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News Release

Bangkok

Hotel Investments in Thailand – A robust start to the year

Momentum expected to continue with improved trading performance


On the back of a significant turnaround in hotel trading environment across Asia Pacific, Thailand is experiencing a similar strong interest in its hotel investment market.  After a strong year of THB 5.5 billion of hotel transactions in 2010, the momentum has continued into 1H 2011 with two major properties totalling THB 3.46 billion transacted.  According to data compiled by Jones Lang LaSalle Hotels, though a long way from the peak in 2006 where close to THB 16 billion of hotel transactions was recorded, 2011 could surpass levels of the past four years. Since the start of the year, Bangkok and Phuket has attracted strong interest with approximately THB 2 billion and THB 1.5 billion in transactions respectively. This contrasts to 2010 when Bangkok recorded no major transactions while Phuket dominated with THB 4 billion and Samui with THB 1.5 billion.
 
According to Mr. Mike Batchelor, Managing Director Investment Sales Jones Lang LaSalle Hotels, “The seller profile to date has been limited to institutional investors and corporates, with the exception of a receiver sale in the case of Baan Taling Ngam Koh Samui which we sold in 2010.  Mr. Batchelor added, “In reverse, investor interest has been generated from a wide range including private investors, public companies, investment funds as well as high net worth individuals.” Notable investors in Thailand have been property funds which have been involved in the transactions of the Mercure Koh Samui as well as the largest transaction of 2010, the Dusit Thani Laguna Phuket, which was sold by Jones Lang LaSalle Hotels for over THB 2.6 billion to Dusit PCL. The property was eventually sold into their new property fund. Such investors could become more prolific as the more flexible real estate investment trust (REIT) structure is introduced in the near future. While domestic investors continue to dominate the hotel investment landscape, regional private equity firms have started to also make major acquisitions during the first half of 2011.
 
Mr. Tom Oakden, Executive Vice President Investment Sales Jones Lang LaSalle Hotels commented, “Looking forward, Thailand continues to face the twin challenges of limitations on foreign ownership  and political instability though the latter to a lesser extent with the recent smooth transition of government. Two notable transactions represented by Jones Lang LaSalle Hotels this year, that of Sofitel Silom Bangkok and the Laguna Beach Resort, were both sold to foreign investment funds, however both funds had a Thai platform that allowed the investment to be made.”  Mr. Oakden added, “Transaction volumes would benefit if foreign capital had more channels to acquire Thai assets. Signs of greater political stability in Thailand have also sparked offshore interest. A stable political environment should bolster investor confidence in the Thai hospitality market, especially if coupled with continued growth in tourism numbers.”
 
While Thailand’s tourism industry has recovered from the political instability in 2010, its landscape is certainly changing. China overtook Japan to become Thailand’s top source market for the first time in 2010 accounting for 7.1% of all arrivals versus Japan’s 6.2%. The trend looks set to continue into 2011 as the disaster in Japan slowed the country’s outbound travel and China arrivals continues to grow rapidly. Russian travelers, another key growth market grew 78% this year to July and are typically attracted to Bangkok as well as the resort markets of Phuket and Pattaya. Regional Asian markets continue to dominate visitor arrivals, with traditional European markets no longer present as a top 5 source market. Approximately 11.2 million tourists have visited Thailand up till July this year, up from 8.8m in the same period last year. In Bangkok alone, arrivals are up almost 30% to 7.4m as of July this year, looking set to exceed 2010’s total of 10.3m, with each month’s visitor arrivals higher than anytime in the past five years.
 
The improved market environment is reflected in hotel trading performance across all star categories, in fact, RevPAR in Bangkok’s 3, 4 and 5 star markets were three of the top ten most improved markets in the region in 2011. The 5-star market saw the strongest year on year RevPAR growth with 29.4%, the 3-star market with 22.9% and the 4-star market with 21.3%. Their average RevPARs are now THB 2,918, THB 981 and THB 1,557 respectively.
 
The Thai hotel market is in the midst of an emerging turnaround with a surge in visitor arrivals backed by a return of relative political stability. Such favorable conditions will further boost investor interest in Thai hospitality assets. While Bangkok still faces the specter of an oversupply in rooms with over 12,000 due to open by 2014, its key strengths in tourism and potential as a meetings, incentives, convention and exhibition (MICE) hub will underpin hotel performance in the medium term. In addition, Jones Lang LaSalle Hotels still sees opportunities in certain niches such as the 3-star hotel market which continues to perform strongly and where future supply only makes up 21% of total Bangkok supply.