largely maintained their rates with less incentive to drop
  2. 2. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 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 classification classification.BaSic ovErviEw of hotEl claSSificationBudget – hotels with limited to no facilities. rooms are simple with basic fixed shower. It will contain a high enough staff 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 staff aim for professional Luxury - spacious and luxurious accommodation throughout the hotel,presentation that offers 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 staffing levels, supervised and flawless in attention to guests’ needs, without beingand a significantly 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. Staff willrestaurants. all bedrooms will have fully en suite bathrooms and offer a be knowledgeable, helpful, and experienced in all aspects of customergood standard of comfort and equipment, such as a hair dryer, telephone care, combining efficiency 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 offer 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
  3. 3. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010ZoninG COLLIERS INTERNATIONAL | P. 3
  4. 4. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010the 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 offices 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 defined 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 offices. 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.hiStorical Supply hiStorical Supply By yEar Source: colliers International thailand researchIn 2010 a total of around 1450 rooms were added to supply, with around of 2010 was approximately 15,000.330 rooms added in Q4 of 2010. the total number of rooms at the endCOLLIERS INTERNATIONAL | P. 4
  5. 5. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 additional Supply durinG thE yEarS 2000 – 2010 Source : colliers International thailand researchSince 2007 onwards more than 1,000 rooms were added every year and approximately 1,450 rooms for 2010. luxury & uppEr ScalE hotEl Supply in BanGkok By location Source : colliers International thailand researchafter the financial crisis and aftermath during the years 1998 – 2005 no the biggest movement in the past four years from approximately 2,650new supply was added in the riverside, Sukhumvit and eastern areas, rooms in 2007 to more than around 4,000 rooms by Q4 2010, an overwith only the northern and Southern cBD areas accommodating new 50% during this fallow period. Supply in the northern cBD has shown COLLIERS INTERNATIONAL | P. 5
  6. 6. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 BrEakdown of luxury & uppEr ScalE hotEl roomS in BanGkok By location, Q4 2010 Source: colliers International thailand researchthe highest number of hotel rooms is located in the northern cBD area, remains static until one new hotel is expected to be completed in 2013.representing 27% of the total. In the next two to three years the northern the lack of available land in this small area will constantly hampercBD area will still have the biggest share due to many of the future growth and in some ways existing hotels on the riverside may benefitprojects being located in the area. Supply in the riverside area still from this exclusivity in the future. Supply By ZonE, aS of Q4 2010 Source: colliers International thailand researchWhile in every area upper scale hotel rooms are in greater supply, their contains a much greater share of upper scale hotels.proportion in relation to Luxury hotels reflects the nature of each area.the northern cBD contains the high end shopping malls comparable to the Sukhumvit area contains a greater proportion of upper Scale roomwhat avenida paulista is to Sao paulo or nanjing road is to Shanghai. compared to Luxury ones. the more down to earth nature of this areatherefore many Luxury scale hotels are located there. the riverside is means that fewer Luxury hotels are located here. the distance of thealso known as a prestigious area due to its scenic location and again eastern area and northern area from the centre explain why no LuxuryLuxury hotels make up a large slice of the hotel market. the Southern hotels are located in these areas and only limited number of upper scalecBD is split between the eastern part of Sathorn road and rama IV rooms. also these areas have limited concentration of tourist facilities.containing more Luxury hotels whilst the older cBD area of SilomCOLLIERS INTERNATIONAL | P. 6
  7. 7. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010futurE Supply cumulativE futurE Supply of hotEl roomS By GradE and yEar, 2011 – 2013 Source: colliers International thailand researchnearly 2,150 rooms in the Luxury/upper segments are scheduled to be time. the concern going forward is the number of Luxury hotels that arecompleted in 2011 and more than 3,500 rooms in the next two years are due to be supplied. While tourism arrivals have grown this has comescheduled to be added in the market. from new markets such as china and India and these visitors have a greater propensity to stay in Mid scale and economy scale hotels. targetSome construction projects in the northern cBD area postponed their markets for Luxury and upper scale hotels have remained static or evenopening date to 2011 due to temporarily halting construction during the shown declines such as uk, uSa and Japan. It remains to be seen ifprotests at the rachaprasong junction in april and May. also the overall these markets can rebound. global financial concerns continue to haunttourism downturn and future problems in this regard may lead to some many industrialized nations and fierce competition from other cities inprojects slated for 2012 and 2013 not being completed at the scheduled asia for tourists make this highly uncertain. COLLIERS INTERNATIONAL | P. 7
  8. 8. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 cumulativE futurE Supply of hotEl By location, 2011 – 2013 Source : colliers International thailand researchSukhumvit is the most popular area for developments in the future, investment niche for the foreseeable future. However the northern cBDrepresenting 34% of all future supply for Bangkok. Many developers continues to be the main focus for Luxury scale projects due to itshave selected to develop hotels in this area due to the convenience to the location amongst the most prestigious retail area, offices, embassies andBtS provided along Sukhumvit road which is suitable for tourists and BtS people alike as well as the vibrant nature of the Sukhumvit roadand its many lively back streets. the eclectic nature of Sukhumvit has although thailand has been afflicted with a myriad of problems duringmeant that it has attracted a significant number of boutique style hotels the past three years, Bangkok still remains a popular destination forthat challenge and innovate within the higher end segments. Many in the foreign tourists and business people and so many investors retainarea are independent, non branded hotels. this represents an interesting interest in developing hotels in Bangkok.COLLIERS INTERNATIONAL | P. 8
  9. 9. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010dEmand – occupancy ratE avEraGE occupancy ratE of luxury & uppEr ScalE hotEl durinG thE yEarS 2000 - 2010 Source : colliers International thailand researchaverage occupancy rate in the last five years has been in more or less 52% due to political unrest in Bangkok, the growth in new supply, thesteady decline from the heights of 2004 at more than 75% to around appeal of other cities in the region and the global economic slowdown. COLLIERS INTERNATIONAL | P. 9
  10. 10. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 avEraGE occupancy ratE of luxury & uppEr ScalE hotEl in BanGkok By GradE, for Q1 – Q4 2010 Source : colliers International thailand researchthe protests at the centre of Bangkok seriously impacted hotels around when the situation returned more or less to normal but the peak seasonthe protest site, therefore average occupancy rate in Q2 dropped of Q4 has failed to show strong figures that the industry was hopingapproximately 50 - 55% from Q1 2010. the numbers grew back in Q3 for. occupancy ratE of luxury & uppEr ScalE hotElS, Q1 – Q4 2010 / Source : colliers International thailand researchthe riverside hotels still showed the poorest levels in the last quarter for the leader for upper scale hotels. overall, although the average occupancyoccupancy as the number of higher spending foreign tourists has not rates in Q4 increased from Q3 by more than 5% the average occupancypicked up since Q2. Luxury hotels in the Sukhumvit area has shown the rate in 2010 is still lower than 2009 by approximately 14%.highest occupancy rate for the year, while in the Southern cBD area isCOLLIERS INTERNATIONAL | P. 10
  11. 11. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 avEraGE occupancy ratE of luxury & uppEr ScalE hotEl compariSon BEtwEEn Q4 2009 and Q4 2010 By location / Source : colliers International thailand researchIn what is usually one of the strongest quarters of the year occupancy effects of the violence in May are still having a detrimental effect on theremained in the doldrums compared with the previous Q4 in 2009. In hotel market. this is probably due to a reduction in advance bookingsfact the figures were even lower and especially in the northern cBD from traditional tourism markets.which bore most of the brunt of the protests in april and May. clearly thedEmand drivErS focuStouriSm GuESt arrivalS at accommodation EStaBliShmEntS in BanGkok durinG thE yEar 2007 –2010 Source: Department of tourism and colliers International thailand research remark: e = estimated by colliers International thailand researchalthough tourism numbers were strong compared to the previous nearly 11 million; a decrease of approximately 15% from 2009, due to thequarter, the figures in Q4 2010 are still lower than other years for the political unrest in Q2. Some efforts have been made to entice touristssame quarter. the total number of tourists staying in hotels in 2010 was back to the city but many challenges remain. COLLIERS INTERNATIONAL | P. 11
  12. 12. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010micE markEtthe lucrative MIce market in Bangkok continues to suffer due to the existing convention centres and very strong competition from manyprotests and continued uncertainty. Many organizers do not want to take other cities in the region for the MIce money.the chance of booking in the city during an election year and the previousState of emergency made it difficult to obtain insurance coverage. even In fact efforts are being made to promote the domestic MIce marketafter a resolution to its problems the city will still face difficulties which usually benefits the lower category hotel market.attracting the MIce market. there are limited hotel facilities close toratES avEraGE daily ratE By GradE durinG thE yEar 2005 - 2010 Source : colliers International thailand researchFor the past two years rates have been in steady decline as hotels reduce remained strong in relation to the Baht. However there are concerns thatprices in order to compete for the new growth markets in India, china the market is rushing to the bottom in light of continued problems bothand russia. Bangkok is increasingly becoming a value for money internationally and domestically.destination especially among asia travelers where currencies haveCOLLIERS INTERNATIONAL | P. 12
  13. 13. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 avEraGE daily ratE of luxury hotEl By location, Q1 – Q4 2010 Source : colliers International thailand researchthe riverside emerged again as the most expensive location as it targets profit from the expected increase in visitors which did not materialize. Inquality over quantity especially over the christmas/new year period. some senses Luxury hotels have less price elasticity as this segment isHowever this appeared to be at the expense of any uptick in occupancy. not in direct competition with the lower grade hotels.In all locations rates increased for the peak season as hotels sought to avEraGE daily ratE of uppEr ScalE hotEl By location, Q1 – Q4 2010 Source: colliers International thailand researchthe upper scale hotels are in increasingly in competition with Mid range locations actually reduced prices for the peak season in anticipation ofhotels for the emerging growth markets and as a result rates have the fierce battle for visitors seeking more affordable accommodation.remained on low side. In contrast to Luxury hotels this sector in some COLLIERS INTERNATIONAL | P. 13
  14. 14. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 avEraGE daily ratE of luxury & uppEr ScalE hotEl compariSon BEtwEEn Q4 2009 and Q4 2010 By location / Source : colliers International thailand researchIn the Luxury segment rates were lower in 2010 than the corresponding remained fairly static.quarter of 2009 except the riverside. In the upper segment ratesrEvparrevpar 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 effects of the april/May period on the hotel market in Bangkok.fall in revpar by approximately 28% from 2009. this reflects the fullCOLLIERS INTERNATIONAL | P. 14
  15. 15. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 rEvpar of luxury hotElS By QuartEr & location, Q1 – Q4 2010 Source : colliers International thailand researchthe strong recovery in revpar was recorded in every area while the the riverside increased rates significantly for the peak Q4 whileSouthern cBD was lowest due to poor occupancy rates. the overall maintaining occupancy, hence the sharp increase in revpar.performance of the Southern cBD area is likely in part due to the relianceon tourists rather than a mix of business travelers in the other hotels. rEvpar of uppEr ScalE hotElS By QuartEr & location, Q1 – Q4 2010 Source: colliers International thailand researchrevpar of hotels in the riverside area was the lowest in the upper scale revpar for the Q4 high season.category. Sukhunvit suffered most for Q4 with an actual decline in COLLIERS INTERNATIONAL | P. 15
  16. 16. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010 rEvpar of luxury & uppEr ScalE hotEl compariSon BEtwEEn Q4 2009 and Q4 2010 By location / Source : colliers International thailand researchoccupancy rates and aDrs of each hotel category in Q4 2010 was lower 2009 apart from Luxury hotels in the riverside which recorded a slightthan in the same period of 2009, so revpar in Q4 of 2010 was less than gain.forEcaStthere will be no respite for the Luxury and upper scale hotel market in While tourism figures for thailand on the surface look positive the big2011 as around 2,150 rooms are scheduled to be completed in the year. number hides problems for Bangkok as a tourism destination. on the oneWith ongoing protests in the centre, an election year, continued global hand those seeking exoticism and adventure are increasingly lured byfinancial concerns and Bangkok’s difficulties in attracting visitors; it will cities that have emerged as tourist destinations only recently such asbe difficult to see how such an increase can be absorbed and occupancy Hanoi, phnom penh and Vientiane. For those seeking a more organizedis likely to continue to suffer. However developers and hotel management city with plenty of attractions then Singapore and Hong kong have raisedcompanies are still keen to enter the market and in some ways the hotels their games. In fact Singapore, occupying just a small piece of landare becoming a victim of their own success. without any real beach, can command nearly the same numbers of tourists as the whole of thailand. Bangkok as a city remains much thethe growing numbers of tourists from new markets such as India, china same as it was for tourists ten years ago and has failed to refresh itselfand russia look set to reshape the hotel market in Bangkok. these to attract more visitors and provide them with a reason to return or visitvisitors look for more economical establishments and it appears that for the first time.upper scale hotels are in fierce competition for this growth market withcorresponding reductions in rates. In the future upper scale hotels could private enterprise continues to work hard in the market, the city boastsreduce the facilities in order to better compete in what is likely to be a so many innovative boutique and strong branded hotels that offer guestsmore no-frills style of operation. an experience in itself. However the city and the country as a whole create an image that seems distant from the situation today. the use ofLuxury hotels have less room to maneuver and are likely to maintain “Land of Smiles” and elephants is rather out of date as the relationshiprates as befits their luxury status and just hope for the wealthier tourists between tourist and the city is less warm than in the past; witness theto return in greater numbers. the new supply of Luxury hotels coming treatment of tourists during the frequent weekend alcohol bans. Bangkokonline over the next two years pose enormous problems for this sector is in the mature stage of its tourism cycle while Ho chi Minh city, foralready struggling with occupancy. tourism numbers from key traditional example is in its early stages. this poses new challenges as the citymarkets of europe, Japan and the uSa are key to how this segment must do more to attract people to visit its many charms.copes. the MIce market is underperforming due to the political problemsdeterring organisers from taking the plunge. the recent end of the Stateof emergency could help in the future.COLLIERS INTERNATIONAL | P. 16
  17. 17. BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010colliErS intErnational thailandmanaGEmEnt tEam 480 offices in 61 countries on 6 continentsaDVISory SerVIceS | HoSpItaLIty united States: 135 • the third largest commercialJean Marc garret | Director real estate services company in canada: 39 the world Latin america: 17reSIDentIaL SaLeS & LeaSIng • the second most recognised asia pacific: 194nuttaya Junhasavasdikul | Manager commercial real estate brand eMea: 95 globallyoFFIce & InDuStrIaL SerVIceS • uS$2 billion in annual revenuenarumon rodsiravoraphat | Senior Manager • over 2 billion square feet under managementretaIL SerVIceS • over 15,000 professionalsasharawan Wachananont | Senior ManageraDVISory SerVIceSnapatr tienchutima | associate DirectorreaL eState ManageMent SerVIceS cOLLIerS InTernaTIOnaL THaILand:Bandid chayintu | associate Director Bangkok Office 17/F ploenchit center,InVeStMent SerVIceS 2 Sukhumvit road, klongtoey,nukarn Suwatikul | associate Director Bangkok 10110 thailandWasan rattanakijjanukul | Senior Manager tEl +662 656 7000 fax +662 656 7111reSearcH Email picon | associate Director pattaya OfficeSurachet kongcheep | Senior Manager 519/4-5, pattaya Second road (opposite central Festival pattaya Beach), nongprue, Banglamung, chonburi 20150VaLuatIon & aDVISory SerVIceS tEl +6638 427 771nicholas Brown | associate Director fax +6638 427 772phachsanun phormthananunta | associate Director Email info.pattaya@colliers.compattaya oFFIceMark Bowling | Senior Sales ManagerSupannee Starojitski | Senior Business DevelopmentManager / office Manager rESEarchEr: rESEarchEr: thailand thailand antony picon Surachet kongcheep associate Director | research Senior 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 affiliation of independently owned and operated companies. accelerating