Market Research. BANGKOK 4 & 5 STAR HOTEL MARKET HIGHLIGHTS 4 th q u arter

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1 Market Research B A N G KO K 4 & 5 star hotel M A R K E T BANGKOK 4 & 5 STAR HOTEL MARKET HIGHLIGHTS 4 th q u arter

2 colliers international THAILAND The Quarterly Report BANGKOK 4 & 5 star hotel MARKET 4th Quarter 2008 BANGKOK 4 & 5 STAR HOTEL MARKET HIGHLIGHTS Market Indicators Q Q1 2009F SUPPLY DEMAND Average Daily Rate occupancy rate By the end of 2008, the six major areas in central Bangkok had a total supply of 12,483 keys with 6,063 keys in the 5 star category and 6,420 keys in the 4 star category. Current supply is most concentrated in the Riverside area, followed by Central and Sukhumvit areas. An additional 10,815 keys from 47 projects are projected to be added to the 4 & 5 star hotel supply by the end of Thailand s tourism industry was severely impacted after anti-government protestors shut down Bangkok s main airport for eight days from 25 November 2008, stranding about 400,000 travellers during the peak tourism season and contributing to a 22% decline in December tourist arrivals. The average length of stay decreased to 1.80 days in 2008 from 1.87 in The average occupancy rate was 64.36% in 2008, 6.4% lower than in ADR for the 4 and 5 star hotel segment in 2008 rose by 4.3% from THB 5, in 2007 to THB 5, in The increase of ADR in 2008 was due to the business in Bangkok performing reasonably well for the first three quarters, before falling off in the last quarter. RevPAR in 2008 fell by 5% to THB 3, in 2008, again with the fall concentrated in the last quarter which marks the start of the high season. There will be an additional 10,815 keys of 4-5 star hotel from 47 projects added in the supply by 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. The Bangkok 4 & 5 star hotel market is expected to remain in a difficult situation over the next two years due to the current conditions as well as the sharp increase of new supply up to The economic crisis along with many other negative factors will dominate the sector in 2009 and

3 BANGKOK 4 & 5 STAR HOTEL MARKET OVERVIEW The Bangkok 4 & 5 star hotel market was severely affected by the closure of Bangkok s international airports during the last month of 2008, which is traditionally the start of the high season for international tourist visitors to Thailand. The Government is working to restore international tourist confidence as soon as possible, but at the same time the hotel business is facing a hard time as tourism is being further harmed by many ongoing negative factors such as the local and global economic slowdown and concerns about the longevity of the new Government. Thailand s tourism industry experienced turmoil after anti- Government protestors shut down Bangkok s main airport for eight days from 25 November 2008 onward, stranding about 400,000 travellers during the peak tourism season and contributing to a 22% decline in December tourist arrivals. The closure may have cost the country about THB 290 billion in lost income. Another cause for concern is the high level of new hotels under development; while the economy was booming many hotel companies began building new properties, and some of those are close to opening. As new product comes onstream, we could well see a significant decline in occupancy this year. However, excess supply means opportunities for consumers. Consumers can expect better value for what they pay better views, free internet, free access to health clubs and attractive promotional packages, such as free extra nights. However, Thailand s political situation is expected to stabilise and consequently, hotel occupancy rates should rebound once confidence returns. In the longer term, hotel operators are beginning to see bookings coming back, not as strongly as last year but the worst-case scenarios predicted earlier are likely to be avoided. BANGKOK 4 & 5 STAR HOTEL MAP 2 Colliers International

4 Supply Trends Hotel Locations At first glance the location of hotel projects in the city of Bangkok appears to be haphazard; however, after more thorough analysis 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 finishing 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. This popular leisure travellers precinct boasts a total supply of 3,669 keys. Table 1 : Supply added in the Riverside area in 2008 Hotel name Location No. of rooms Chatrium Suites Bangkok Charoengkrung Road 396 Total 396 Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research 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, the Conrad, among others, are located in this section of the city with approximately 3,159 keys. Table 2 : Supply added in the Central area in 2008 Hotel name Location No. of rooms Centara Grand at Central World Ratchaprasong 505 Total 505 Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research Colliers International 3

5 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 popular area 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. In total there are 1,986 hotel keys. Table 3 : Supply added in the Sukhumvit area in 2008 Hotel name Location No. of rooms Grand Millennium Sukhumvit Sukhumvit Soi Total 325 Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research CBD Area 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, star hotel rooms. The Sofitel Silom, Lebua at State Tower Hotel, Holiday Inn Silom, Dusit Thani and Pan Pacific are located here. Table 4 : Supply added in the CBD area in 2008 Hotel name Location No. of rooms Le Meridien Bangkok Surawongse Road 282 Total 282 Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research 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 which boasts approximately 210 keys. Other Areas Most of the remaining hotels comprising 2, 3 and 4 stars 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. Table 5 : Supply added in the Other areas in 2008 Hotel name Location No. of rooms Pullman Bangkok King Power Soi Rangnam 386 Total 386 Source : Thai Hotels Association (THA), Tourism Authority of Thailand (TAT) & Colliers International Thailand Research 4 Colliers International

6 Total Current Supply By the end of 2008, the six major areas in Central Bangkok had a total supply of 12,483 keys with 6,063 keys in the 5 star category and 6,420 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 29 percent of the total supply for 4 and 5 star hotels, followed by the Central area with 25 percent of the total Bangkok supply. Figure 1 : 4 & 5 star hotel room supply, Q Source : THA, TAT & Colliers International 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. There will be an additional 10,815 keys of 4-5 star hotel from 47 projects added in the supply by 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 2,162 keys, respectively. If all these projects complete, by 2012 the Sukhumvit area will be the area with the highest supply of 4-5 star hotels, followed by the Central area. However, it will be challenging for the 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 Figure 2 : Future new supply of 4 & 5 star hotel rooms by location, f Source : THA, TAT & Colliers International Thailand Research Colliers International 5

7 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. However, 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 only relying on Government support. Continued investment by operators will help shore up the confidence of local people and foreign tourists. Figure 3 : Future new supply of 4 & 5 star hotel rooms by year and grade, f Source : THA, TAT & Colliers International Thailand Research Table 6 : 4 and 5 star hotels scheduled for completion, f No. Hotel name Location Estimated completion No. of rooms 1 Aloft Bangkok CBD Alila Boutique Hotel Central Banyan Tree (Expansion) Sathorn Best Western Premier Amarath Suvarnabhumi Airport Others Radisson Hotel Sathorn Sathorn Ratchatewi Hotel Central 2009 NA 7 S31 Sukhumvit Siam Kempinski Central Sivayathorn Central 2009 NA 10 Sofitel Bangkok Sukhumvit Sukhumvit The Watt Sukhumvit The 340 keys Sukhumvit Aloft Bangkok Sukhumvit Amari Soonvijai Others Four Points by Sheraton Sukhumvit Four Points by Sheraton Others Four Wing Residence Others Colliers International

8 Table 3 : Apartments scheduled for completion, No. Hotel name Location Estimated completion No. of rooms 18 Holiday Inn Express Sukhumvit M Gallery Central 2010 NA 20 Novotel Ploenchit Central Novotel Silom CBD Park Plaza Asoke Sukhumvit Renaissance Bangkok Ratchaprasong Central Sofitel Veranda Sathorn St. Regis Bangkok Central The Aetas Lumpini Sathorn The Aetas Residence Central The Grand Siamese Hotel Others The Regent Bangkok Sukhumvit W Hotel Sathorn Holiday Inn Express Rama I Central Le Meridien Suvarnabhumi Golf Resort & Spa Others Novotel Platinum Central Radisson Suite Sukhumvit Sukhumvit Renaissance Bangkok Sukhumvit Hotel Sukhumvit Four Points by Sheraton Sathorn Asiatique Hotel Riverside Asiatique Villa Resort Riverside 2012 NA 39 Planned Project (Charoengkrung Road) Riverside Planned Project (Charoenkrung Road) Riverside Planned Project (Dubai World) Riverside Planned Project Sukhumvit Planned Project (Wireless Square) Central A-One Hotel Others NA Crowne Plaza Sukhumvit Sukhumvit NA The Bench Hotel Bangkok Others NA The Siam on The River Riverside NA NA Total 10,815 Source : THA, TAT & Colliers International Thailand Research Colliers International 7

9 Supply 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 The economic slowdown will prompt companies to cut corporate travel, meetings and incentive expenses. On the other hand, there is the possibility of many companies relocating conferences to this region to benefit from cost savings. We believe that during these difficult times, many companies will still be proactive in training staff and implementing team-building activities, since this will be a good opportunity to prepare for the return of stronger revenues and growth cycles. Thus, we see potential for the meetings, incentives, conferences and exhibitions (MICE) business in the Japanese and other markets whose their currencies are weak against the US dollar and the euro. International Tourist Arrivals to Thailand Official figures from the Tourism Authority of Thailand (TAT) reveal that the number of international tourist arrivals to Bangkok hotels declined by as much as 26% in the last two years from around 10.7 million hotel guests in 2006 to nearly 7.9 million in Figure 4 : International tourist arrivals at hotels in Bangkok, F Source : TAT & Colliers International Thailand Research 8 Colliers International

10 Table 7 : International tourist arrivals at hotels in Bangkok by source country, f Nationality YEAR Q1 Q Q1 Q F ASEAN 1,658,776 1,423,352 1,189, , , ,844 Malaysia 378, , , , , ,789 Singapore 849, , , , , ,536 Indonesia 148, , ,074 54,013 54, ,293 Philippines 276, , ,721 53,688 46,904 90,616 Laos ,592 20,568 10,813 9,211 13,211 Vietnam 5, , ,784 48, , ,912 Brunei - 9,915 8,845 3,965 9,055 7,618 Cambodia - 25,423 21,087 12,074 15,398 16,294 Myanmar 85 22,252 31,001 15,135 10,885 22,575 EAST ASIA 3,450,383 4,034,385 3,245,978 1,695,136 1,729,914 2,544,822 China 977,236 1,357, , , , ,741 Hong Kong 430, , , , , ,108 Japan 1,502,734 1,495,912 1,448, , ,038 1,274,824 Korea 240, , , , , ,948 Taiwan 298, , , , , ,200 SOUTH ASIA 430, , , , , ,255 India 430, , , , , ,255 Others South Asia - 94, MIDDLE EAST 454, , , , , ,145 Israel 99,331 77,827 94,555 37,932 29,850 59,570 Other Middle East 355, , , , , ,575 EUROPE 1,658,046 1,634,521 1,875, , ,833 1,490,537 Austria 53,407 61,324 81,329 47,776 49,293 55,857 Belgium 74,854 63,849 62,526 33,679 17,702 42,486 France 229, , , , , ,058 Germany 355, , , , , ,939 Italy 111, , ,331 52,825 39,533 99,223 Spain 63,170 69,108 61,353 25,114 21,246 53,892 Netherlands 137, , ,970 65,608 46, ,110 Switzerland 102, , ,031 64,068 52,201 75,931 U.K. 529, , , , , ,041 EAST EUROPE 155, , , , , ,307 Russia 92, , ,341 73,054 68, ,956 Other East Europe 63,298 83,515 99,370 49,968 80, ,351 SCANDINAVIA 361, , , , , ,761 Sweden 142, , ,089 71,226 65,358 56,072 Denmark 84,206 88,633 90,215 52,989 48,773 75,167 Finland 77,792 70,242 41,300 21,295 17,975 35,886 Norway 56,683 56,882 52,637 27,496 24,479 52,637 AMERICA 710, , , , , ,125 U.S.A. 609, , , , , ,330 Canada 101, , ,903 59,458 52,107 91,794 Others Americas - 33, Colliers International 9

11 Table 7 : International tourist arrivals at hotels in Bangkok by source country, f Nationality YEAR Q1 Q Q1 Q F OCEANIA 513, , , , , ,260 Australia 434, , , , , ,532 New Zealand 78,485 66,705 73,552 31,554 39,510 25,728 AFRICA 89,325 47,595 55,706 16,742 21,545 44,008 Africa 89,325 47,595 55,706 16,742 21,545 44,008 OTHER 1,036, , , , , ,287 Total 10,519,754 10,639,637 9,851,462 4,830,152 4,887,698 7,872,350 Source : THA, TAT & Colliers International Thailand Research From the breakdown of international travellers at accommodation in Bangkok, visitors from East Asia (Japan, China), South Asia (India), South East Asia (Malaysia, Singapore), Europe ( Germany, UK, France), USA, Australia and the Middle East make up the majority of inbound travellers to Thailand. Approximately half of the total came from the Asian region in Figure 5 : International tourist arrivals at hotels in Bangkok by region, 2008f Source : THA, TAT & Colliers International Thailand Research The overall decline in tourist arrivals in 2008 was around 26%, but arrivals from some countries and regions were much sharper. For instance, arrivals from South Korea were down some 40%, Oceania 40%, the UK 35%, Scandinavia 29% and China 26%. Singaporean arrivals declined over 50% in 2008, but unlike other source countries, this was part of a long-term declining trend: arrivals from Singapore have been declining each year since 2005, an overall fall of some 76% in three years. On the other hand, arrivals from some major markets, such as Germany (down 3%), India (4%) France (6%) and Japan (12%) were less dramatic, while arrivals from Vietnam proved counter-cyclical, growing by almost double in the year. 10 Colliers International

12 Occupancy and Room Rates Average Length of Stay The average length of stay in Bangkok decreased from over 2 nights per guest in 2004 to 1.83 nights in After a slight revival to 1.87 nights in 2007, however, the average fell back to 1.80 days in Figure 6 : Average length of stay of international tourist arrivals at hotels in Bangkok, Source : THA,TAT & Colliers International Thailand Research Occupancy Rates The average occupancy rate of Bangkok hotels fell 6.4%yearon-year to 64.36% in 2008, with the downturn pronounced in the final quarter when occupancy was only 55%, well below the normal average of 80% in that period. In December, cancellations for advance bookings in the first quarter of 2009 was over 20,000 rooms. As a result, it is forecast that the average occupancy rate of the hotel sector in the first half of 2009 will fall by 20%-30%, compared with the first half of 2008, especially for those hotels focused on the leisure market. Occupancy at business hotels will also decrease, but less severely. Figure 7 : Average occupancy rates for selected 4 and 5 star hotels, 2005 to 2008 Source : Colliers International Thailand Research Colliers International 11

13 Room Rates The average daily room rate (ADR) for the 4 & 5 Star hotel segment in 2008 rose by 4.3% from THB 5, in 2007 to THB 5, in The increase of ADR in 2008 was due to the business in Bangkok performing reasonably well for three consecutive quarters, with the drop focused in the last quarter. Business travellers, especially from the Asia-Pacific region, are more price-conscious than ever before and are spending more prudently. Corporate expenditure such as travel and entertainment is now being scrutinised more closely. During this situation, there are many hotel operators applying price-cutting strategies. When operators start to cut prices it is often difficult to increase the rates back to their prior levels because customers expectations change. The successful and surviving hotels are the hotels which offer attractive promotions to their potential customers. Promotions and price cuts are different strategies. 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 slow down. Hotel operators should therefore focus on value-for-money packages. Figure 8 : Average daily rates for selected 4 and 5 star hotels, Source : Colliers International Thailand Research Revenue Per Available Room (RevPAR) Between 2005 and 2008, RevPAR in Bangkok peaked at THB 3, in 2006 but has since dropped to THB 3, in 2007 and THB 3, in The RevPAR fall in 2008 occurred in the last quarter which is normally the high season for the Bangkok tourism industry. Figure 9 : Revenue per available room for selected 4 and 5 star hotels, Source : Colliers International Thailand Research 12 Colliers International

14 Outlook: Despite challenging economic conditions, there will be some potential markets for tourism in Thailand, although as the economic crisis spreads, it remains to be seen which markets will prove resilient sources of demand. However, major markets, such as the UK and several other long-haul sources, are most likely to see a continuing low level of tourist arrivals. Moreover, although hotel rates in Bangkok are not considered expensive on a comparative basis, tour groups will be focusing more on cost and 3-star alternatives. 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 The economic crisis along with many other negative factors will dominate the sector in 2009 and In this period, the trend appears brighter for budget hotels as executives and tourists search out cheaper options able to offer the minimum level of service required from a low-cost alternative. 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 Colliers International 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 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. Colliers International 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 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.