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News Release

Bangkok

Thailand’s Hotel Market Continues to Lure Investors

Lower capital vaues allow for higher yields while outlook for the country's tourism industry remains promising


Thailand’s hotel investment market remains buoyant and attractive to both domestic and foreign real estate investors. It has steadily improved after the market slump during the Global Financial Crisis that erupted in 2009. Hotel transaction volumes across the country tracked by JLL’s Hotels and Hospitality Group reached approximately THB 10.9 and 13.9 billion in 2013 and 2014 respectively, accounting for approximately 4.1% and 5.7% respectively of all hotel transactions in Asia Pacific.


Investment Destinations:

Investors are interested in acquiring hotels in Thailand for a number of reasons including lower capital values than in more developed market such as Singapore or Hong Kong, relatively higher yield returns (whether at the outset of the investment or the opportunity for the incoming investor to add value) and the long term prospects of Thailand’s tourism industry. The initial investment destinations for investors tend to cover the main Bangkok, Phuket and Samui markets, followed by Chiang Mai, Pattaya, Khao Lak and Krabi as secondary markets which are also attracting some investor interest.

  • Bangkok remains Thailand’s most attractive hotel investment destination due to its position as one of the most visited cities in the world, attracting both leisure and corporate travelers all year round. Investor demand for assets in Bangkok has driven asset prices ever higher in spite of a significant amount of new supply of hotel rooms over the last few years as evidenced by a transaction that JLL advised on in mid-2014 of a hotel in the prime Sukhumvit area.
  • Phuket has also proven to be an extremely buoyant market in recent years for resort transactions with JLL having advised on nine resorts deals for a combined volume of approximately THB 14.8 billion. Investors are attracted to Phuket due to the significant and growing direct airlift that is available into Phuket International Airport (PIA) which insulates the market from disturbances in Bangkok. For example, in 2014, when the Bangkok protests caused visitor arrivals to drop by 11.3% year-on-year compared to 2013, Phuket’s visitor arrivals were less affected and remained flat, moderately growing by 0.2% (Source: AOT). Expansion of PIA’s capacity, additional road infrastructure plus the ability to achieve a higher yield return as compared to Bangkok further adds to Phuket’s allure as one of Asia’s investment hotspots.
  • Samui can be described as the ying to Phuket’s yang as its limited airlift and high airfares have shaped the market into a more ‘boutique’ destination as opposed to the ‘mass tourism’ characteristic of Phuket; resulting in some of the highest RevPARs (Revenue Per Available Room) in Thailand. The emergence of Surat Thani as a low cost airport hub has also increased access to Samui and supported the growth in the number of visitors to the island. This, combined with a limited supply of new hotels under construction (only one major resort opened on Samui in 2014), presents a favorable environment for hotel investors investing in Samui. JLL currently has a number of resorts in Samui that are being marketed for sale which have received strong interest from investors.
Investor Profile:
To give a flavor for the types of investors who have been active in Thailand, numbers tracked by JLL show that from 2012 – year-to-date 2015, 58% of buyers have been Thai investors and 40% have been international investors.

The type of investors can be primarily split into:
  • Developers who buy with the intent of redevelopment
  • Owner-operators who control hotel or serviced apartment brands and own the underlying assets they manage
  • Investment funds that invest funds on behalf of international investors
  • Corporates whose primary business is not hotel investments
  • High net worth individuals (HNWI) and families. 
On the buy side, developers/property companies represent the vast majority of the investment activity, accounting for almost 60% of the total volume of transactions recorded. Owner-operators are the second largest group of investors representing over 15%, followed by corporates (almost 12%). Combined investment volumes by investment funds and HNWI account for 10%.

On the opposing side of the table, sellers of hotel assets have typically been investment funds, developers/property companies, corporates and HNWI, representing 35%, 26%, almost 11% and approximately 10% of the total transaction volumes recorded, respectively.

Transaction Characteristics: 
Investors look at a number of factors in assessing investment opportunities. Primarily, hotel investments are a function of purchase price versus existing or potential cashflow that can be generated from the hotel’s operations. For more passive investors, a certain yield expectation is applied to stabilized cashflows being generated by the target property, whether it is approximately 6-7% in Bangkok or slightly higher in the resort markets. 

However, many investors acquire a property with a view to create and extract additional value, a strategy typically followed by Developers / Property Companies as highlighted in the previous section. This might entail acquiring an existing asset to renovate, reposition, and/or appointing an international operator to manage the property or also adding additional rooms, amongst other strategies. Following such value enhancement, an investor can exit by selling the property to an aforementioned passive investor or real estate investment trusts (REITs) that have now become active investors in Thailand.

Thailand’s tourism prospects continue to be promising given the country’s already well developed infrastructure, strategic location and reputation as one of the world’s most popular holiday destinations. All these will continue to attract investors to the country’s hotel market in the foreseeable future.

Abouth the author
Karan Khanijou is a Vice President attached to the Investment Sales team of JLL’s Hotels and Hospitality Group. He has been a member of the team since 2011 and has advised on over THB 9 billion worth of hotel and resort transactions. He can be reached at 02-624 6563 for further inquiries.​