Bangkok Luxury Hotel Market Faces Uncertainty

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.

www.colliers.co.th

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


Zoning

collieRs inTeRnaTional 3


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.



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-



lUxURY & UPPeR scale HoTel in BangKoK BY YeaR & locaTion, 1995 – Q1 2010


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


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%.



sUPPlY of RooMs BY Zone – Q1 2010


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



sUPPlY BY Zone


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



fUTURe sUPPlY

fUTURe sUPPlY of lUxURY & UPPeR scale HoTel BY YeaR, 2010 - 2013


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.



fUTURe sUPPlY of HoTel RooMs BY gRaDe anD YeaR, 2010 - 2013


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


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.



DeManD - occUPancY RaTe

aveRage occUPancY RaTe of lUxURY & UPPeR scale HoTel in BangKoK BY gRaDe, Q1 2010


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


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



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.



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



nUMBeR of ToURisT aRRivals To THailanD fRoM THe asia Pacific Region


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.



nUMBeR of ToURisTs visiTing THailanD fRoM selecTeD MaRKeTs


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



RaTes

aveRage DailY RaTe BY gRaDe 2005 - Q1 2010


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


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.



RevPaR
RevPaR BY gRaDe


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



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.



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
patima.jeerapaet@colliers.com antony.picon@colliers.com

RESIDENTIAL
Surachet Kongcheep
Patima Jeerapaet | Managing Director Manager | Research
surachet.kongcheep@colliers.com
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 : info.th@colliers.com

Pattaya Office : 492/2 Thappraya Road, Nongprue,
Banglamung Chonburi 20150 Tel: 6638 364 411-2
Fax: 6638 364 414 Email : info.pattaya@colliers.com

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.

www.colliers.co.th collieRs inTeRnaTional 19

Bangkok Luxury Hotel Market Faces Uncertainty

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (16)

En vedette

En vedette (7)

Similaire à Bangkok Luxury Hotel Market Faces Uncertainty

Similaire à Bangkok Luxury Hotel Market Faces Uncertainty (20)

Plus de Colliers International Thailand

Plus de Colliers International Thailand (17)

Dernier

Dernier (20)

Bangkok Luxury Hotel Market Faces Uncertainty