While the political turmoil of 2013 and 2014 hit the hospitality sector hard in Thailand, last year brought renewed optimism and a record 29.9 million international travelers to its shores.
Given the proven link between tourists and eventual property buyers this has to be good news for the real estate sector in the Kingdom.
For a tourist hub like Thailand, which ranks among the top 10 preferred holiday destinations globally, the prolonged unrest in 2014 could have spelled disaster however, according to Mike Batchelor, Managing Director for Investment Sales (Asia) at JLL Hotels & Hospitality Group, the impact it had on the Thai hospitality market was barely “a hiccup”.
He said that he believed the country’s remarkably resilience in the face of coups, airport closures and natural disasters may have played a role in minimising the extent of the damage.
Batchelor pointed to increased activity from the low-cost air carriers that are flying tourists to transport hubs such as Surat Thani and U-Tapao, which in turn service popular destinations such as Koh Samui and Pattaya respectively. Pattaya, for example, is expected to see a 13 percent rise in tourists when AirAsia connects Thailand with Chinese cities such as Nanning and Nanchang.
Other factors likely to bump up arrivals during 2016 include the recent introduction of multiple-entry six-month visas, the re-opening of Terminal 2 at Bangkok’s Don Muang airport and an almost completed expansion of Phuket airport, which will increase capacity from 6.5 million to 12 million visitors a year.
In Thailand hotel market, while the pace of recovery could be moderated by the new supply, Batchelor noted that mid-tier hotels will likely continue to do well, thanks to increased tour group activity, especially from China. These are already seeing 70 percent occupancy rates, higher than other hotels. Bangkok, meanwhile, will have more hotel rooms this year with the opening of a further 5,500 rooms in the mid-scale segment.
In the luxury sector, demand is very much keeping up with supply. Around 900 new rooms are expected in Koh Samui during the next two years, yet occupancy is likely to increase due to better transport connections to the island and a growing number of tourists.
On the investment side, while investors’ interest in acquiring hotels during 2016 increases, the lack of premier assets on the market will likely keep yields tight.
Batchelor said: “There is a scarcity of investment-grade assets on Thailand’s hotel market, which has shifted the focus of transactions to smaller assets over 2015.”
He also pointed out that “yields for Thai hotels are likely to remain tight across most markets during 2016, which may prompt local Thai investors to seek investments offshore.”
Despite fewer investment opportunities, the outlook for the Thai hospitality sector during 2016 is positive. With tourist numbers steadily on the up, optimism levels are also rising.