Pattaya Hotel Market H1 2010

The Knowledge Reportc o 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

executive summaryOccupancy rates fall further as April and May demonstrations in Bangkok affect tourism in Pattaya.

Limited supply over the past few years has allowed for some breathing space for the hotel industry during the turbulence since 2006. Future supply is not expected to flood the market with just over 700 rooms to be added in 2010, representing a 1.8% increase from 2009.

The greater range of Mid scale hotels has allowed the industry to compete on price to a greater extent than Bangkok.

The development of a new modern retail centre and the opening of the highway between Bangkok and Pattaya mean the city will increasingly become an attractive and convenient tourist destination for Thais. The long term prospects for the hotel industry are very encouraging.

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H2 2009 - H1 2010

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HoTel classificaTion

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The Knowledge Report | 1st Half | 2010 | Pattaya Hotel Market

While the Thailand Hotels Association (THA) categorizes ho-tels with a star rating, many hotels do not abide by star rating. Therefore in this study, Colliers International Thailand have

produced a classification based on the quality of the hotel as seen through the eyes of the hotel management companies and on the British Hospitality Association classification.

Guesthouse – simple accommodation offering limited or no facilities with basic furnishings with sizes ranging from 12 to 18 sq m.

Budget – slightly upgraded rooms and facilities from guesthouses although differences can be slight.

Economy - comfortable, well equipped accommodation, with an en-suite Bath / shower room. Reception and other staff aim for professional presentation that offers a wide range of straight forward services, including food and drink.

Mid scale - hotels are usually of a size to support higher staffing levels, and a significantly greater quality and range of facilities. Reception and the other public rooms will be more spacious with a number of restaurants. All bedrooms will have fully en suite bathrooms and offer a good standard of comfort and equipment, such as a hair dryer, telephone and toiletries.

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.

Luxury - spacious and luxurious accommodation throughout the hotel, matching the highest international standards. Interior design should impress with its quality and attention to detail, comfort and sophistication. Furnishings should be immaculate. Services should be formal, well supervised and flawless in atten-tion to guests’ needs, without being intrusive. The restaurant will demonstrate a high level of technical aptitude, creating dishes to the highest international standards. Staff will be knowledgeable, helpful, and experienced in all aspects of customer care, combin-ing efficiency with courtesy.

This study focuses on the major areas of hotel accommodation in Pattaya, which can be subdivided into six main areas:

1. Wong Amat is the area to the north of Pattaya Nua. It is considered a peaceful, more up-market location and is a relatively new area for condominium development. This area is considered a peaceful location. 2. North Pattaya is the area to the south of Pattaya Nua. It is divided into a larger northern section that spans the areas to the east of Naklua Beach (the most northern beach). 3. Central Pattaya is considered the city centre, covering the section of beach from Central Road (Pattaya Klang) to the entrance to Walking Street at South Pattaya Tai road.

4. South Pattaya is the area from the border of Central Pattaya to the Bali Hai pier and Arthachinda road and is adjacent to the core of Pattaya’s busy nightlife area. This area is popular among Middle Eastern, South Asian and Russian visitors. 5. Pratumnak is the area covering the main thoroughfare connecting Pattaya and Jomtien Beach and the hill overlooking Pattaya bay and Cosy Beach. 6. Jomtien is about 1 km south of Pratumnak Hill. The area is home to many high-rise condominiums, beachfront hotels, shops and restaurants. The area at the beginning of Jomtien is considered busy, while the area at the end of this beach, border-ing Na Jomtien in Sattahip district, is quieter.

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There are approximately 38,850 hotel rooms in Pattaya in all grades at the end of H1 2010. The fallout from the Asian Finan-cial Crisis meant only a very modest increase in supply occurred in the first five years of the 2000’s but growth in tourism num-bers meant that developers were back on the bandwagon with

a surge in supply taking place in 2006 and 2007. However the ongoing political problems in the country and the global economic downtown affected tourism adversely and only a limited supply has come onto the market since then.

Pattaya bay accounts for over 64% of all hotel rooms in Pattaya city and these are fairly evenly distributed between the three areas of Pattaya bay. Pattaya bay is by far the main centre of

tourism in the city with its wide range of shopping and entertain-ment facilities.

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Source : Colliers International Thailand




Pratumnak takes up the lion’s share of luxury hotel rooms primar-ily due to the location of the Royal Cliff Resort with over 1,000 rooms. In very general terms the Central and South Pattaya as well as Jomtien areas contain a greater proportion of lower end

accommodation while North Pattaya, Wongamat and Pratum-nak focus more on higher end although the distinctions are not clear cut.

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LK group will open three new hotels by the end of the year. Central Pattana plans to open the Hilton Hotel on the top of Central Festival Pattaya Beach with 340 hotel rooms by the end of 2010. Three new hotels based on a tie up between Centara Hotels & Resorts and Nova Group with more than 365 rooms, are scheduled to open their doors by Q3 2011. Other develop-ers, such as local company Petch Property, plans to develop a luxury hotel in the area near The Cove condominium within the next seven years. Major Development also plans to develop a luxury hotel behind part of Reflection Jomtien Beach Pattaya condominium and MBK Property Development plans the devel-

opment of an Upper Scale hotel in the Pattaya Bay area in the next five years. Further international brands are also interested in developing hotels in Pattaya, such as Intercontinental Hotel Group in Pattaya bay area, Le Meridien and Movenpick in Na Jomtien area.

An additional 340 hotel rooms will be added to supply in 2010, while a further 500 rooms are expected to be added by 2015. Overall future supply will be limited over the course of the next few years although further new projects may be announced.

The global slowdown and ongoing political upheavals has put the tourism industry in Thailand in the doldrums. The recent riots in Bangkok affected the tourism market in Pattaya. The proximity to Bangkok, while a significant benefit to the city, can also adversely affect sentiment during conflict in the capital.

The development of a more family orientated image coupled with events such as the International Music Fair and marathon have helped to diversify the city and are creating the conditions for further growth in the tourism sector. The MICE industry represents a potential draw card for companies wishing to provide a coastal environment.

The introduction of Central Festival Pattaya Beach shopping mall in 2009 will encourage tourism, especially the domestic

variety, as it represents the city’s first modern last scale shop-ping complex and the largest coastal shopping mall in Asia. This development is likely to pressure other retail locations to up-grade their own malls to compete for custom and this will further enhance Pattaya as a family destination.

Pattaya also has potential for acting as a commercial centre for the industrial estate investors who wish to avoid Bangkok. With the development of dedicated office supply or retail/office parks in the future the hotel market could cater for an influx of busi-ness people in the future. The longer term future of the hospital-ity sector is dependent on how the city defines itself in the new decade.

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Official figures from the Tourism Authority of Thailand (TAT) reveal that the number of international tourist arrivals to Pattaya declined by as much as 30% in 2008, down from around 5.8 million in 2007 to 3.42 million in 2008. For 2009 in the first quarter was higher than the same period of the previous year. Since April 2009 everything worsened due to political prob-lems, especially the postponement of an ASEAN summit in Pat-

taya which directly affected the tourism market. Therefore the total number of tourist arrivals in accommodation in H1 2010 was approximately 2.49 million. The April and May protests in Bangkok did spill out into other locations with only minor disturbances in Pattaya itself but overall coverage of the events affected the tourism market in Thailand as whole and Pattaya was not spared.

Tourists from Europe still represent the main tourist market in Pattaya, especially from Russia which registered an over 150% increase for Q2 2010 y/y for Pattaya and represented by far the biggest market from one foreign country. Indian and Middle Eastern visitors represent significant growth markets and are less

affected by political disruptions. On top of that these visitors prefer coming to Thailand in the off season summer period due to the climate in their own countries. This will help boost the hotel market during periods of lower occupancy.

Source : Tourism Authority of Thailand (TAT), Office of Tourism Development and Colliers International Thailand




The average length of stay has gravitated around the three night mark throughout the past ten years except for a brief surge in 2008. A significant proportion of tourists coming to Pattaya

reside in Bangkok and will often visit Pattaya for weekends which means that average stays are likely to remain on the low side.

Since 2007, average occupancy rates for Pattaya hotels have fallen by over half in H1 2010. This trend was due to various factors, such as Thailand’s political instability, H1N1 and the

global economic slowdown. In the first quarter of this year, hotel occupancy rates are similar to same period of last year, but politi-cal turmoil in Q2 reduced levels.

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The Average Daily Rate (ADR) of hotels in Pattaya reveals a big gap. The lowest ADR is less than 1,000 baht per night and the highest is over 4,500 baht per night. The majority of hotels in Pattaya, approximately 18,300 rooms, have an average ADR less than 1,000 baht per night. The ADR of 4-star hotels is in the range of 2,500-3,500 baht per night, while that of 5-star hotels is higher than 3,500 baht per night. Lower end hotels in the range of 500-1,000 baht per night offer very good value compared to similar price range hotels in Bangkok.

Tourists and business travelers, especially from the Asia-Pacific region, are more price conscious than ever before and are spend-ing more prudently. Corporate expenditure, such as on travel and entertainment, is now being scrutinized more closely. During this current situation, many hotel operators are applying price-cutting strategies. When operators start to cut prices, it is often difficult to increase the rates back to their prior levels because customers’ expectations change. The successful hotels are those that offer attractive promotions to potential customers.

The economic mainstay of Pattaya is tourism and over the past ten years, the number of tourists has jumped sharply from 3 to 6 million. Pattaya is currently going through difficult times, as are many other markets, and its strength is as a resort city that is able to attract a higher number of tourists than Phuket and Samui combined.

The proximity to Bangkok remains an important demand driver for hotel accommodation as many Bangkokians visit Pattaya as a weekend getaway. The recent completion of highway 7 has reduced travelling times from the cities to within 90 minutes. The proximity to the airport also weighs in Pattaya’s favours with international visitors having the option of avoiding Bangkok and

this market will continue to propel demand.

The continued development of family theme parks and upscale shopping malls will help to underpin the tourism industry and give Bangkokians more excuses to visit and stay in Pattaya. The successes of Ripley’s World of Entertainment, Mini Siam and Mini Europe, Nong Nuch as well as the innovative Flight of the Gibbon point to further growth in family entertainment facilities around Pattaya.

Pattaya has moved a long way from being a fishing village and now resembles a fully fledged city but it is still in the process of defining itself. Real estate can be an active part of that process to a greater degree than Bangkok.

The lower end segment will continue to drive the market reaching a customer base unconcerned by the absence of con-cierges and chandeliers. No nonsense establishments offering clean rooms, basic services at an affordable price will remain in demand from the new tourism markets in India and Bangkok expats wanting to swap the hustle and bustle of Bangkok for the hustle and bustle of Pattaya.

However Pattaya is starting to develop two faces. While the Pattaya that is loved and loathed will continue its earthy swagger; a new, upmarket Pattaya is beginning to take shape alongside its raucous cousin. The locations outside of Pattaya and Jomtien bays are starting to carve out a far more gentle and

sophisticated reputation enhanced by the number of high end condominiums springing up. Bangkokians now have an opportu-nity to enjoy a lifestyle far removed from the Pattaya of old and developers should see this as an opportunity, especially with the dearth of new hotel supply coming on stream.

Even within Pattaya bay itself, shifts are taking place that are defining the area. Gradually higher end retail centres, restau-rants are taking shape on Beach road and Second road and the less wholesome temptations are being slowly driven back by higher land prices into the subterranean sois of Third road. It is likely that in the next ten years the area in close proximity to the beach will contain almost all family orientated facilities except for Walking Street, which has evolved into something of a living museum that even appeals to families. Higher end hotels, mostly in the Mid-end to Upper-Scale bracket will likely be part of the new landscape.

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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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Bangkok Office : 17/F Ploenchit Center, 2 Sukhumvit Rd. , Klongtoey, Bangkok 10110 Tel: 662 656 7000 Fax: 662 656 7111 Email : [email protected] Pattaya Office : 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]

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PROJECT SALES & MARKETINGWasan Rattanakijjanukul | ManagerNukarn Suwatikul | Manager

ADVISORY SERVICESNapatr Tienchutima | Manager

OFFICE & INDUSTRIAL SERVICES / RETAIL SERVICESNarumon Rodsiravoraphat | Senior Manager

REAL ESTATE MANAGEMENT SERVICESViroj Piromthong | Management AdvisorBandid Chayintu |Associate Director

ADVISORY SERVICES | HOSPITALITY Jean Marc Garret | Director

INVESTMENT SERVICESNukarn Suwatikul | Senior Manager

RESIDENTIAL SALES & LEASINGPatima Jeerapaet | Managing Director

RESEARCHAntony Picon | Senior ManagerSurachet Kongcheep | Manager

VALUATION & ADVISORY SERVICESNicholas Brown | Associate DirectorPhachsanun Phormthananunta |Manager

PATTAYA OFFICEMark Bowling | Sales ManagerSupannee Starojitski |Business Development Manager

THailanD: Patima Jeerapaet Managing Director [email protected]

Mark BowlingSales Manager | Pattaya Office [email protected]

Antony Picon Senior Manager | Research [email protected]

Surachet Kongcheep Manager | Research [email protected]

Documents

Pattaya Hotel Market H1 2010