Bangkok Hotel Market Report Q4 2010

year end 2010 | HOTeL

thailand

Bangkok Luxury & upper ScaLe
HoteL Market report

Bangkok Luxury & Upper Scale
Hotel Market
ExEcutivE Summary
the Luxury and upper scale hotel market continued to show weakness on account of the after
effects of the april/May disturbances and the traditional high season of Q4 did little to raise spirits.
occupancy for Q4 was just around 60%, a full ten percentage points below the figure for Q4
2009.

markEt indicatorS y/y Middle eastern, Indian and chinese visitors continue to bolster the Bangkok tourism industry
2009 - 2010
which is a welcome support during the low season. However traditional tourist markets, the
mainstay of the upper/Luxury segment, remain in the doldrums.
Supply
Future supply in 2011 and 2012 will further test hotels’ ability to absorb the shocks of the past 18
ratES months.
occupancy
upper scale hotels are driving rates down to compete with Mid range hotels for the more price
revpar conscious tourist and businessperson. Luxury hotels have largely maintained their rates with less
incentive to drop them.

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BangkOk Luxury & upper ScaLe HOTeL MarkeT repOrT | Q4 2010

hotEl claSSification

While the thailand Hotels association (tHa) categorizes hotels with a based on the quality of the hotel as seen through the eyes of the hotel
star rating, many hotels do not abide by star rating. therefore in this management companies and on the British Hospitality association
study, colliers International thailand have produced a classification classification.

BaSic ovErviEw of hotEl claSSification

Budget – hotels with limited to no facilities. rooms are simple with basic fixed shower. It will contain a high enough staff to provide services like
furnishings with sizes ranging from 12 to 18 sq m. concierge and porter service, 24-hour room service, laundry and dry-
cleaning. the restaurants will provide high quality cuisine.
economy - comfortable, well equipped accommodation, with an en-suite
Bath / shower room. reception and other staff aim for professional Luxury - spacious and luxurious accommodation throughout the hotel,
presentation that offers a wide range of straightforward services, matching the highest international standards. Interior design should
including food and drink. impress with its quality and attention to detail, comfort and sophistication.
Furnishings should be immaculate. Services should be formal, well
Mid scale - hotels are usually of a size to support higher staffing levels, supervised and flawless in attention to guests’ needs, without being
and a significantly greater quality and range of facilities. reception and intrusive. the restaurant will demonstrate a high level of technical
the other public rooms will be more spacious with a number of aptitude, creating dishes to the highest international standards. Staff will
restaurants. all bedrooms will have fully en suite bathrooms and offer a be knowledgeable, helpful, and experienced in all aspects of customer
good standard of comfort and equipment, such as a hair dryer, telephone care, combining efficiency with courtesy.
and toiletries.
For the purposes of this report the use of the word “hotel” shall refer to
upper scale - a degree of luxury as well as quality in the furnishings, the upper Scale and Luxury hotel ratings that are the subject of this
decor and equipment, in every area of the hotel. Bedrooms will also report. Hotels below these will be mentioned by their particular
usually offer more space and be well designed with co-ordinated category.
furnishings and decor. the en-suite bathrooms will have both bath and

COLLIERS INTERNATIONAL | P. 2


ZoninG



the centre of Bangkok contains the lion’s share of Luxury and upper the Southern cBD includes the area bounded by Si phraya, the south
scale hotels in the city due to it being the heart for both business and side of rama IV, Sathorn and the eastern side of charoenkrung. It is
tourism. primarily a location for offices with limited shopping facilities and
reasonable entertainment areas that partially rival Sukhumvit.
Sukhumvit road up to phrom phong has its own distinct identity due to
the location being the main night life entertainment area in the city for the riverside is the biggest player in the upper scale and Luxury
foreigners. as these entertainment facilities extend some way into many segment due to its attractive location. However supply is limited in this
of the sois, a large number of hotels are also located away from the main market and no Mid-scale hotels can be found in the area. the thonburi
Sukhumvit road. even within this road many sois have there own micro- side of the area is considered as the same market as the hotel shuttle
identities such as sois 4, 7, 8 11 and 22. boats that regularly ply between the two banks are an added attraction
for most tourists.
the northern cBD has its borders defined by phetchaburi to the north
to chalermahanakorn expressway down to rama VI but also including the Western area contains the old city as well as the backpacker area
the area up to ratchadapisek south of Sukhumvit. this area contains located in Bamglampoo. Whilst this area is awash with hotel rooms,
most of the large upper scale shopping malls as well as offices. the there are no upper or Luxury scale hotels located here and as such is
emphasis is on a mix of business travelers and family tourists. not considered in this report.

hiStorical Supply

hiStorical Supply By yEar

Source: colliers International thailand research

In 2010 a total of around 1450 rooms were added to supply, with around of 2010 was approximately 15,000.
330 rooms added in Q4 of 2010. the total number of rooms at the end



additional Supply durinG thE yEarS 2000 – 2010

Source : colliers International thailand research

Since 2007 onwards more than 1,000 rooms were added every year and approximately 1,450 rooms for 2010.

luxury & uppEr ScalE hotEl Supply in BanGkok By location


after the financial crisis and aftermath during the years 1998 – 2005 no the biggest movement in the past four years from approximately 2,650
new supply was added in the riverside, Sukhumvit and eastern areas, rooms in 2007 to more than around 4,000 rooms by Q4 2010, an over
with only the northern and Southern cBD areas accommodating new 50% increase.
hotels during this fallow period. Supply in the northern cBD has shown



BrEakdown of luxury & uppEr ScalE hotEl roomS in BanGkok By location, Q4 2010


the highest number of hotel rooms is located in the northern cBD area, remains static until one new hotel is expected to be completed in 2013.
representing 27% of the total. In the next two to three years the northern the lack of available land in this small area will constantly hamper
cBD area will still have the biggest share due to many of the future growth and in some ways existing hotels on the riverside may benefit
projects being located in the area. Supply in the riverside area still from this exclusivity in the future.

Supply By ZonE, aS of Q4 2010


While in every area upper scale hotel rooms are in greater supply, their contains a much greater share of upper scale hotels.
proportion in relation to Luxury hotels reflects the nature of each area.
the northern cBD contains the high end shopping malls comparable to the Sukhumvit area contains a greater proportion of upper Scale room
what avenida paulista is to Sao paulo or nanjing road is to Shanghai. compared to Luxury ones. the more down to earth nature of this area
therefore many Luxury scale hotels are located there. the riverside is means that fewer Luxury hotels are located here. the distance of the
also known as a prestigious area due to its scenic location and again eastern area and northern area from the centre explain why no Luxury
Luxury hotels make up a large slice of the hotel market. the Southern hotels are located in these areas and only limited number of upper scale
cBD is split between the eastern part of Sathorn road and rama IV rooms. also these areas have limited concentration of tourist facilities.
containing more Luxury hotels whilst the older cBD area of Silom



futurE Supply

cumulativE futurE Supply of hotEl roomS By GradE and yEar, 2011 – 2013


nearly 2,150 rooms in the Luxury/upper segments are scheduled to be time. the concern going forward is the number of Luxury hotels that are
completed in 2011 and more than 3,500 rooms in the next two years are due to be supplied. While tourism arrivals have grown this has come
scheduled to be added in the market. from new markets such as china and India and these visitors have a
greater propensity to stay in Mid scale and economy scale hotels. target
Some construction projects in the northern cBD area postponed their markets for Luxury and upper scale hotels have remained static or even
opening date to 2011 due to temporarily halting construction during the shown declines such as uk, uSa and Japan. It remains to be seen if
protests at the rachaprasong junction in april and May. also the overall these markets can rebound. global financial concerns continue to haunt
tourism downturn and future problems in this regard may lead to some many industrialized nations and fierce competition from other cities in
projects slated for 2012 and 2013 not being completed at the scheduled asia for tourists make this highly uncertain.



cumulativE futurE Supply of hotEl By location, 2011 – 2013


Sukhumvit is the most popular area for developments in the future, investment niche for the foreseeable future. However the northern cBD
representing 34% of all future supply for Bangkok. Many developers continues to be the main focus for Luxury scale projects due to its
have selected to develop hotels in this area due to the convenience to the location amongst the most prestigious retail area, offices, embassies and
BtS provided along Sukhumvit road which is suitable for tourists and BtS connections.
business people alike as well as the vibrant nature of the Sukhumvit road
and its many lively back streets. the eclectic nature of Sukhumvit has although thailand has been afflicted with a myriad of problems during
meant that it has attracted a significant number of boutique style hotels the past three years, Bangkok still remains a popular destination for
that challenge and innovate within the higher end segments. Many in the foreign tourists and business people and so many investors retain
area are independent, non branded hotels. this represents an interesting interest in developing hotels in Bangkok.



dEmand – occupancy ratE

avEraGE occupancy ratE of luxury & uppEr ScalE hotEl durinG thE yEarS 2000 - 2010


average occupancy rate in the last five years has been in more or less 52% due to political unrest in Bangkok, the growth in new supply, the
steady decline from the heights of 2004 at more than 75% to around appeal of other cities in the region and the global economic slowdown.



avEraGE occupancy ratE of luxury & uppEr ScalE hotEl in BanGkok By GradE, for Q1 – Q4 2010


the protests at the centre of Bangkok seriously impacted hotels around when the situation returned more or less to normal but the peak season
the protest site, therefore average occupancy rate in Q2 dropped of Q4 has failed to show strong figures that the industry was hoping
approximately 50 - 55% from Q1 2010. the numbers grew back in Q3 for.

occupancy ratE of luxury & uppEr ScalE hotElS, Q1 – Q4 2010

/


the riverside hotels still showed the poorest levels in the last quarter for the leader for upper scale hotels. overall, although the average occupancy
occupancy as the number of higher spending foreign tourists has not rates in Q4 increased from Q3 by more than 5% the average occupancy
picked up since Q2. Luxury hotels in the Sukhumvit area has shown the rate in 2010 is still lower than 2009 by approximately 14%.
highest occupancy rate for the year, while in the Southern cBD area is



avEraGE occupancy ratE of luxury & uppEr ScalE hotEl compariSon BEtwEEn Q4 2009 and Q4 2010 By location

/


In what is usually one of the strongest quarters of the year occupancy effects of the violence in May are still having a detrimental effect on the
remained in the doldrums compared with the previous Q4 in 2009. In hotel market. this is probably due to a reduction in advance bookings
fact the figures were even lower and especially in the northern cBD from traditional tourism markets.
which bore most of the brunt of the protests in april and May. clearly the

dEmand drivErS focuS

touriSm

GuESt arrivalS at accommodation EStaBliShmEntS in BanGkok durinG thE yEar 2007 –2010

Source: Department of tourism and colliers International thailand research
remark: e = estimated by colliers International thailand research

although tourism numbers were strong compared to the previous nearly 11 million; a decrease of approximately 15% from 2009, due to the
quarter, the figures in Q4 2010 are still lower than other years for the political unrest in Q2. Some efforts have been made to entice tourists
same quarter. the total number of tourists staying in hotels in 2010 was back to the city but many challenges remain.



micE markEt

the lucrative MIce market in Bangkok continues to suffer due to the existing convention centres and very strong competition from many
protests and continued uncertainty. Many organizers do not want to take other cities in the region for the MIce money.
the chance of booking in the city during an election year and the previous
State of emergency made it difficult to obtain insurance coverage. even In fact efforts are being made to promote the domestic MIce market
after a resolution to its problems the city will still face difficulties which usually benefits the lower category hotel market.
attracting the MIce market. there are limited hotel facilities close to

ratES

avEraGE daily ratE By GradE durinG thE yEar 2005 - 2010


For the past two years rates have been in steady decline as hotels reduce remained strong in relation to the Baht. However there are concerns that
prices in order to compete for the new growth markets in India, china the market is rushing to the bottom in light of continued problems both
and russia. Bangkok is increasingly becoming a value for money internationally and domestically.
destination especially among asia travelers where currencies have



avEraGE daily ratE of luxury hotEl By location, Q1 – Q4 2010


the riverside emerged again as the most expensive location as it targets profit from the expected increase in visitors which did not materialize. In
quality over quantity especially over the christmas/new year period. some senses Luxury hotels have less price elasticity as this segment is
However this appeared to be at the expense of any uptick in occupancy. not in direct competition with the lower grade hotels.
In all locations rates increased for the peak season as hotels sought to

avEraGE daily ratE of uppEr ScalE hotEl By location, Q1 – Q4 2010


the upper scale hotels are in increasingly in competition with Mid range locations actually reduced prices for the peak season in anticipation of
hotels for the emerging growth markets and as a result rates have the fierce battle for visitors seeking more affordable accommodation.
remained on low side. In contrast to Luxury hotels this sector in some



avEraGE daily ratE of luxury & uppEr ScalE hotEl compariSon BEtwEEn Q4 2009 and Q4 2010 By location

/


In the Luxury segment rates were lower in 2010 than the corresponding remained fairly static.
quarter of 2009 except the riverside. In the upper segment rates

rEvpar

revpar is the aDr multiplied by the occupancy rate and is arguably the industry.
most important metric for analyzing the current health of the hotel

rEvpar By QuartEr in BanGkok


the twin falls in occupancy and room rates led to a subsequent dramatic effects of the april/May period on the hotel market in Bangkok.
fall in revpar by approximately 28% from 2009. this reflects the full



rEvpar of luxury hotElS By QuartEr & location, Q1 – Q4 2010


the strong recovery in revpar was recorded in every area while the the riverside increased rates significantly for the peak Q4 while
Southern cBD was lowest due to poor occupancy rates. the overall maintaining occupancy, hence the sharp increase in revpar.
performance of the Southern cBD area is likely in part due to the reliance
on tourists rather than a mix of business travelers in the other hotels.

rEvpar of uppEr ScalE hotElS By QuartEr & location, Q1 – Q4 2010


revpar of hotels in the riverside area was the lowest in the upper scale revpar for the Q4 high season.
category. Sukhunvit suffered most for Q4 with an actual decline in



rEvpar of luxury & uppEr ScalE hotEl compariSon BEtwEEn Q4 2009 and Q4 2010 By location

/


occupancy rates and aDrs of each hotel category in Q4 2010 was lower 2009 apart from Luxury hotels in the riverside which recorded a slight
than in the same period of 2009, so revpar in Q4 of 2010 was less than gain.

forEcaSt

there will be no respite for the Luxury and upper scale hotel market in While tourism figures for thailand on the surface look positive the big
2011 as around 2,150 rooms are scheduled to be completed in the year. number hides problems for Bangkok as a tourism destination. on the one
With ongoing protests in the centre, an election year, continued global hand those seeking exoticism and adventure are increasingly lured by
financial concerns and Bangkok’s difficulties in attracting visitors; it will cities that have emerged as tourist destinations only recently such as
be difficult to see how such an increase can be absorbed and occupancy Hanoi, phnom penh and Vientiane. For those seeking a more organized
is likely to continue to suffer. However developers and hotel management city with plenty of attractions then Singapore and Hong kong have raised
companies are still keen to enter the market and in some ways the hotels their games. In fact Singapore, occupying just a small piece of land
are becoming a victim of their own success. without any real beach, can command nearly the same numbers of
tourists as the whole of thailand. Bangkok as a city remains much the
the growing numbers of tourists from new markets such as India, china same as it was for tourists ten years ago and has failed to refresh itself
and russia look set to reshape the hotel market in Bangkok. these to attract more visitors and provide them with a reason to return or visit
visitors look for more economical establishments and it appears that for the first time.
upper scale hotels are in fierce competition for this growth market with
corresponding reductions in rates. In the future upper scale hotels could private enterprise continues to work hard in the market, the city boasts
reduce the facilities in order to better compete in what is likely to be a so many innovative boutique and strong branded hotels that offer guests
more no-frills style of operation. an experience in itself. However the city and the country as a whole
create an image that seems distant from the situation today. the use of
Luxury hotels have less room to maneuver and are likely to maintain “Land of Smiles” and elephants is rather out of date as the relationship
rates as befits their luxury status and just hope for the wealthier tourists between tourist and the city is less warm than in the past; witness the
to return in greater numbers. the new supply of Luxury hotels coming treatment of tourists during the frequent weekend alcohol bans. Bangkok
online over the next two years pose enormous problems for this sector is in the mature stage of its tourism cycle while Ho chi Minh city, for
already struggling with occupancy. tourism numbers from key traditional example is in its early stages. this poses new challenges as the city
markets of europe, Japan and the uSa are key to how this segment must do more to attract people to visit its many charms.
copes. the MIce market is underperforming due to the political problems
deterring organisers from taking the plunge. the recent end of the State
of emergency could help in the future.



colliErS intErnational thailand
manaGEmEnt tEam 480 offices in 61 countries on
6 continents
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oFFIce & InDuStrIaL SerVIceS • uS$2 billion in annual revenue
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management
retaIL SerVIceS • over 15,000 professionals
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aDVISory SerVIceS
napatr tienchutima | associate Director

reaL eState ManageMent SerVIceS cOLLIerS InTernaTIOnaL THaILand:
Bandid chayintu | associate Director
Bangkok Office
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rESEarchEr: rESEarchEr:
thailand thailand
antony picon Surachet kongcheep
associate Director | research Senior Manager | research
Email antony.picon@colliers.com Email surachet.kongcheep@colliers.com

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Bangkok Hotel Market Report Q4 2010

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