Bangkok Hotel Market Report Q3 2010

Q3 2010 | HOTEL

THAILAND

BANGKOK LUXURY & UPPER SCALE
HOTEL MARKET REPORT

Bangkok Luxury & Upper Scale Hotel
Market
EXECUTIVE SUMMARY
The hotel market continued to show weakness on account of the after e ects of the April/May
disturbances and the traditional low season.

Middle Eastern and Indian visitors continue to bolster the Bangkok tourism industry which is a
welcome support during the low season. However traditional tourist markets, the mainstay of the
MARKET INDICATORS Y/Y Upper/Luxury segment, remain in the doldrums
Q2-Q3 2010
The focus of attention is on Q4 2010 gures which will provide guidance on whether the Bangkok
SUPPLY hotel market has fully recovered; further disruptions permitting.

DEMAND Concerns remain as to the nation’s course for the future and whether further protests or sporadic
violence occurs. Travel advisories based on the continued State of Emergency continue to be a
RATES
dark cloud on the horizon.
OCCUPANCY
Future supply in Q4 2010 and 2011 will further test hotels’ ability to absorb the shocks of the past
RevPAR 18 months.

www.colliers.co.th

BANGKOK LUXURY & UPPER SCALE HOTEL MARKET REPORT | Q3 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 classi cation classi cation.

BASIC OVERVIEW OF HOTEL CLASSIFICATION

Budget – hotels with limited to no facilities. Rooms are simple with basic xed shower. It will contain a high enough sta 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 sta aim for professional Luxury - spacious and luxurious accommodation throughout the hotel,
presentation that o ers 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 sta ng levels, supervised and awless in attention to guests’ needs, without being
and a signi cantly 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. Sta will
restaurants. All bedrooms will have fully en suite bathrooms and o er 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 e ciency 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 o er 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

HISTORICAL SUPPLY BY YEAR

CUMULATIVE SUPPLY IN BANGKOK



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 o ces 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 de ned 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 o ces. 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 QUARTER

Source: Colliers International Thailand Research

As of Q3 2010 there was a total supply of approximately 14,700 rooms scheduled to be completed and opened during Q4 2010. This year has
with around 300 rooms added in Q3 of 2010 and about 340 rooms heralded a signi cant addition of new supply in Bangkok.

ADDITIONAL SUPPLY DURING THE YEAR 2000 – 2010

Remark: E = Estimated supply

Since 2007 onwards more than 1,000 rooms were added every year and 1,100 rooms already completed.
approximately 1,460 are scheduled to be completed in 2010, with around



LUXURY & UPPER SCALE HOTEL SUPPLY IN BANGKOK BY LOCATION

Remark: E = Estimated supply

Supply in the Northern CBD has shown the biggest movement in the past player in the Mid scale and Economy scale ranges, these are mostly not
2 years from approximately 3,160 rooms in Q1 2009 to more than around covered in this report. In terms of the Luxury/Upper end the area
4,000 rooms by Q3 2010, an over 26% increase. It has already overtaken currently lags behind the CBD and Riverside areas but has grown by
the Riverside area as the greatest supply of rooms. This is not surprising 28% since Q2 2009 due to Sukhumvit’s diverse attractions, ever growing
at it is located not only in tourist and shopping areas but also in amongst popularity and access to the BTS.
o ces and large embassies. While the Sukhumvit area is the dominant

BREAKDOWN OF LUXURY & UPPER SCALE HOTEL ROOMS IN BANGKOK
BY LOCATION, Q3 2010


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



SUPPLY BY ZONE, AS OF Q3 2010


While in every area Upper scale hotel rooms are in greater supply, their containing more Luxury hotels whilst the older CBD area of Silom
proportion in relation to Luxury hotels re ects the nature of each area. contains a much greater share of Upper scale hotels.
The Northern CBD contains the high end shopping malls comparable to
what Calle Florida is to Buenos Aires or Bourke Street is to Melbourne. The Sukhumvit area contains a greater proportion of Upper Scale rooms
Therefore many Luxury scale hotels are located there. The Riverside is compared to Luxury ones. The more down to earth nature of this area
also known as a prestigious area due to its scenic location and again means that fewer Luxury hotels are located here. The distance of the
Luxury hotels make up a large slice of the hotel market. The Southern Eastern area and Northern area from the centre explain why no Luxury
CBD is split between the eastern part of Sathorn road and Rama IV hotels are located in these areas.



FUTURE SUPPLY

FUTURE SUPPLY OF HOTEL ROOMS BY YEAR, 2010 – 2013

Source : Colliers International Thailand Research

Nearly 1,460 rooms are scheduled to be completed in 2010 and more especially in Northern CBD area, temporary stopped construction during
than 5,600 rooms in the next three years are scheduled to be added in the protests at Rachaprasong junction in April and May and this might
the market. At the end of 2010 one luxury hotel will have been added to lead to delays in completion and opening. Also the overall tourism
supply for the whole year. The Siam Kempinski (306 rooms) located in downturn and future problems in this regard may lead to some projects
the Northern CBD, began operations in August 2010. slated for 2012 and 2013 not being completed at the scheduled time.

The instability in Q2 has directly impacted the tourism market especially
in the city. Many of the hotel projects under construction in Bangkok,

CUMULATIVE FUTURE SUPPLY OF HOTEL ROOMS BY GRADE AND YEAR, Q4 2010 – 2013


Although Thailand has been a icted with a myriad of problems during 20% respectively. As tourists seek value for money and the new growth
the past three years, Bangkok still remains a favorite destination for markets in India for example generally focus on the lower priced
foreign tourists and so many investors retain interest in developing categories, the case for Mid scale segment development is a compelling
hotels in Bangkok. Approximately 55% of the total rooms are in the Mid one. Developers may consider readjusting their plans to take account for
scale category followed by Upper scale and Luxury scale, with 25% and this.



CUMULATIVE FUTURE SUPPLY OF HOTEL BY GRADE AND LOCATION, Q4 2010 – 2013


Sukhumvit is the most popular area for developments in the future, challenge and innovate within the high end segments. Many in the area
representing 34% of all future supply for Bangkok. Many developers are independent, non branded hotels. This represents an interesting
have selected to develop hotels in this area due to the convenience to the investment niche for the foreseeable future. However the Northern CBD
BTS provided along Sukhumvit road which is suitable for tourists and continues to be the main focus for Luxury scale projects due to its
business people alike as well as the vibrant nature of the Sukhumvit road location amongst the most prestigious retail area, o ces, embassies and
and its many lively sois. The eclectic nature of Sukhumvit has meant that BTS connections.
it has attracted a signi cant number of boutique style hotels that

DEMAND – OCCUPANCY RATE

AVERAGE OCCUPANCY RATE OF LUXURY & UPPER SCALE HOTEL IN BANGKOK BY GRADE, FOR Q1 – Q3 2010


The protest at the centre of Bangkok seriously impacted the number of represents the traditional low season so occupancy is expected to su er
foreign tourists, so average occupancy rate in Q2 dropped approximately in comparison. The occupancy rates of Luxury & upper scale hotels
50 - 55% from Q1 2010 in both hotel categories and some hotels in the improved in Q3 after the media shifted focus to other con icts around
area around the protest site were forced to close. However Q2 2010 the world and the situation calmed.



OCCUPANCY RATE OF LUXURY & UPPER SCALE HOTELS BY QUARTER


Although Q3 2010 represented a strong bounce from the lows recorded Upper and Luxury scale mainstay markets such as USA, Germany, UK,
in Q2 during the protests and rioting, occupancy still remains in the Scandinavia and Japan recorded downturns. This is likely as many
doldrums with a y/y comparison with Q3 2009. It is clear that the after tourists in the quarter make longer term bookings due to the school
e ects of the Q2 events continue with many traditional tourist markets holiday period and many were probably put o by the events that
remaining fragile. In fact while overall tourist numbers are up y/y for Q3, appeared on their TV sets in April and May.

OCCUPANCY RATE OF LUXURY & UPPER SCALE HOTELS, Q1 2010 - Q3 2010


The Riverside hotels showed the poorest gures for occupancy as the western tourists and the traumatic events of May meant that a far greater
traditional markets in Europe, USA and Japan have not picked up since rebound for Q3 was expected. Now the focus of attention will be on the
Q2. Overall, although the numbers are up from Q2, the picture for Q3 is peak season and advanced bookings so far are not promising.
very disappointing. Q2 represents the low season for Bangkok for



DEMAND DRIVERS FOCUS

TOURISM

GUEST ARRIVALS AT ACCOMMODATION ESTABLISHMENTS IN BANGKOK DURING THE YEAR 2007 – Q3 2010

Source: O ce of Tourism Development, Colliers International Thailand Research
Remark: E = Estimated by Colliers International Thailand Research

Although tourism numbers were strong compared to the previous quarter and Luxury hotel rooms. This can be seen in the disconnect between
the gures only showed a small increase in comparison from Q3 2009. fairly positive visitor numbers against that of low occupancy rates for
The bounce back from Q2 2010 provides scant encouragement as a Upper and Luxury scale hotels. However some of these hotels are
large proportion of this increase came from new markets such as India noticing more reservations from these new markets for Upper and
and Iran, which with exceptions, are not traditional occupiers of Upper Luxury scale rooms.

RATES

AVERAGE DAILY RATE BY GRADE Q1 – Q3 2010


The Luxury sector has been more prone to the political situation and narrowed as the tourists now visiting Bangkok are demanding more
many have o ered steep discounts to attract guests and maintain a value for money.
reasonable occupancy. The gap between Luxury and Upper scale has



AVERAGE DAILY RATE OF LUXURY HOTEL BY LOCATION, Q3 2010


The need to retain occupancy has meant that rates are being driven to enter into a price war. The Luxury scale hotels have felt greater
down in the Riverside and Southern CBD. This may be due to the fact pressure as they have reduced rates to attract customers wishing to
that hotels reduced rates for advanced bookings in the wake of events in economise.
May. However the appeal of the Sukhumvit area has meant less pressure

AVERAGE DAILY RATE OF UPPER SCALE HOTEL BY LOCATION, Q3 2010


The Upper scale hotels were able to maintain pricing except for the are already competitively priced for the product that they o er.
poorly performing Riverside area. It would appear that Upper scale hotels



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 segments picked up for Q3 with Luxury hotels making gains by reducing
fall in RevPAR by approximately 58% from Q1 2010. This re ects the full pricing to increase occupancy.
e ects of the April/May period on the hotel market in Bangkok. Both

REVPAR OF LUXURY HOTELS BY QUARTER & LOCATION, Q3 2010


The strong recovery in RevPAR was recorded in three areas while the a mix of business travelers in the other hotels. The more re ned nature
Riverside continues to languish. The overall poor performance of the of the Riverside area may attract the type of tourist who is more likely to
Riverside area is likely in part due to the reliance on tourists rather than be repelled by the events in May in Bangkok.



REVPAR OF UPPER SCALE HOTELS BY GRADE & LOCATION, Q3 2010


As in the Luxury sector the Riverside recorded poor RevPAR gures for entertainment scene; events occurring in other parts of the city do little
the same reason as stated above. Sukhumvit’s resilience to the travails to a ect the day to day life there. It is also probable that many of the
of the city was evidenced by a robust Q3. In some ways the area is self guests in this area are returnees who are familiar with the ups and
contained with a mix of residential, hotels, retail as well as a lively downs in the city and continue to return.



FORECAST – TWO VIEWS

At this juncture it is di cult to predict where the hotel market is heading this particular report. Hopefully by the end of Q1 2011 a more clearer
in the future. Therefore two opposing forecasts have been adopted for picture will emerge of where the industry is headed.

THE POSITIVE VIEW

The tourist represents the eternal phoenix from the ashes. Undaunted by past more bookings will made and tourists will come ocking back to the
natural and man-made disasters, within a year or two they return again country for the high season. While the new supply of hotels will provide
to enjoy the wonders of the a ected country. Thailand is no exception. challenging times for the industry, new markets in India, Russia and the
The land of smiles remains despite the events of May and around 60% Middle East are growing rapidly and are also providing strong numbers
of tourists to this country are returnees. This is an important number as for the traditional low seasons of Q2 and Q3. The strong growth of
many are less likely to be fazed by recent events and maintain a close tourism in Asia will soon be witnessed again in Thailand.
connection with the country. By contrast the gure for Malaysia is less
than 20% and so any serious negative event would impact tourism far Bangkok bounced back strongly from the events in May and retains its
more. The hospitality that Thailand is so famous for cannot be simply strong blend of culture, entertainment and shopping which will continue
replicated. to entice tourists to visit the City of Angels.

Although traditional markets are slow in returning to the country this is
likely due to fewer advance bookings being made during the events of
April and May. In all likelihood now that time is becoming a thing of the

THE DARK VIEW

The tectonic plates of Thailand’s tourism industry may be shifting and vibrant nightlife. Manila has built more tourist attractions and has seen
Bangkok in particular. While the country is bene ting from the stellar numbers rise. Hong Kong still attracts shoppers and theme park visitors
growth of the “RIM” markets (Russia, India & Middle East) who accounted from around the world. New cities appear on the radar screen with
for nearly 16% of total foreign arrivals by air in Q3 2010, these new dynamic Saigon and Hanoi in Vietnam and the colonial and cultural
markets do not represent at the present time strong growth opportunities appeal of Phnom Penh. Time was when a visit to Bangkok brought kudos
for the Upper to Luxury end of the market as many visitors are keen on to the traveler in his or her own country, now the city is not much more
more a ordable, no-frills accommodation. exotic than Benidorm in the eyes of many and other less ventured cities
become more appealing as a ‘wow’ destination. With the signi cant
The mainstay of the Upper/Luxury market is now under threat even in amount of new supply coming on stream, Luxury and Upper scale
the longer term. While the appeal of Bangkok remains for European, hoteliers cannot rely on sophisticated, generous travelers returning to
American and Japanese tourists, many now may be avoiding Bangkok their establishments. The hotels may hold their noses when the busloads
and head directly for the resorts as many now o er international of baseball hat wearing package tourists following ags enter their doors,
accommodation, retail and entertainment facilities that can even rival the but they must embrace them because they are the only means of
capital. Frequent alcohol bans, cumbersome immigration regulations, survival.
armed police on the streets and tra c gridlock are gradually eroding
Thailand’s and especially Bangkok’s special status among western
tourists.

Other big cities are luring tourists more than ever. Singapore as sin city?
Hair cuts at the border a distant memory, think now of casinos and a



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Bangkok Hotel Market Report Q3 2010

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