The growth of the serviced apartments market looks to remain strong throughout 2006 and into 2007. The CBD area remains the most desired location, providing the highest yields to operators. There are a number of new serviced apartments currently under construction or being planned to be operational within the next couple of years. Hence, the present robust demand will most likely be offset by the coming new supply as well as by indirect competition comprising new hotels, condominiums and apartments.

Special thanks to Phanom Kanjanathiemthao (Managing Director) and Colin Wong (Senior Associate Director – Research Services) of Knight Frank Thailand.

The Hotel Act which came into force in May 2005 (projects that do not apply for a hotel license will be unable to offer short-term rental periods of less than one month) spurred many serviced apartments operators to opt to apply for the new hotel license. This new act will affect serviced apartment projects with mainly short-stay clients much more than those operators with mainly long-stay clients. Operators that will not apply for a hotel license are those which are restricted by high renovation costs or that are legally incapable of compliance. To-date no existing serviced apartments have obtained actual hotel licenses and the process is ongoing and may
take time in the majority of cases.

About 4,000 4- and 5-star hotel rooms will be added into the hospitality market during the next two years and this will have an impact on the short-stay part of the business for serviced apartments, especially in the Grade A segment.

The serviced apartments market, while still strong, will experience heightened competition in the medium-term due to changing market dynamics. Grade A and ‘branded' operators with attributes such as great location, excellent facilities and good marketing and management and who are quick to adjust to rapidly changing market conditions, will continue to strive whilst the rest of the field will encounter increased competition.