Thailand hotel investment market sets new records in 2017
Bangkok 27 February 2018 – Hotel investment transaction volume in Thailand hit an all-time high last year, totalling THB 17 billion, led by a number of marquee transactions. Despite high levels of investor interest, transaction volume in 2018 is, however, unlikely to match 2017 as fewer investment grade hotel assets are put up in the market this year, according to property consultancy JLL.
Data from JLL's Hotels and Hospitality Group shows 12 hotel assets were sold last year with a combined value of THB 17 billion. This is a 70% jump from 2016 and is 39.7% higher than the five-year average annual volume recorded between 2012 and 2016 of approximately THB 12.2 billion.
By value, Bangkok dominated the investment activity with six hotel assets sold for almost THB 14 billion, accounting for nearly 80% of the total market-wide volume last year. The six assets included the EDITION hotel at Thailand's iconic Mahanakorn development, sold to a US private equity fund together with its observation deck; a 34-storey partially completed structure on Sukhumvit 27 sold to Carlton hotel group from Singapore; former Premier Inn on Sukhumvit sold to V Hotel Group from Singapore; Somerset Lake Point sold to JR Kyushu from Japan; Swissotel Nai Lert Park sold to Bangkok Dusit Medical Services; and a serviced apartment in Thonglor sold to a private investor.
Some of the major transactions outside Bangkok included Dusit Island Resort Chiang Rai, Pilanta Resort on Phi Phi Island, and Premier Inn Pattaya which was acquired as part of a portfolio by Singapore's V Hotel Group.
Aside from another year of record breaking transaction volumes, 2017 also witnessed an increase in foreign investment accounting for more than 50% of traded value. Buyers from Singapore, Japan and the USA dominated the investment activity.
Mike Batchelor, Chief Executive Officer at JLL's Hotels and Hospitality Group Asia, says "Continued growth in visitor arrivals and healthy hotel trading performance supported by a stable political environment are the driving factors behind strong levels of investment in Thailand's hotel market." According to the Department of Tourism and Sports, Thailand welcomed over 35 million visitor arrivals in 2017, up 8.6% from 2016 and an increase of more than 10 million in the last 3 years alone. The authority also expects 37.6 million visitors in 2018.
"The Department of Tourism and Sports' forecast is certainly achievable," says Mr. Batchelor. "Bangkok was crowned the most visited city in the world by MasterCard where visitors' number surpassed the 21 million mark on international tourist arrivals last year and is expected to strengthen its reputation as a culinary destination as the first edition of the Michelin Guide has recently been released for the city."
"Moreover, improving connectivity is a key theme with the planned and ongoing expansions of multiple international airports throughout Thailand, additions of new low–cost carrier flights and the high speed railway to enhance intercity connectivity," he says.
Several airport expansions that are underway or nearing completion will help increase Thailand's capacity to accommodate more visitors. Capacity for Don Mueang and Suvarnabhumi together will be 100 million passengers. In 2018, U-Tapao Airport near to Pattaya in Rayong province will see a further expansion coming online. Khao Lak may see its own airport in future as the potential development of the Phang Nga Airport is under review pending Environmental Impact Assessment (EIA) approval. Hua Hin is also in discussion of opening an airport in future.
"The unprecedented level of activity underlines Thailand as a market with strong investment fundamentals and a positive future outlook, however, with limited availability of investment grade assets on the market, we expect transaction volume in 2018 to taper off somewhat and normalize to around THB 10 billion" Mr. Batchelor concludes.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
In Thailand, JLL is the largest international property services firm, with 1,600 employees. In Euromoney Real Estate Survey 2017, the firm was named Thailand's number one overall real estate advisor for the seventh consecutive year and also won top votes for research and valuation in the same survey.