3 tips for hotel investment in Thailand

Pattaya

Following the death of Thailand’s King Bhumibol Adulaydej last week, the country has announced an official year of mourning. While Tourism Minister Kobkarn Wattanavrangkul told Reuters that she does not expect much of an impact on tourism, "the mood and tone might be different.”

But as locals mourn, hotels across Thailand may see a decline in events and conferences. Ronnachit Mahattanapreut, SVP of finance at Central Plaza Hotel, said that some seminars and conferences have been canceled, and the company is negotiating with customers about postponing other events.

Over the course of a year, canceled events and an overall decline in festivities could have a big impact on the country’s tourism and hotel industries. Tourism accounts for approximately 10 percent of Thailand's economic output, and the industry has been fairly solid in the country’s overall rough economy, which grew 2.8 percent last year and is poised for 3.3-percent growth in 2016. This coupled with excessive supply and a sluggish global economy.

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Investing in Thailand

So what do hoteliers looking to grow their business in Thailand need to know? A few insiders shared some insights.

1. Chamnong Buakai, managing director of property consultant Agency for Real Estate Affairs, said that boutique hotels are seen as a safer option compared to larger properties. “Boutique hotel businesses reach break-even points the fastest," he said. “Some riverside boutique hotels now generate higher revenue per room in a month than many five-star hotels in prime locations.” Hotel investors may consider acquiring old houses or shophouses and converting them into small hotels, Chamnong said. 

2. Sopon Pornchokchai, president of Agency for Real Estate Affairs, said that investors should avoid suburban locations like Min Buri, Nong Jok or Lam Luk Ka. Locations that offer “promising prospects” for hospitality include heritage sites and traditional communities, as well as the areas that are close to the mass transit system. 

3. But prime locations inevitably lead to increased competition. Kunawat Damrongmanee, executive director at I Residence Hotel Group, which runs two hotels in Silom and Sathon area, said that competition has increased among not just neighboring hotels in one city or region, but all of the hotels along a transportation corridor.

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This survey is intended for companies that third-party manage hotel properties for other owners.

The results of the survey will be published in the December ADVISOR issue of Hotel Management, and the survey is open until Oct. 11.