Market Research hotel overview BANGKOK 4 & 5 STAR HOTEL SECTOR OVERVIEW 2008 | j an u ary | 2 0 0 8
c o l l i e r s i n t e r n at i o n a l
HOTEL O V ERV IE W
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| Thailand
J ANUARY
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2008
BANGKOK 4 & 5 STAR HOTEL SECTOR OVERVIEW 2008 Market Indicators 2007
2008F
Supply
Demand
Occupancy (%)
ADR
RevPAR
BAngkok 4 & 5 Star hotel
Although investment activity has been relatively quiet over the past two years, there is growing international recognition of the potential growth prospects of the Bangkok market, and a number of international investors and brands can be expected to make moves into this sector over the coming years.
Thailand’s economic growth over the last few years has been on the back of the global economic boom which has had a profound impact on corporate operated hotels worldwide. Since the year 2004, there has been an unprecedented number of developments in the upper tier 4 and 5 star hotel sector, not only in Bangkok city but other popular resort areas in Thailand as well. Strong global economic growth continues to drive this demand-led trend, with the tourism sector fully benefiting from these development. Despite this strong growth, hotel operators in Thailand have had an increasingly difficult time of late due to political uncertainties which has placed considerable competitive pressure on operators. Apart from the increased supply of new 4 and 5 star hotels, other competing factors came into play; namely, a contracting corporate travel market (due to a slower economic performances), higher Baht exchange rate, uncertainty in government policies and more competition from a number of new hotel and serviced apartment operators. Although investment activity has been relatively quiet over the past two years, there is growing international recognition of the potential growth prospects of the Bangkok market, and a number of international investors and brands can be expected to make moves into this sector over the coming years. The top tier market, which comprises of 4 and 5 star hotels saw vacancies levels increase after the relatively peaceful military coup in September 2006 where average room rates for the luxury market increased slightly by around 1.6 percent. Luxury hotels targeting corporate clients generally suffered more than FIT or leisure focused hotels. The corporate or business hotels, which are characterized by 60% corporate and 40% leisure guests in the Central Business District (CBD) experienced a tougher time due to lower business activity and poor economic performances whilst The ‘tourists’ hotels with 75% leisure and 25% corporate guests located along the Chao Phraya River fared much better due to fairly strong tourism numbers. As most hotel rates are quoted in US dollar terms, the revaluation of the baht since 2006 has made Thailand a more expensive destination and hence did not improve demand for hotels as expected. Recent trends in Bangkok revealed that relativity few 1,2 and 3 star hotels are being developed, but rather a number of new 4 and 5 star hotel developments are being constructed, as well as boutique (Dream Hotel and Le Fenix Hotel) and budget type hotels (such as IBIS and future Tune Hotels) This research paper looks at the main 4 and 5 star hotel locations in Bangkok, supply and demand changes, and highlights potential investment opportunities which may arise.
www.colliers.com/thailand
Source : Colliers International Thailand
Major 4 & 5 Star Hotel Areas in Bangkok
The Knowledge Report | January | 2008 | Bangkok Hotel Market
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The Knowledge Report | January | 2008 | Bangkok Hotel Market
HOTEL LOCATIONS IN BANGKOK
At first glance the location of hotel projects in the city of Bangkok appears to be haphazard; however, after more thorough analysis four and five star hotels can be divided into five areas or pockets of concentration : • THE RIVERSIDE AREA
HOTEL LOCATIONS IN BANGKOK Riverside Area - Charoenkrung Road - Charoen Nakorn Road
This is the area that stretches along both banks of the Chao Phraya River southward just past the Sathorn Bridge and to the north of Sipraya Road. The river area has historically been the site favoured by large established hotels.
Recently the area has lost some of its allure because of traffic congestion, flooding and associated difficulties, as well as increased accommodation options elsewhere in the city. Despite this many of the hotels in the area such as the Oriental, the Peninsula, the Shangri La, Millenium Hilton and Marriott Resort and Spa have excellent reputations at the top end of the Bangkok market. This popular leisure travelers precinct boasts a total supply of 3,273 keys.
Future New Supply along the Riverside Hotel Name
Star Rating
Est. Completion
No. of Rooms
Planned Project
Luxury
2010
100
Planned Project
Luxury
2010
150
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
• CENTRAL AREA
HOTEL LOCATIONS IN BANGKOK Central Area - Ploenchit Road - Wireless Road - Langsuan Road - Rajdamri Road - Ratchaprasong Road - Rama I Road - Phayathai Road
The central covering areas along Rama I, Phayathai, Rajdamri, Wireless, Ploenchit and Langsuan Roads. This area is again convenient for both business travelers and tourists, because of its proximity to many of the office buildings and local attractions. The Grand Hyatt Erawan, The Intercontinental, Holiday Inn, Four Seasons Hotel, Courtyard by Marriott,
the Conrad, among others, are located in this section of the city with approximately 2,654 keys. The newly announced Starwood’s St Regis Hotel is scheduled to be opened in 2010.
Future New Supply in Central Hotel Name
Star Rating
Est. Completion
No. of Rooms
Centara Grand
Luxury
2008
505
Renaissance Bangkok Ratchaprasong
Luxury
2009
333
Siam Kempinski
Luxury
2009
300
St Regis Bangkok
Luxury
2010
198
Planned Project
Luxury
2011
NA
Planned Project
Luxury
2011
NA
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
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• SUKHUMVIT AREA
This is the section of Sukhumvit Road between Soi 1 and Soi 39 to the north and Soi 2 and Soi 26 to the south. This popular area with expatriates and tourists spans includes the Asoke Intersection on the west to the Emporium Mall to the east. Hotels in the vicinity include The Landmark, Grande Sheraton Sukhumvit, Westin Grande
Sukhumvit, Milliennium Grand Sukhumvit, Davis Hotel, Majestic Grand, Grand Sofitel Sukhumvit and Carlson’s new Park Plaza, to name a few. Recent trends include new budget and boutique hotels such as Le Fenix and The Dream Hotel. Crown Plaza and The Regent Bangkok are earmarked to be developed by 2009. In total there are 1,986 hotel keys.
Future New Supply in Sukhumvit
SUKHUMVIT AREA Sukhumvit Road between Soi 1 and Soi 39 to the north and between Soi 2 to Soi 26 to the South.
Hotel Name
Star Rating
Est. Completion
No. of Rooms
Sofitel Sukhumvit
Luxury
2008
128
Crowne Plaza Sukhumvit
Luxury
2009
380
The Regent Bangkok
Luxury
2009
346
S31
Luxury
2009
150
The Watt
Luxury
2010
300
Aloft Bangkok
Luxury
2010
308
Radisson Suite
Luxury
2011
448
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
• CENTRAL BUSINESS DISTRICT AREA (CBD)
This is the area that encompasses Surawongse Road and Silom Road. It is an established business location with quick access to Sathorn and Wireless Road CBD corridors, Sukhumvit and the riverside areas. The area has a supply of approximately 2,079 4 – 5 Star hotel rooms.
The Sofitel Silom, Lebua at State Tower Hotel, Holiday Inn Silom, Dusit Thani, and Pan Pacific are located here. New hotels currently being developed include the Le Meridien Hotel in Suriwongse Road by TCC Land.
Future New Supply in CBD Hotel Name
CENTRAL BUSINESS DISTRICT AREA (CBD) Silom Road, Surawongse Road, Siphaya Road, Rama 4 Road.
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Star Rating
Est. Completion
No. of Rooms
Le Meridien
Luxury
2008
282
Aloft Bangkok
Luxury
2010
130
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
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• SATHORN AREA
This is generally a popular business precinct. Hotels in this area include the Banyan Tree and the Metropolitan. The Sukhothai Hotel is an example of a top quality hotel in this area which boasts approximately 210 keys. W Hotel is currently under development in this area at Sathorn Square by Golden Land Public Company Limited Future New Supply in Sathorn Hotel Name
SATHORN AREA Sathorn North and South Narathiwad Ratchanakarin Road.
Star Rating
Est. Completion
No. of Rooms
Radisson Hotel Sathorn
Luxury
2008
300
Soffitel Veranda
Luxury
2009
200
W Hotel
Luxury
2011
400
Planned Project
Luxury
NA
NA
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
• OTHER AREAS
Most of the remaining hotels comprising 2, 3 and 4 stars are scattered across the city including Phayathai, Petchaburi, Vibhavadee Rangsit, Ratchadapisek and Rama 9 Roads, Victory Monument, etc. The recent addition of the Pullman Bangkok Kingpower Hotel near the Victory Monument at Rangnam comprised of a ‘chic designer’ theme hotel adjacent to the Kingpower duty free shopping complex. The total stock for this area is 993 rooms. Future New Supply in Other Areas Hotel Name
Star Rating
Est. Completion
No. of Rooms
Four Points by Sheraton
Luxury
2009
430
The Siam on The River
Luxury
2011
NA
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
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SUPPLY OF 4 & 5 STAR HOTELS
In 2007, the five major areas in Central Bangkok had a total supply of 11,582 keys with 4,880 keys in the 5 star category and 6,702 keys in the 4 star category. In recent years, Riverside has developed into a strong leisure base whilst the Central Business District has become more business-oriented with a larger composition of corporate clients.
Current supply is most concentrated in the Riverside area, followed by Central and Sukhumvit areas. The Riverside area commands about 28 percent of the total supply for 4 and 5 star hotels followed by the Central area with 23 percent of the total Bangkok supply.
Graph 1: Hotel Supply in Bangkok as of Jan, 2008
SUPPLY OF 4 & 5 STAR HOTELS Current supply is most concentrated in the Riverside area, followed by Central and Sukhumvit areas.
Other, 993, 9% Riverside, 3,273, 28%
Sathorn, 597, 5%
CBD, 2,079, 18%
Central, 2,654, 23% Sukhumvit, 1,986, 17%
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
NEW SUPPLY
Due to land availability in the Sukhumvit area, new supply of 4 and 5 star hotel projects has focused on this area recently. By 2011, Sukhumvit will surpass the Riverside area in having the highest concentration of 4 and 5 star hotel keys in Bangkok with 4,046 keys or more than double room availability in 2007. Room supply in the Central area will increase
by 50% by 2010 to reach 3,990 keys by 2010, while the Riverside area has 2 projects under planning with approximately 250 new keys expected to be completed in 2010.
Graph 2 : Hotel Future Supply in Bangkok, 2011
NEW SUPPLY By 2011, Sukhumvit will surpass the Riverside area in having the highest concentration of 4 and 5 star hotel keys in Bangkok with 4,046 keys or more than double room availability in 2007.
Keys 5,000 4,500 4,000 3,500
250
3,000
1,336 2,060
2,500
130
2,000 1,500
3,273
2,654
1,000
1,986
2,079
900
500 0
597
Riverside
Central
Sukhumvit
CBD
Sathorn new supply
430 993
Others
Location
current supply
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
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In terms of star rating, new development in the 5 star category is expected to outstrip 4 star by a ratio of 2.1 to 1, with some 3,478 new 5 star keys by 2011 (71% increase) as against 1,628 keys new 4 star category (24% growth). Graph 3: Hotel Future Supply in Bangkok, 2011 by Class Keys 1,559
1,600 1,400 1,200
NEW SUPPLY BY CLASS The new development in the 4 & 5 star category is expected to be 1,628 keys and 3,478 keys respectively.
1,000
5 star new hotel
886
4 star new hotel
800 633
580
600
400
400
448
300
300
200 0
Location 2008
2009
2010
2011
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
Table 1 : Summary of new supply of 4 and 5 star hotels in Bangkok No.
Hotel Name
Location
Est. Completed
No. of Room
1
2 Planned Projects
Riverside
2010
250
2
Aloft Bangkok
CBD
2010
130
3
Sofitel Sukhumvit
Sukhumvit
2008
128
4
Crowne Plaza Sukhumvit
Sukhumvit
2009
380
5
The Regent Bangkok
Sukhumvit
2009
346
6
S31
Sukhumvit
2009
150
7
The Watt
Sukhumvit
2010
300
8
Aloft Bangkok
Sukhumvit
2010
308
9
Radisson Suite
Sukhumvit
2011
448
10
Centara Grand
Central
2008
505
11
Siam Kempinski
Central
2009
300
12
Renaissance Bangkok Ratchaprasong
Central
2009
333
13
St Regis Bangkok
Central
2010
198
14
Planned project
Central
2011
NA
15
Planned project
Central
2011
NA
16
Radisson Hotel Sathorn
Sathorn
2008
300
17
Sofitel Veranda
Sathorn
2009
200
18
W Hotel
Sathorn
2011
400
19
Planned Project
Sathorn
NA
NA
20
Four points by Sheraton
Other
2009
430
21
The Siam on The River
Other
2011
NA
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
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THAILAND’S ECONOMY
THAILAND’S ECONOMY Internally, a number of factors have affected the Thai Economic situation. The political situation is mostly of primary concern for business travelers & international leisure travelers. The Election held on 23 December 2007 considered to have been one of the key determinants in renewing business confidence, consumer confidence, and international tourist confidence.
According to the World Bank, the gross domestic product (GDP) of Thailand grew by 4.3% in 2007, which represents a fall of 5% from 2006. It is anticipated that the GDP in 2008 will grow by 4.6%. Lower interest rates and higher consumer confidence will help improve consumer spending. The inflation rate in 2007 fell to 2.2% from 4.7% in 2006, and is forecasted to rise by around 3% in 2008. The Consumer Confidence Index has been declining every month since the beginning of the year, from 24 in January 2007 to 13.5 in November; however it then started to increase, and reach 18.8 in December 2007. Internally, a number of factors have affected the Thai Economic situation. The political situation is
mostly of primary concern for business travelers & international leisure travelers. The Election held on 23 December 2007 considered to have been one of the key determinants in renewing business confidence, consumer confidence, and international tourist confidence. The GDP for hotel service grew by 4.1% at the end of 2007, due to a rise in tourist numbers.
INTERNATIONAL TOURISTS ARRIVALS TO THAILAND
Official figures from the Tourism Authority of Thailand (TAT) revealed that between 2003 and 2006, tourist arrivals increase annually. However, the numbers dropped in 2007 following the September 2006 military coup and the 2007 New Year bombings as well as the economic slowdown during the past year. Leisure travelers have curtailed their travel plans to the kingdom since the bombings
whilst the business clients, locally and internationally have reduced hotel usage. This also caused a decline in the use of MICE (Meeting, Incentive, Conference, Event) facilities. The chart below depicts the declining foreign tourists into Thailand following the coup and New Year’s Eve bombings.
SEPTEMBER COUP 2006 AND NEW YEAR'S EVE BOMBING Graph 4 : The number of International Tourist Arrivals at hotels in Bangkok between Q1’06 and Q4’07 Persons New Year’s Eve Bombings
3,500,000 3,000,000 2,500,000 2,000,000
INTERNATIONAL TOURISTS ARRIVALS TO THAILAND The number of tourist arrivals at Bangkok hotels declined by 6.7 percent year-on-year in 2007 from just over 10.5 million hotels guests at the end of 2006 to just over 9.5 million towards the end of 2007.
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The Sept 19 Coup
1,500,000 1,000,000 500,000 0
Period Q1 2006
Q2 2006
Q3 2006
Q4 2006
Q1 2007
Q2 2007
Q3 2007
Q4 2007
Source : Tourism Authority of Thailand (TAT)
Official figures from the Tourism Authority of Thailand (TAT) revealed that the number of tourist arrivals at Bangkok hotels declined by 6.7 percent year-on-year in 2007 from just over 10.5 million hotels guests at the end of 2006 to just over 9.5 million towards the end of 2007. The following chart shows the number of tourist arrivals at hotels in Bangkok between 2003 and 2008F
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Graph 5 : The number of International Tourists Arrivals at hotels in Bangkok between 2003 and 2008F Persons 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000
INTERNATIONAL TOURISTS ARRIVALS TO THAILAND The number of tourists from Malaysia and Singapore dropped significantly, by 23.22% and 61.77% respectively.
0
Year 2003
2004
2005
2006
2007
2008f
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
INTERNATIONAL TOURISTS ARRIVALS TO THAILAND
From data obtained from the Tourism Authority of Thailand (TAT) which is illustrated below in tabular form, it is clear to see that the number of Asian tourists has been on the increase yearly between 2003 and 2006. This is despite the fact that the number of tourists from Malaysia and Singapore
dropped significantly, by 23.22% and 61.77% respectively due to newly implemented immigration regulations. Good growth is seen from European, Russian and Israel tourists over the period. However, a slight drop in European tourist arrivals occurred in 2006 due to the coup.
Graph 6 : The number of Malaysian & Singaporean Tourists at hotels in Bangkok between 2003 and 2007 Persons 1,400,000 1,200,000 1,000,000 800,000
Singapore
600,000
Malaysia
400,000 200,000 0
Year 2003
2004
2005
2006
2007
Source : Tourism Authority of Thailand (TAT)
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Table 2 : International tourist arrivals at hotels in Bangkok by COUNTRY, 2005 - Q3 2007 Country
INTERNATIONAL TOURISTS ARRIVALS TO THAILAND From the breakdown of international travelers at accommodation in Bangkok, visitors from Asia (Japan, China, India, Singapore), Europe (UK, Germany, France), USA, Australia and the Middle East make up the majority of in bound travelers to Thailand.
2005
2006
Q1 - Q3 2006
Q1 - Q3 2007
% Change 3Q 06-0-3Q 07
Malaysia
378,356
370,188
265,360
215,360
-23.22%
Singapore
849,343
618,853
416,266
257,316
-61.77%
China
977,236
1,357,387
1,067,520
798,455
-33.70%
Hong Kong
430,842
442,632
352,164
239,154
-47.25%
Japan
1,502,734
1,495,912
1,035,473
998,699
-3.68%
Korea
240,697
305,185
184,829
236,455
21.83%
India
430,754
361,156
285,012
302,400
5.75%
Taiwan
298,874
433,269
328,350
196,617
-67.00%
Other Asian
431,077
528,517
380,455
402,563
12.20%
Asia
5,539,913
5,913,099
4,315,429
3,647,019
-18.33%
France
229,401
250,738
193,668
213,624
9.34%
Germany
355,711
343,922
245,544
313,881
21.77%
UK
529,840
494,990
372,748
382,601
2.58%
Other European
904,130
885,571
679,625
696,255
-5.91%
Europe
2,019,082
1,975,221
1,491,585
1,606,361
7.15%
USA
609,367
682,083
518,412
394,262
-31.49%
Other America
NA
33,508
23,837
47,239
49.54%
Canada
101,543
111,551
84,484
78,278
-7.93%
Americas
710,910
827,142
626,733
519,779
-20.58%
Australia
434,608
442,982
341,104
304,084
-12.17%
New Zealand
78,485
66,705
54,930
53,754
-2.19%
Oceanic
513,093
509,687
396,034
357,838
-10.67%
Israel
99,331
77,827
51,499
64,731
20.44%
Middle East
355,603
465,599
401,392
286,573
-40.07%
Middle East
454,934
543,426
452,891
351,304
-28.92%
East Europe
155,834
204,832
123,113
174,345
29.39%
South Africa
89,325
47,595
28,141
38,755
27.39%
Other
1,036,663
652,143
487,275
386,628
-26.03%
Total tourist
10,519,754
10,673,145
7,921,201
7,082,029
-11.85%
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
The Airport Authority of Thailand has implemented the new immigration clearing regulations in which all passengers transiting at a non-international airport will have to clear the immigration at Suvarnabhumi International Airport or any other Thai International Airport. This is not expected to significantly affect inbound numbers to Bangkok, since a large proportion of international tourists either initially disembark in Bangkok and fly internally at a latter date, or travel by coach or train.
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From the breakdown of international travelers at accommodation in Bangkok, visitors from Asia (Japan, China, India, Singapore), Europe (UK, Germany, France), USA, Australia and the Middle East make up the majority of in bound travelers to Thailand. More than half of the total visitors or 52 percent come from the Asian region in 2007.
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Graph 7 : International Tourists arrivals at hotels in Bangkok : 2003 to 2007 Persons 12,000,000
10,000,000 Others South Africa East Europe Middle East Oceanic America Europe Asia
8,000,000
INTERNATIONAL TOURISTS ARRIVALS TO THAILAND Leisure travelers have curtailed their travel plans to the kingdom since the bombing whilst the business clients, locally and internationally have reduced hotel usage.
6,000,000 4,000,000 2,000,000
Year
0
2003
2004
2005
2006
2007
Source : Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
Graph 8 : International Tourists arrivals at hotel accommodation in Bangkok in 2007 by region
5% 5%
2% 1%
5% 52%
7%
Asia Europe America Oceanic Middle East East Europe South Africa Others
23%
INTERNATIONAL TOURISTS ARRIVALS TO THAILAND More than half of the total visitors or 52 percent come from the Asian region in 2007.
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
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Thailand’s top five fastest growing tourist markets Country
Percent Growth 3Q 06-o-3Q 07
Latin America
49.54%
Russia
34.51%
Austria
31.86%
Netherland
22.69%
Germany
21.77%
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
SEASONALITY OF THAILAND'S TOURISTS ARRIVALS The number of tourist's records peak numbers during the fourth quarter of each year and continues to rise in the first month of the first quarter.
The decline in tourism seems to relate closely to perceived political/ security problems, economic problems, and the strengthening of the Thai Baht which makes Thailand more expensive for travelers. Vietnam, China and the Middle East have seen high economic growth in their own countries and this is reflected in the big jumps in tourist arrivals from these countries. All in all, the ‘value for money’ advantage of Thailand, its warm and friendly people, great culture, delicious food, sophisticated hospitality industry, and added attractions such as medical tourism, MICE facilities, and spa and health attractions, as well as the countries amazing natural beauty are some positive factors that will continue to attract tourists. According to the recent Asia Pacific Tourism Forecasts 2007-2009 report which was recently
released by the Pacific Asia Travel Association (PATA), Thailand will be one of the biggest beneficiaries, gaining almost US$13 billion (or 435 billion) Baht by 2009 in additional tourism revenue. Other markets likely to receive strong receipt growth over the forecast period include Malaysia with close to US$11 billion; China (PRC) with US$36 billion; and Macau SAR with US$5 billion. The predicted windfall for Thailand follows on from the results of the recent Asia Travel Intentions Survey 2007 which revealed that nine percent more travelers were looking at Asia as their next travel destination. One in five ranked Thailand as their most likely destination with 84% of Swedish respondents most likely to consider the destination for a holiday within the next two years.
SEASONALITY OF THAILAND’S TOURIST ARRIVALS
The tourism sector is also affected by the seasonal changes in tourist arrivals. From empirical data, the number of tourist’s records peak numbers during the fourth quarter of each year and continues to rise in the first month of
the first quarter. It then declines and plateaus in the second quarter. However, the rebound is generally strong again in the third quarter of the year. The chart below shows quarterly seasonality changes between 2005 and 2006.
Graph 9 : Quarterly number of tourist arrivals at hotels in Bangkok between 2005 and 2006 Persons 4,000,000 3,500,000 3,000,000 2,500,000
2005
2,000,000
2006
1,500,000 1,000,000 500,000 0
Quarter Q1
Q2
Q3
Q4
Source : Tourism Authority of Thailand (TAT)
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AVERAGE LENGTH OF STAY
It is interesting to note that the average length of stay in Bangkok has decreased from over 2 nights in 2003 to 1.83 nights in 2006. The length of stay is expected to remain the same for 2008 and 2009. However, more MICE business are expected within the CBD from the newly opened Centara World Hotel Convention Center in the heart of Ratchaprasong, a fully integrated world class
AVERAGE LENGTH OF STAY The average length of stay in Bangkok has decreased from over 2 nights in 2003 to 1.83 nights on 2006, however the average length of stay is expected to remain the same for 2008 and 2009.
convention venue offering a city center MICE venue of over 10,000 square meters. This venue can accommodate events of up to 6,000 delegates at any time, and is likely to lengthen the average number of days spent in Bangkok, as well as improving overall occupancy rates.
Graph 10 : Average length of stay of International Tourist arrivals at hotels in Bangkok between 2003 and 2008F Days 2.05
2.02
2.00
2.01 1.97
1.95 1.90
1.90
1.87
1.85
1.83
1.80 1.75 1.70
Period 2003
2004
2005
2006
2007
2008f
Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research
OCCUPANCY RATE
OCCUPANCY RATE The occupancy rate for the overall Bangkok hotel market is forecasted to be around 71% in 2008, showing a positive growth rate of 5% from 2007.
The average occupancy rate for the Bangkok hotel market increased between 2003 and 2005. However, the 2006 occupancy rate dropped by 2.08% to 67.63% from 69.71% in 2005. The 2006 military coup had a devastating effect upon Thailand’s MICE business. Most organisers tried to move forward with their scheduled events but were finally forced to cancel because some of their important speakers/delegates choose not to travel to Thailand. Although the political
situation has stabilised, the New Year’s Eve bombings had another damaging impact. However, demand for Bangkok hotels did improve by the 3rd quarter of 2007 following two down quarters. The occupancy rate for the overall Bangkok hotel market is forecasted to be around 71% in 2008, showing a positive growth rate of 5% from 2007 despite the fact that a number of additional rooms will be added to the market in 2008.
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The Knowledge Report | January | 2008 | Bangkok Hotel Market
4 and 5 Star Hotel Occupancy 2005-2007 Due to Bangkok’s New Year’s Eve bombings in 2007 coupled with political and economic uncertainties, the average occupancy rate in 2006 for 4 and 5 star hotel segment dropped by 2% to 76.04% from 77.55% in 2005 and
the average occupancy rate dropped by 7% from 2006 to 71.05% in 2007. The occupancy rate for 4 and 5 star hotel market is forecasted to be around 74.60% in 2008, showing a positive growth rate of 5% from 2007.
Graph 11 : Average Occupancy Rate for Selected 4 and 5 star Hotels in Bangkok, 2005 to 2008F Percent 78.00% 77.00% 76.00%
77.55%
75.00%
76.04%
74.00%
74.60%
73.00% 72.00% 71.00% 70.00%
71.05%
69.00% 68.00% 67.00% 0
4 AND 5 STAR HOTEL OCCUPANCY 2005-2007 The occupancy rate for 4 and 5 star hotel market is forecasted to be around 74.60% in 2008, showing a positive growth rate of 5% from 2007.
2005
2006
2007
2008
Year
Source : Colliers International Thailand Research
MAJOR ISSUES WHICH CAUSED A DECLINE IN OCCUPANCY RATES IN 2007
Various factors have coalesced to cause a drop in occupancy rates. Aside from political instabilities, a number of issues are listed below.
• The Re-opening of Bangkok’s Old Airport (Don Muang)
Having the dual airports causes a great inconvenience and confusion for airlines, travel agents and tourists. The impact from having two separate airports catering for domestic and international travelers could act as a hindrance for growth within the tourism industry. It causes considerably difficulty and annoyance for tourists catching connecting flights from the international route to the domestic route and vice versa. • Currency Fluctuations
Thai Baht’s strengthening currency affected international travelers, making it more expensive to travel to Thailand in US Dollar terms. • New Immigration Regulation
The Airport Authority of Thailand has implemented a new immigration clearing regulation in which all passengers transiting a non-international airport have to clear the immigration at Suvarnabhumi International Airport or at another Thai InternationalAirport. From Graph 6 on Page 9, we can see the decreasing numbers of tourists from both Malaysia and Singapore who normally travel to Thailand by coach from the southern part of Thailand.
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The Knowledge Report | January | 2008 | Bangkok Hotel Market
AVERAGE DAILY RATE (ADR)
4 and 5 Star Hotel Occupancy 2005-2007 The ADR for the 4 and 5 star hotel segment in 2006 rose by 8.4% from THB 4,551.70 or $135* to THB 4,932.92 or $146* in 2006. In 2007, the ADR registered THB 5,010.43 or $148* representing an increasing 1.6% year on year.
4 AND 5 STAR HOTEL AVERAGE DAILY RATE (ADR) 2005-2007 We do not expect to see much of a rate increase in 2008. We would expect that rates will remain stable by the main brands.
Generally the 4 and 5 star category is not pursuing an aggressive discounting strategy. The hotel operators are now adopting more savvy marketing strategies such as pitching to new markets, particularly in the Middle East (JW Marriott have been successful in this respect)
and offering new enhanced experiences such as specialty spa (Grand Hyatt Erawan’s strategy). Wi t h t h e p e r s i s t i n g c u r r e n t p o l i t i c a l uncertainty, albeit improved from last year, and a slowing global economic growth led by the US sub-prime uncertainties, we at Colliers International Thailand do not expect to see much of a rate increase i n 2 0 0 8 . We w o u l d e x p e c t t h a t r a t e s will remain stable by the main brands.
*The exchange rate of December 31, 2007, $1 = 33.747
Graph 12 : Average Daily Rate for Selected 4 and 5 star Hotels in Bangkok, 2005 to 2008F 77.55%
Percent 5,100 5,000
5,010.43
5,015.00
2007
2008F
4,932.29
4,900 4,800 4,700 4,600
4,551.70
4,500 4,400 4,300
2005
2006
Year
Source : Colliers International Thailand Research
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The Knowledge Report | January | 2008 | Bangkok Hotel Market
REVENUE PER AVAILABLE ROOM (REVPAR)
4 and 5 Star Hotel Revenue Per Available Room (RevPAR) 2005-2007 segment’s RevPAR fell by 5% in 2007 year on year. With the elections held in year end, we expect the figures to improve in 2008.
Between 2005 and 2007, the RevPAR in Bangkok peaked at THB 3,744.08 or $111* in 2006 but has since dropped to THB 3,559.92 or $105.5* in 2007. The 4 and 5 star hotel *The exchange rate of December 31, 2007, $1 = 33.747
Graph 13 : Revenue Per Available Room (RevPAR) for Selected 4 and 5 star Hotels in Bangkok, 2005 to 2007
4 AND 5 STAR HOTEL REVENUE PER AVAILABLE ROOM (REVPAR) 2005-2007 The 4 and 5 star hotel segment’s RevPAR fell by 5% year on year in 2007. With the elections held in year end, we expect the figures to improve in 2008.
Percent 3,750.00
3,744.08
3,700.00 3,650.00 3,600.00 3,550.00
3,559.92 3,530.06
3,500.00 3,450.00 3,400.00
2005
2006
2007
Year
Source : Colliers International Thailand Research
CAPITAL VALUES
The Bangkok market can best be described as fairly inactive in terms of actual transactions. Whilst there are a number of hotel owners who are willing to sell their properties in Bangkok, many have yet to come to terms with the realities of the market. For example, sellers would like to sell at a lower cap rate whilst buyers want a higher cap rate. At present there are many owners seeking room prices in the range of THB10 million per key. A prime example of this is the high end 469-room Sofitel Silom (which has been offered for sale since early 2007). Unless there is strong evidence to support such levels, we feel that the asking prices have to come down by at least 40 to 50 percent before transaction volumes can revive. Most transactions of recent years comprise of portfolio transactions concluded by public listed companies and property funds such as Grande Asset, Pacific Asset and Lehman Brothers.
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Hotels are investment vehicles and are valued based on their trading potential. Investors tend to look at the balance sheet and trading accounts for the past three years. The valuation will take into account the market condition, occupancy rates, achieved room rates, additional income sources, trends in RevPAR (Revenue Per Available Room) and GOPPAR (Gross Operating Profit Per Available Room), for example. The reluctance by hotel sellers to release any information is hindering the transaction process. In order to facilitate more future hotel transactions, owners must be prepared to be realistic and be more transparent.
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The Knowledge Report | January | 2008 | Bangkok Hotel Market
CONCLUSION
Investment Opportunities With high levels of capital mobility continuing across the world and in particular in Asia Pacific, investment funds are increasing their present, and actively competing for hotel assets which are in limited supply. Many hotel players that have not entered Thailand are now seeking to have a brand in the country. The lack of genuine sellers has also prompted hotel investors and operators to build their own properties. From our research, by 2011, there will be a shift in high end hotel supply from the traditional Riverside area to the Sukhumvit area. Hence, we expect to see more investment and development activity in the Sukhumvit area for the next 3 years. The interesting area for hotel investment is Central area along Ratchaprasong Road which will have the lowest supply levels until 2011; therefore this location should also present some opportunity if the location is successfully pedestrianised and becomes a major shopping district. Both investors, and a number of international hotels operators see Thailand as an exciting opportunity for hotel investment despite recent weak performances. Long-term prospects for Bangkok remain good in light of the forecasted rise in tourist arrival to Thailand. The average quality of Bangkok’s Hotel stock is expected to improve as international hotel chains will open new properties in the near future. Long-term prospect for Bangkok 4 and 5 star hotel remains good, the occupancy rate is expected to increase to 74.6% in 2008, a growth rate of 5%. However, the average daily rate is expected to remain stable in 2008 due to the increasing number of keys which will be completed in 2008. More MICE business is expected within the Bangkok’s Central Business District. The tourism industry has already shifted to focus mainly on the premium market and more high-quality products.
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NOTES
The hotel star rating used in our research is solely based on hotel rates and achieved rates obtained from market research. The rating system used in our report is not of Colliers International, Tourism Authority of Thailand (TAT) or Thai Hotels Association (THA).
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This report and other research materials may be found on our website at www.colliers.com/thailand. 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.
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w w w. c o l l i e r s . c o. t h
This report and other research materials may be found on our website at www.colliers.co.th 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.
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