Market Research B A N G KO K 4 - & 5 - S TA R H OT E L M A R K E T B A N G KO K 4 - & 5 - S TA R H OT E L M A R K E T 1 ST H A L f

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1 Market Research B A N G KO K 4 - & 5 - star hotel M A R K E T B A N G KO K 4 - & 5 - S TA R H OT E L M A R K E T 1 st hal f 2009

2 colliers international THAILAND The Knowledge Report BANGKOK 4- & 5-STAR HOTEL MARKET 1 st half 2009 BANGKOK 4- & 5-STAR HOTEL MARKET HIGHLIGHTS Market Indicators 1h h 2009F SUPPLY DEMAND average daily rate occupancy rate 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 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 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, and fell further, by 14.28% quarter-on-quarter, to around THB3, in Q2 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. 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 The economic crisis, along with many other negative factors, will dominate the sector in the second half of 2009 and

3 BANGKOK 4- & 5-STAR HOTEL MARKET OVERVIEW The 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 Table 1 : Supply added in the Sukhumvit area in 1H 2009 Hotel name Location No. of rooms President Palace Hotel Sukhumvit Soi TOTAL 236 Source: Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Thailand Research 2

4 Other Areas There was only one hotel project added to the supply of this area. 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) & Thailand Research 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. Figure 1 : 4 & 5 star hotel room supply, 1H 2009 Source : THA, TAT & Thailand Research 3

5 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 Source : THA, TAT & Thailand Research 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. 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 There will be an additional 10,540 keys of 4- and 5-star hotels from 46 projects added to the supply by Sukhumvit is the Figure 3 : Future new supply of 4- & 5-star hotel rooms by location, 2H f Source : THA, TAT & Thailand Research 4

6 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, f Source : THA, TAT & Thailand Research 5

7 Table 3 : 4- & 5-star hotels scheduled for completion, 2H f No. Hotel Name Location No. of rooms Est. Completion 1 Banyan Tree Bangkok Expansion CBD Sofitel Bangkok Sukhumvit Sukhumvit S31 Sukhumvit Radisson Hotel Sathorn Sathorn Renaissance Bangkok Ratchaprasong Central The Watt Sukhumvit The 340 keys Sukhumvit Alila Boutique Hotel Central Aloft Bangkok CBD Amari Serenade Hotel (Soi Soonvijai) Others Four points by Sheraton Others Four Wing Residence Others Four points by Sheraton Sukhumvit Holiday Inn Express Sukhumvit M Gallery Central NA Novotel Silom CBD Novotel Ploenchit Central Park Plaza Asoke Sukhumvit Sivayathorn Central NA Sofitel Veranda Sathorn St Regis Bangkok Central The Regent Bangkok Sukhumvit The Aetas Residence Central The Aetas Lumpini Sathorn The Grand Siamese Hotel Others Aloft Bangkok Sukhumvit Four Points by Sheraton Sathorn Le Meridien Suvarnabhumi Golf Resort & Spa Others Novotel Platinum Central Holiday Inn Express Rama I Central Renaissance Bangkok Sukhumvit Hotel Sukhumvit Radisson Suite Sukhumvit Sukhumvit Siam Kempinski Central W Hotel Sathorn Asiatique Hotel Riverside Asiatique Villa Resort Riverside NA Ratchatewi Hotel Central NA Planned Project (Charoenkrung Road) Riverside Planned Project (Charoenkrung Road) Riverside Planned Project (Dubai World) Riverside Planned Project Sukhumvit Planned Project (Park Venture) Central 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 Source : THA, TAT & Thailand Research 6

8 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 Figure 5 : International tourist arrivals at suvarnabhumi International Airport, 1H 2007 to 1H 2009 Source : TAT & Thailand Research 7

9 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 Figure 6 : International tourist arrivals at suvarnabhumi International Airport, f Source : Thai Hotel Association (THA), Tourism Authority of Thailand (TAT) & Thailand Research 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 Figure 7 : International tourist arrivals at Suvarnabhumi international airport by region, 1H 2009 Source : THA, TAT & Thailand Research 8

10 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 Figure 8 : Average length of stay of international tourist arrivals at suvarnabhumi International Airport, f Occupancy Rates Source : THA, TAT & Thailand Research 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 9 : Average occupancy rates for selected 4- and 5-star hotels, 2005 to 2009f Source : THA, TAT & Thailand Research 9

11 Room Rates The average daily room rate (ADR) for the 4- & 5-star hotel segment in the first quarter of 2009 decreased to THB4, and fell further, by 14.28% quarter-on-quarter, to around THB3, 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, per night, representing a 20% decrease from Figure 10 : Average daily rates for selected 4- & 5-star hotels, f Source : Thailand Research Revenue Per Available Room (RevPAR) Between 2005 and 2008, RevPAR in Bangkok peaked at THB3, in 2006 but later dropped to THB3, in 2007 and THB3, in 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 Figure 11 : Revenue per available room for selected 4- and 5-star hotels, f Source : Thailand Research 10

12 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

13 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. 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. 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, 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 the Banyan Tree and the Metropolitan. The Sukhothai Hotel is an example of a top quality hotel in this area, boasting approximately 210 keys. 12

14 The Knowledge Report 1st Half 2009 Bangkok 4- & 5-Star Hotel Market 293 offices in 61 countries on 6 continents USA 99 Canada 19 Latin America 18 Asia Pacific 62 EMEA 95 US$ 2 billion in annual revenue 868 million square feet under management 11,048 Professionals Contact information THAILAND: Patima Jeerapaet Managing Director Risinee Sarikaputra Director Research 17/F Ploenchit Center Klongtoey Bangkok Tel: Fax: This report and other research materials may be found on our website at Questions related to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by for advertising and general information only. 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. is a worldwide affiliation of independently owned and operated companies. 13

15 This report and other research materials may be found on our website at Questions related to information herein should be directed to the Research Department at the number indicated above. This document has been prepared by for advertising and general information only. 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. 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. is a worldwide affiliation of independently owned and operated companies.