Bangkok Hotel Market Report Q2 2010

8/9/2019 Bangkok Hotel Market Report Q2 2010

1/19

Th Kd Rprtco l l i e R s i n T e R n aT i o n a l | T H a i l a n D

eut summryThe protests and rioting over April and May wreaked havoc or the hotel market or Q2 withoccupancies plummeting to all time lows, some even to single digits.

A number o hotels were orced to close their doors as they were located next to or within theprotest area.

June provided a silver lining as occupancies rose dramatically when Bangkok ceased to be the centreo media attention.

Middle Eastern and Indian visitors returned to Bangkok providing welcome support during the lowseason.

The ocus o attention is on Q4 2010 gures which will provide guidance on whether the Bangkokhotel market has ully recovered, urther disruptions permitting.

Concerns remain as to the nations course or the uture and whether urther protests or sporadicviolence occurs. Travel advisories based on the continued State o Emergency continue to be a darkcloud on the horizon.

Future supply in H2 2010 will urther test hotels ability to absorb the shocks o the past 18months.

The Northern CBD has overtaken The Riverside as the biggest supplier o Luxury/Upper Scalerooms. However this is likely to be short lived with Sukhumvit set to dominate in the comingyears.

MaRKeT inDicaToRs

Q2 2009 - Q2 2010

sUPPlY (Q1-Q2)

DeManD

RaTes

occUPancY

RevPaR

www.colliers.co.th

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 | 2 n D Q Ua R T e R | 2 0 1 0


2/19collieRs inTeRnaTional2

HoTel classiicaTion

Basic oveRview o HoTel classiicaTion

The Knowledge Report | 2nd Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market

While the Thailand Hotels Association (THA) categorizeshotels with a star rating, many hotels do not abide by star rating.Thereore in this study, Colliers International Thailand have

produced a classication based on the quality o the hotel as seenthrough the eyes o the hotel management companies and on theBritish Hospitality Association classication.

Budget - hotels with limited to no acilities. Rooms are simplewith basic urnishings with sizes ranging rom 12 to 18 sq m.

Economy - comortable, well equipped accommodation, with anen-suite Bath / shower room. Reception and other sta aim orproessional presentation that oers a wide range o straightor-ward services, including ood and drink.

Mid scale - hotels are usually o a size to support higher stang

levels, and a signicantly greater quality and range o acilities.Reception and the other public rooms will be more spacious witha number o restaurants. All bedrooms will have ully en suitebathrooms and oer a good standard o comort and equipment,such as a hair dryer, telephone and toiletries.

Upper scale - a degree o luxury as well as quality in the urnish-ings, decor and equipment, in every area o the hotel. Bedroomswill also usually oer more space and be well designed with co-ordinated urnishings and decor. The en-suite bathrooms willhave both bath and xed shower. It will contain a high enoughsta to provide services like concierge and porter service, 24-hour room service, laundry and dry-cleaning. The restaurants

will provide high quality cuisine.Luxury - spacious and luxurious accommodation throughout thehotel, matching the highest international standards. Interiordesign should impress with its quality and attention to detail,comort and sophistication. Furnishings should be immaculate.Services should be ormal, well supervised and fawless in atten-tion to guests needs, without being intrusive. The restaurant willdemonstrate a high level o technical aptitude, creating dishes tothe highest international standards. Sta will be knowledgeable,helpul, and experienced in all aspects o customer care, combin-ing eciency with courtesy.

For the purposes o this report the use o the word hotel shall

reer to the Upper Scale and Luxury hotel ratings that are thesubject o this report. Hotels below these will be mentioned bytheir particular category.


3/19collieRs inTeRnaTional 3


Zoning



The centre o Bangkok contains the lions share o Luxury andUpper scale hotels in the city due to it being the heart or bothbusiness and tourism.

Sukhumvit road up to Phrom Phong has its own distinct identitydue to the location being the main night lie entertainment areain the city or oreigners. As these entertainment acilities ex-tend some way into many o the sois, a large number o hotels arealso located away rom the main Sukhumvit road. Even withinthis road many sois have there own micro-identities such as sois4, 7, 8 11 and 22. It is interesting to note that or almost all oduration o the protests the area went about it business largelyunaected. Hotel occupancies, whilst down, remained resilientduring this time.

The Northern CBD has its borders dened by Phetchaburi to thenorth to Chalermahanakorn Expressway down to Rama VI butalso including the area up to Ratchadapisek south o Sukhumvit.This area contains most o the large upper scale shopping malls aswell as oces. The emphasis is on a mix o business travelers andamily tourists. As the Northern CBD was largely included in theprotest sites, the area was very seriously aected with a numberbeing orced to close during May.

The Southern CBD includes the area bounded by Si Phraya, thesouth side o Rama IV, Sathorn and the eastern side o Charoen-krung. It is primarily a location or oces with limited shoppingacilities and reasonable entertainment areas that partially rivalSukhumvit. This area bordered the protest site area and was seri-ously aected by the protests and later riots. One hotel, the DusitThani, suered some limited damage as a result o rioting duringthe May 19 crackdown.

The Riverside is the biggest player in the Upper scale and Luxurysegment due to its attractive location. However supply is lim-ited in this market and no Mid-scale hotels can be ound in thearea. The Thonburi side o the area is considered as the samemarket as the hotel shuttle boats that regularly ply between thetwo banks are an added attraction or most tourists. While notdirectly aected by the protests and riots, the area suered by be-ing isolated rom other parts o Bangkok as a result.

The Western area contains the old city as well as the backpackerarea located in Bamglampoo. Whilst this area is awash with ho-tel rooms, there are no Upper or Luxury scale hotels located hereand as such is not considered in this report. The initial proteststhat occurred in April aected this area more.




ToTal sUPPlY enD o Q2 2010

Supply o Luxury and Upper scale hotel rooms in Bangkok con-

tinued to grow ater the Asian Financial Crisis in 1997 ulllingthe demand rom the ever increasing number o tourists visitingthe city partially ignited by the weakening o the Baht duringthat time. About an average o 400 rooms per year were addedrom 1998 to 2006. However ater this, supply grew more quicklywith over 1,000 rooms added each year ater that and the trend

is set to continue or this year and the next. As o Q2 2010 there

was a total supply o approximately 14,400 rooms with around700 rooms added in the rst hal o 2010 and more than 1,300scheduled to be completed and opened during the second hal o2010. This year is likely to witness the greatest addition o newsupply ever in Bangkok.

Source : Colliers International Thailand Research

Remark : E = Estimated supply

HisToRical sUPPlY



6/19



While in every area Upper scale hotels are in greater supply,their proportion in relation to Luxury hotels refects the natureo each area. The Northern CBD contains the high end shop-ping malls comparable to what the Champs-lyses is to Paris or

Myeong-dong is to Seoul. Thereore many Luxury scale hotelsare located there. The Riverside is also known as a prestigiousarea due to its scenic location and again Luxury hotels makeup a large slice o the hotel market. The Southern CBD is splitbetween the eastern part o Sathorn road and Rama IV con-taining more Luxury hotels whilst the older CBD area o Silom

contains a much greater share o Upper scale hotels.

The reewheeling nature o Sukhumvit means ar more Upperscale hotels in comparison. In the next 2 years this area will

contain more Upper scale hotel rooms, as more than 1,500 roomsare scheduled to be completed. The distance o the Eastern areaand Northern area rom the centre explain why no Luxury hotelsare located in this area.

sUPPlY BY Zone, as o Q2 2010





Nearly 2,000 rooms are scheduled to be completed in 2010 andmore than 4,000 rooms in the next 3 years will be added in themarket. Two hotels in the Luxury end o the market are due toopen their doors in 2010. The Siam Kempinski (306 rooms)located in the Northern CBD, is scheduled to begin operationsin August 2010, although on 22 July they plan to have a sotopening. The 198 room St. Regis Bangkok is scheduled to beopen its doors rom October 2010.

The recent instability has directly impacted the tourismmarket especially in the city. Many o the hotel projects underconstruction in Bangkok, especially in Northern CBD area, tem-porary stopped construction during the protests at Rachaprasongjunction in April and May and this might lead to delays incompletion and opening.

Although Thailand has been aficted with a myriad o problemsduring the past 3 years, Bangkok still remains a avorite desti-nation or oreign tourists; so many investors retain interest indeveloping hotels in Bangkok, although approximately 55% o

the total are or Mid scale hotels ollowed by Upper scale andLuxury scale, with 25% and 20% respectively. As tourists seekvalue or money, the case or Mid scale segment development isa compelling one.

UTURe sUPPlY

UTURe sUPPlY o lUxURY & UPPeR scale HoTel BY YeaR, 2010 - 2013

UTURe sUPPlY o HoTel RooMs BY gRaDe anD YeaR, 2010 - 2013






UTURe sUPPlY o HoTel BY gRaDe anD locaTion, 2010 - 2013


Sukhumvit is the most popular area or developments in theuture, representing 34% o all uture supply or Bangkok. Manydevelopers have selected to develop hotels in this area due to theconvenience to the BTS provided along Sukhumvit road whichis suitable or tourists and business people alike as well as thevibrant nature o the Sukhumvit road and its many lively sois.

The eclectic nature o Sukhumvit has meant that it has attracteda signicant number o boutique style hotels that challenge and

innovate within the high end categories. Many in the area areindependent, non branded hotels. This represents an interestinginvestment niche or the oreseeable uture. However the North-ern CBD continues to be the main ocus or Luxury scale projectsdue to its location amongst the most prestigious retail area andBTS connections.





The protest at the centre o Bangkok seriously impacted the num-ber o oreign tourists, so average occupancy rate in Q2 droppedapproximately 50 - 55% rom Q1 2010 in both hotel categoriesand some hotels in the area around the protest site were orcedto close. However Q2 2010 represents the traditional low season

so occupancy is expected to suer in comparison. The occupancyrates o Luxury & Upper scale hotels improved ater the mediashited ocus to other conficts around the world and the situa-tion calmed.

DeManD - occUPancY RaTe

aveRage occUPancY RaTe o lUxURY & UPPeR scale HoTel in BangKoK BYgRaDe, oR Q1 anD Q2 2010




occUPancY RaTe



occUPancY RaTe o lUxURY & UPPeR scale HoTels, 2005 - Q2 2010

occUPancY RaTe o lUxURY & UPPeR scale HoTels BY QUaRTeR

Occupancy rates declined steadily or three years rom 2005. Thiswas the result o growing instability including the 2006 coup aswell as a number o health scourges. The previous low point oroccupancy was at the end o 2008 with the closure o the airportas a result o the yellow shirts blockade which let large num-

bers o international travelers stranded exacerbated by the severeglobal economic downturn. The recovery that started to occur in2009 and continued into 2010 stalled in Q2 2010.

Occupancy rates were low even compared to the previously lowrates recorded in Q2 2009. The emergence o the Bangkok tour-ism market rom the airport blockade and rioting during April o

2009 took another severe blow in April and May 2010 as the citytook centre stage or all the wrong reasons.




In Q2 2010 the occupancy rate o luxury hotels in the Sukhum-vit area was higher than other areas, while Southern CBD andSukhumvit area has shown a highest occupancy rate or Upper

scale hotels. The Northern CBD showed the greatest alls romQ1 to Q2 due to the location o a signicant proportion o theprotests in this area.


occUPancY RaTe o lUxURY & UPPeR scale HoTels, 2005 - Q2 2010




DeManD DRiveRs ocUs

ToURisM


Source : Airports Authority o Thailand, Colliers International Thailand Research

inTeRnaTional PassengeRs To sUvaRnaBHUMi aiRPoRT MinUs THose in TRansiT

While Q1 showed a healthy increase rom the same quarter theprevious year the corresponding Q2 showed a decline. Howeverthis was minimal and is somewhat surprising ater the protractedand then dramatic events that culminated in violent rioting in

May. It must be stated that many o these arrivals were likely totravel to other parts o Thailand that were less aected by theriots.



Tourists (Thais and oreigners) who stayed in hotels in Bangkokduring Q2 2010 dropped roughly 35% rom Q1 2010, due to thepolitical turmoil but also the traditional low season that occursin Q2 and Q3 o each year. The comparison with previous Q2sshows the eects o events in April and May but that the all wasnot as dramatic as once predicted. The pick up in visitors in June

showed that already green shoots or the hospitality industry areevident but it is still too soon to evaluate i this will lead to arevival in numbers or the beginning o the high season in Q4and continued sporadic disruptions and violence is a signicantcaveat underpinning this.

The traditional mainstay or the Bangkok tourism market, EastAsia, has been in strong decline since 2006. The coup o that

year and ongoing Thailand political instability hereater has de-terred travelers rom this region as they are more sensitive tosuch situations. Other traditional markets have remained airlystagnant with Europe aected by the global economic crisis andcurrency weakness. However signicant growth has come romnewer markets in the orm o Russia, India and the Middle East.

The eect is more pronounced as people rom the latter twovisit usually during the low season when temperatures in their

own countries can be unbearable. Although this represents anexciting area or development such growth comes rom a low baseand does not oset the declines in East Asia. With continuedexpansion o these heavily populated new markets, they arelikely to aect the dynamics o the tourism market in Bangkokin the coming years.

Source : Ofce o Tourism Development, Colliers International Thailand ResearchRemark : E = Estimated by Colliers International Thailand Research


gUesT aRRivals aT accoMMoDaTion esTaBlisHMenTs in BangKoK DURing THe YeaR 2007 - Q2 2010

Main MaRKeTs o BangKoK ToURisM.




RaTes




aveRage DailY RaTe BY gRaDe 2005 - Q2 2010

aveRage DailY RaTe o lUxURY HoTel BY gRaDe & locaTion, Q2 2010

Average daily rate o both grades in Q2 2010 have allen romQ1 by approximately 18%. Hotels have reduced rates in the

atermath o the May riots to attract customers as well as theusual drops in rates during the low season.

Hotel rates decreased rom Q1 2010 in every location, even thearea outside the protest zone, such as The Riverside althoughSukhumvit has taken a lesser hit due its location away rom the

site. It is also likely that Sukhumvit also contains a greater num-ber o returning visitors who are less sensitive to the travails oThailand and room rates were already lower in comparison.



In Q2 2010 the average daily rate in Sukhumvit actuallyincreased rom Q1 2010, while there were alls in otherlocations. This can be partially explained by the act that manyguests moved or rebooked to Sukhumvit and away rom other

locations during April and May. The higher rates charged by theother locations was then refected in the rates oered in Sukhum-vit or this time. It is thereore very likely that this represents anaberration rather than a trend.

The twin alls in occupancy and room rates led to a subsequentdramatic all in RevPAR by approximately 58% rom Q1 2010.

This refects the ull eects o the April/May period on the hotelmarket in Bangkok.



aveRage DailY RaTe o UPPeR scale HoTel BY gRaDe & locaTion, Q2 2010


RevPaR

HisToRical RevPaR






RevPaR o lUxURY HoTels BY gRaDe & locaTion, Q2 2010

RevPaR o UPPeR scale HoTels BY gRaDe & locaTion, Q2 2010

Steep alls were recorded in all locations with the Northern CBD showing the steepest declines as many hotels shut their doors dueto the events.

RevPAR in the Southern CBD and Sukhumvit areas were higherthan other areas due to the specic locations during the protests

and rioting in May. Few, i any hotels, were spared the eects oevents in April and May 2010.



oRecasT

Even in good times the hotel market aces strong challenges in the orm o signi-cant new supply entering the market over the course o the next ew years and evergrowing competition rom the serviced apartment sector. But these are ar rom

good times. The maelstrom o April and May rocked the industry like never beoreand it is still eeling the ater eects exacerbated by the extension o the State oEmergency urther justiying travel advisories rom a number o countries.

While the situation has calmed and ears o a repeat have receded or the timebeing, the development o the industry in Bangkok will remain a nervy one orthe oreseeable uture. But the scene o tourists cramming the narrow pavementson Sukhumvit road and elsewhere at the end o June can only motivate thoseprepared to tough it out.invesToRs ocUs

The issue o abundant supply in the Luxury hotel segment in the next ewyears should cause pause or thought or investors wishing to enter this market.Movement into the Upper scale range still oers promise but the acquisition oeconomical land in a reasonable location would weigh heavily in any decision.Future investors should also judge between ocusing on specialized products such assmaller scale boutique style concepts which would allow the hotel to ocus onniche markets or develop properties large enough to benet rom economies oscale such as in targeting the MICE market, use o banqueting halls or even aimingor the serviced apartment market.

Larger scale hotels should consider reducing the number o restaurants and ocuson other peripheral revenue generating outlets such as specialist spas and healthclubs. Thailand may ollow the trend in the west by subcontracting out F&B andother outlets to specialist operators.

oPeRaToRs ocUs

Even with high occupancy, hotels will have to continue with the trend o allingprices as consumers become more price savvy due to the copious amount o inor-mation on the internet and the range o hotels rooms at all price levels being avail-able. Food and beverages continue to be a signicant revenue stream and hotelswill have to be more proactive and inventive in maintaining this rom both guestsand non-guests through the promotion o MICE and other revenue generatingactivities such as birthdays and anniversaries. The need to attract niche markets isbecoming increasingly prevalent and operators should try and dierentiate them-selves as much as possible rom their competitors and dissociate rom a me tooapproach. While branding may aid this process in specic cases, it is not the be-alland end-all and the guest experience goes ar beyond this.

The growing markets in the Middle East and South Asia can be urther engaged bytargeting individual countries within each region. A urther breakdown on tour-ism statistics or the Middle East would be useul. The South East Asian market,spurred by low cost carriers and short term decision making can be targeted withlong weekend getaway packages.

As sixty percent o visitors have visited Thailand beore, hotels would be wise inoering incentives or existing guests to return such as anniversary packages orhoneymooners. Some hotels respond to online travel orums such as Tripadvisor toboth positive and negative comments regarding their establishment. This helps tocreate a more personal touch and increase the chances o guests returning. Otheroptions include creating special pages on social networking sites to keep peopleinormed o new developments and oers. The nurturing o niche markets, the

creation o innovative revenue generators and growing a loyal customer base willocus the minds o operators in these very challenging times.



19/19

conTacT inoRMaTion

THailanD:Patima JeerapaetManaging [email protected]

Jean Marc GarretDirector | [email protected]

Antony PiconSenior Manager | [email protected]

Surachet KongcheepManager | [email protected]

Th rprt d thr rrh mtr my b ud ur bt t .r..th. Qut rtdt rmt hr hud b drtd t th RrhDprtmt t th umbr dtd b. Th dumt

h b prprd by cr itrt r drtd r rmt y. cr itrt mk urt, rprtt r rrt y kd,prd r mpd, rrd th rmt ud,but t mtd t, rrt tt, ury drbty. ay trtd prty hud udrtk thr qur t th ury th rmt. critrt ud uquy rrd r mpdtrm, dt d rrt r ut th dumtd ud bty r d dm r thrrm. cr itrt rdd ft dpdty d d prtd mp.

480 oices in 61 coUnTRieson 6 conTinenTs

Us$ 1.9 Billion in annUal RevenUe

1.1 Billion sQUaRe eeT UnDeR

ManageMenT

15,000 PRoessionals

Colliers International Thailand

Bangkok Ofce : 17/F Ploenchit Center, 2 SukhumvitRd. , Klongtoey, Bangkok 10110Tel: 662 656 7000 Fax: 662 656 7111Email : [email protected]

Pattaya Ofce : 519/4-5, Pattaya Second Road(Opposite Central Festival Pattaya Beach),Nongprue, Banglamung, Chonburi 20150Tel: 6638 364 411-2 Fax: 6638 364 414Email : [email protected]

collieRs inTeRnaTional THailanDManageMenT TeaM

ASSET MANAGEMENTWasan Rattanakijjanukul | Manager

Nukarn Suwatikul | Manager

CONSULTANCYNapart Tienchutima | Manager

COMMERCIAL / INDUSTRIAL /RETAILNarumon Rodsiravoraphat | Senior Manager

FACILITY / PROPERTY MANAGEMENTViroj Piromthong | Management AdvisorBandid Chayintu |Associate Director

HOSPITALITY DIVISIONJean Marc Garret | Director

INVESTMENTNukarn Suwatikul | Senior Manager

RESIDENTIALPatima Jeerapaet | Managing Director

RESEARCH & ADVISORYAntony Picon | Senior ManagerSurachet Kongcheep | Manager

VALUATIONNicholas Brown | Associate DirectorPhachsanun Phormthananunta |Manager

PATTAYA OFFICEMark Bowling | Sales ManagerSupannee Starojitski |Business Development Manager


Documents

Bangkok Hotel Market Report Q2 2010