Bangkok Hotel Market - 1st half 2009

MarketResearchB A N G KO K 4 - & 5 - S TA R H OT E L M A R K E T | 1 S T H A L f | 2 0 0 9

B A N G KO K 4 - & 5 - S TA R H OT E L M A R K E T

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

BanGKoK 4- & 5-sTaR HoTel MaRKeT HiGHliGHTs• Thailand’s tourism industry has suffered from a sharp fall in tourist arrivals. Luxury hotels seem to be hit the hardest, with many hotels in Bangkok reporting occupancy of around 40 per cent.

• By the end of 1H 2009, the six major areas in Central Bangkok had a total supply of 13,108 keys, with 6,452 keys in the 5-star category and 6,656 keys in the 4-star category. • During 1H 2009, there were approximately 514 keys added in the Bangkok 4- & 5-star hotel sector, of which 236 keys were in the Sukhumvit area, while 278 keys were added in the Other areas.

• An additional 10,540 keys in 4- to 5-star hotels from 46 projects are planned to be added to the supply by 2012.

• The average length of stay of international visitors in Bangkok hotel accommodation would be estimated to decrease to 1.72 nights in 2009 from 1.8 nights in 2008.

• The forecast occupancy rate of Bangkok hotels in 2009 would be around 57.92%. The occupancy rate in the first quarter of 2009 was at 47.3%, with the downturn pronounced in April; thus, the occupancy rate in the second quarter fell to 39.52%.

• The average daily room rate (ADR) for the 4- & 5-star hotel segment in the first quarter of 2009 decreased to THB4,080.25 and fell further, by 14.28% quarter-on-quarter, to around THB3,497.73 in Q2

• The Bangkok 4- & 5-star hotel market will remain in a difficult situation over the next two years due to current conditions, as well as the sharp increase of new supply expected in 2010. The economic crisis, along with many other negative factors, will dominate the sector in the second half of 2009 and 2010.

MaRKeT inDicaToRs

1H 2009 2H 2009F

sUPPlY

DeManD

aveRaGe DailY RaTe

occUPancY RaTe

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B a n G Ko K 4 - & 5 - s Ta R H oT e l M a R K e T | 1 s T H a l F | 2 0 0 9

assuming a peaceful political context, general tourism could begin to recover in three months. We expect the number of bookings to improve in the high season and the country’s tourism situation to pick up in the last quarter of this year.

collieRs inTeRnaTional2

The Knowledge Report | 1st Half | 2009 | Bangkok 4- & 5-Star Hotel Market

BanGKoK 4- & 5-sTaR HoTel MaRKeT oveRvieWThe first six months of 2009 marked a dramatic slowdown in tourism in Thailand, with a decrease in higher paying long-haul visitors. This in turn triggered rate volatility among upper-scale hotels in Thailand, especially Bangkok. Thailand’s tourism industry is going to great lengths to drum up business that has plunged; however, the number of new hotel developments keeps increasing. Luxury hotels seem to be hit the hardest, with many hotels in Bangkok reporting occupancy of around 40 per cent.

Foreign travellers’ arrivals have fallen 16 per cent so far this year, while hotel occupancy across the country has dropped to 44 per cent, down from 66 per cent last year. Luxury hotels in Bangkok have even lower occupancy rates. Business is normally slower from June till October because of the rainy season.

sUPPlY TRenDs

Of the six main areas for 4- and 5-star hotels identified on the above map, new supply in 1H 2009 entered the market in two areas: • 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. There was one hotel project added to the supply of this area in the first half of 2009.

TaBle 1 : sUPPlY aDDeD in THe sUKHUMviT aRea in 1H 2009

HoTel naMe locaTion no. of RooMS

President Palace Hotel sukhumvit soi 11 236

ToTal 236

Source: Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research

collieRs inTeRnaTional 3

• Other Areas

There was only one hotel project added to the supply of this area.

Total Current Supply

By the end of 1H 2009, the six major areas in Central Bangkok had a total supply of 13,108 keys, with 6,452 keys in the 5-star category and 6,656 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 24 percent of the total Bangkok supply.


TaBle 2 : sUPPlY aDDeD in THe oTHeR aReas in 1H 2009

HoTel naMe locaTion no. of RooMS

Best Western Premier amaranth Hotel suvarnabhumi airport 278

ToTal 278

Source: Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research

Source : THA, TAT & Colliers International Thailand Research

FiGURe 1 : 4 & 5 sTaR HoTel RooM sUPPlY, 1H 2009


During 1H 2009, there were approximately 514 keys added in Bangkok 4- & 5-star hotels, of which 236 were added in the

Sukhumvit area, while 278 keys were added in the Other areas.



FiGURe 2 : aDDiTional sUPPlY oF 4- & 5-sTaR HoTel RooMs BY locaTion, 1H 2009

FiGURe 3 : FUTURe neW sUPPlY oF 4- & 5-sTaR HoTel RooMs BY locaTion, 2H 2009-2012F


Future Supply

Thailand’s tourism industry is projected to grow in the long term as the country can offer tourists a range of products at cheaper prices than many competing destinations. Many investors are expanding and undergoing investment to tap this potential. The BTS Skytrain operator plans to develop three hotels with combined investments of THB10 billion. Many investors see that this as a good time to enter the property business because the investment cost is cheap compared to levels during boom periods.

There will be an additional 10,540 keys of 4- and 5-star hotels from 46 projects added to the supply by 2012. Sukhumvit is the

most popular area, with the largest proportion of new rooms (3,767 keys) by 2012, followed by the Central area and the Other areas, with 2,316 keys and 1,884 keys, respectively. If all these projects complete, by 2012 the Sukhumvit area will be the area with the highest supply of 4- and 5-star hotels, followed by the Central area. However, it will be challenging for new operators to build market share during these tough times. The newcomers and existing players are all hoping the situation will recover from the second half of 2009.


By 2010, the majority of the new supply is projected to come on line, with 1,281 keys of 5-star and 3,582 keys of 4-star. However, it is likely that some hotels being developed in Bangkok will postpone their openings due to the economic crisis, which is affecting all hotels in Bangkok and other major destinations. Although Thailand has been a popular tourist destination for a long time, with a very diversified leisure offering, hotel operators

and investors will need to take part in promoting tourism and the economy, not just rely on Government support. Continued investment by operators will help shore up the confidence of local people and foreign tourists.



FiGURe 4 : FUTURe neW sUPPlY oF 4- & 5-sTaR HoTel RooMs BY YeaR anD GRaDe, 2009-2012F


TaBle 3 : 4- & 5-sTaR HoTels scHeDUleD FoR coMPleTion, 2H 2009-2012F

no. HoTel naMe locaTion no. of RooMS eST. coMpleTion

1 Banyan Tree Bangkok expansion cBD 80 2009

2 sofitel Bangkok sukhumvit sukhumvit 345 2009

3 s31 sukhumvit 150 2009

4 Radisson Hotel sathorn sathorn 436 2009

5 Renaissance Bangkok Ratchaprasong central 333 2009

6 The Watt sukhumvit 300 2009

7 The 340 keys sukhumvit 340 2009

8 alila Boutique Hotel central 62 2010

9 aloft Bangkok cBD 130 2010

10 amari serenade Hotel (soi soonvijai) others 128 2010

11 Four points by sheraton others 450 2010

12 Four Wing Residence others 450 2010

13 Four points by sheraton sukhumvit 276 2010

14 Holiday inn express sukhumvit 380 2010

15 M Gallery central na 2010

16 novotel silom cBD 200 2010

17 novotel Ploenchit central 390 2010

18 Park Plaza asoke sukhumvit 142 2010

19 sivayathorn central na 2010

20 sofitel veranda sathorn 200 2010

21 st Regis Bangkok central 198 2010

22 The Regent Bangkok sukhumvit 350 2010

23 The aetas Residence central 204 2010

24 The aetas lumpini sathorn 204 2010

25 The Grand siamese Hotel others 250 2010

26 aloft Bangkok sukhumvit 308 2011

27 Four Points by sheraton sathorn 437 2011

28 le Meridien suvarnabhumi Golf Resort & spa others 214 2011

29 novotel Platinum central 283 2011

30 Holiday inn express Rama i central 300 2011

31 Renaissance Bangkok sukhumvit Hotel sukhumvit 250 2011

32 Radisson suite sukhumvit sukhumvit 170 2011

33 siam Kempinski central 306 2011

34 W Hotel sathorn 403 2011

35 asiatique Hotel Riverside 38 2012

36 asiatique villa Resort Riverside na 2012

37 Ratchatewi Hotel central na 2012

38 Planned Project (charoenkrung Road) Riverside 100 2012

39 Planned Project (charoenkrung Road) Riverside 150 2012

40 Planned Project (Dubai World) Riverside 195 2012

41 Planned Project sukhumvit 414 2012

42 Planned Project (Park venture) central 240 2012

43 a-one Hotel others 213 na

44 crowne Plaza sukhumvit sukhumvit 342 na

45 The siam on The River Riverside na na

46 The Bench Hotel Bangkok others 179 na

Total 10,540




DeManD TRenDs

The global slowdown has put the Thai and world tourism industry in the doldrums. Thailand has experienced a big decline in hotel occupancy in many regions and tourist arrivals have fallen sharply. But the economic problems have been exacerbated by Thailand’s political conflicts, which led to the week-long closure of Suvarnabhumi Airport in late November/early December 2008 and the sudden cancellation of an important Asian

Summit Meeting in Pattaya in April. The economic slowdown will prompt companies to cut corporate travel, meetings and incentive expenses. Singapore is likely to draw away conference and meetings business from Thailand for one or two years. While the global swine flu epidemic has also affected tourism, the sector has been harder hit by political turbulence.

International Tourist Arrivals to Thailand

Official figures from the Tourism Authority of Thailand (TAT) reveal that the number of international tourist arrivals at Suvarnabhumi International Airport declined by as much as 22% during the first half of 2009, compared with the first half of

2008, from just 4.89 million international travellers in the first half of 2008 to 3.77 million in the first half of 2009.

Source : TAT & Colliers International Thailand Research

FiGURe 5 : inTeRnaTional ToURisT aRRivals aT sUvaRnaBHUMi inTeRnaTional aiRPoRT, 1H 2007 To 1H 2009



It is estimated that the total number of international tourist arrivals at Bangkok accomodation will be approximately

8,221,664 persons in 2009, representing a 7.6% decrease from 2008.

From the breakdown of international travellers with accommodation in Bangkok, visitors from East Asia (Japan, China), South Asia (India), Asean (Malaysia, Singapore) and

the Middle East make up the majority of inbound travellers to Thailand. Approximately half of the total came from the Asian region in the first half of 2009.

FiGURe 6 : inTeRnaTional ToURisT aRRivals aT sUvaRnaBHUMi inTeRnaTional aiRPoRT, 2005 – 2009F

FiGURe 7 : inTeRnaTional ToURisT aRRivals aT sUvaRnaBHUMi inTeRnaTional aiRPoRT

BY ReGion, 1H 2009

Source : Thai Hotel Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research




occUPancY anD RooM RaTes

Average Length of Stay

The average length of stay in Bangkok is estimated to decrease from 1.8 nights per guest in 2008 to 1.72 nights in 2009.

Occupancy Rates

Due to the global crisis, coupled with the local political instability in Thailand, the average occupancy rate of Bangkok hotels fell to 39.52% in Q2 2009, with the downturn pronounced in the first quarter, when occupancy was only 47.3%. Occupancy rates in the second quarter 2009 deteriorated when a group of demonstrators broke into a summit of Asian leaders in the beach town of Pattaya and later clashed with riot police in Bangkok’s

streets, leaving two dead. It is estimated that the occupancy rate of hotels in the third quarter of 2009 may decrease further, due to the low season and the impact of the swine flu in Thailand. Thus, the estimated occupancy rate of 4- & 5-star hotels in Bangkok will be approximately 57.92%.


FiGURe 8 : aveRaGe lenGTH oF sTaY oF inTeRnaTional ToURisT aRRivals aT sUvaRnaBHUMi inTeRnaTional aiRPoRT, 2004-2009F

FiGURe 9 : aveRaGe occUPancY RaTes FoR selecTeD 4- anD 5-sTaR HoTels, 2005 To 2009F




FiGURe 10 : aveRaGe DailY RaTes FoR selecTeD 4- & 5-sTaR HoTels, 2005- 2009F

FiGURe 11 : RevenUe PeR availaBle RooM FoR selecTeD 4- anD 5-sTaR HoTels, 2005- 2009F

Source : Colliers International Thailand Research

Source : Colliers International Thailand Research

Room Rates

The average daily room rate (ADR) for the 4- & 5-star hotel segment in the first quarter of 2009 decreased to THB4,080.25 and fell further, by 14.28% quarter-on-quarter, to around THB3,497.73 in Q2. The successful hotels are those which offer attractive promotions to their potential customers, such as special promotions or rate cuts. One of the most important

factors is to cater to the needs of business travellers, who will be making fewer, shorter and cheaper trips during the slowdown. Hotel operators need to therefore focus on value-for-money packages. Thus, ADR of 2009 is forecast to be at THB4,167.89 per night, representing a 20% decrease from 2008.

Revenue Per Available Room (RevPAR)

Between 2005 and 2008, RevPAR in Bangkok peaked at THB3,744.08 in 2006 but later dropped to THB3,559.92 in 2007 and THB3,386.43 in 2008. RevPAR fell sharply in the first and second quarters of 2009, to THB1,962 and THB1,905,

respectively, due to deeper rate cuts. The RevPAR in 2009 is forecast to be approximately THB 2,320.2, representing a decrease of 31.5% from 2008.



Outlook

We expect the number of bookings to improve in the high season and the country’s tourism situation to pick up in the last quarter of this year. Assuming a peaceful political context, general tourism could begin to recover in three months, although the lucrative convention and exhibition market would likely take twice as long to revive. Many hotel developers in Thailand have turned for future expansion overseas rather than to the domestic market, where the downturn and the opening of new five-star hotels have triggered heavy competition.

Amid the economic slowdown, efficient design management that reduces costs but does not compromise on quality is needed. Many hotels are dealing with the global recession by focusing on hotel renovation. New designs should help to reduce operating costs in the long term. With the support of the government

sector, a new tax incentive for hotel operators is planned in order to help them sustain their cash flow and undertake hotel renovations during this difficult time.

The Bangkok 4- & 5-star hotel market will therefore remain in a difficult situation over the next two years due to current conditions, as well as the sharp increase of new supply expected in 2010 and thereafter. The economic crisis, along with many other negative factors, will dominate the sector in the second half of 2009 and 2010.



APPENDIX

Hotel Locations

Bangkok 4 & 5 star hotels can be divided into six areas or pockets of concentration:

• The Riverside Area

This is the area that stretches along both banks of the Chao Phraya River southward just past the Krungthep Bridge and ends at Memorial Bridge. 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 Mandarin Oriental, the Peninsula, the Shangri La, Millennium Hilton and Marriott Resort & Spa, have excellent reputations at the top end of the Bangkok market.

• Central Area

The Central area covers areas along Rama I, Phayathai, Rajdamri, Wireless, Ploenchit and Langsuan Roads. This area is again convenient for both business travellers 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, and the Conrad, among others, are located in this section of the city.

• 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 area, popular with expatriates and tourists, spans 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 Park Plaza, to name a few. Recent trends include new budget and boutique hotels, such as Le Fenix and The Dream Hotel.

• 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- to 5-star hotel rooms. The Sofitel Silom, Lebua at State Tower Hotel, Holiday Inn Silom, Dusit Thani and Pan Pacific are located here.

• Sathorn Area

This is generally a popular business precinct. Hotels in this area include theBanyan Tree and the Metropolitan. The Sukhothai Hotel is an example of a top quality hotel in this area, boasting approximately 210 keys.

• Other Areas

Most of the remainder, comprising 2-, 3- and 4-star hotels, 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 comprises a ‘chic designer’ theme hotel adjacent to the Kingpower duty free shopping complex. The total stock for this area is 993 rooms.



conTacT inFoRMaTion

THailanD: Patima Jeerapaet Managing Director Colliers International17/F Ploenchit CenterKlongtoeyBangkok 10110Tel: 662 656 7000Fax: 662 656 7111

Risinee Sarikaputra Director | Research

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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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 Hotel Market - 1st half 2009