Absolute Hotel Services Co, a local hotel management firm, is eyeing the purchase of at least 20 hotels abroad in the next five years.
Wigley: Tourists will return to Thailand
A new company will be established in London in the third quarter.
Apart from Absolute Hotel Services, a venture fund with US$100 million in assets is already committed to be one of the key stakeholders. The company will raise funds from other sources in London as well.
Chief executive Jonathan Wigley said Absolute is expected to list on the London Stock Exchange.
“It’s a big change for Absolute this year. We will start buying existing properties mainly in Southeast Asia around the third quarter,” he added.
At the present, Absolute operates 22 hotels — 14 in Thailand and eight elsewhere.
It will add 40 new ones to its portfolio this year.
Mr Wigley said if the company could acquire 20 properties in the next five years, it would have more than 80 hotels in its portfolio. Its brands include U Hotels & Resorts, Eastin Hotels, Eastin Easy and Estin Residences.
Of its total revenue, 70% comes from Southeast Asia and 30% from India and the Middle East. Its revenue proportion will become 60:40 by 2015.
For the hotel management business, Absolute focuses on established destinations in Thailand like Phuket due to a strong airlift.
Mr Wigley said Thailand’s tourism relies on international demand while other countries such as Indonesia and India can survive on the domestic market.
“Thailand is a very competitive market, even its hotel room rate is lower than the rate in Indonesia by around 30%. The value-for-money concept is a strength of Thailand. This is why tourism always bounces back quickly after any crisis,” he said.
While many tourists are avoiding Thailand during the political turmoil, they don’t have more choices to travel elsewhere. If they want to go to Malaysia, it might not comfortable for international tourists because it’s a Muslim country. Vietnam has a low repeat tourist rate because it’s less charming than Thailand.
“Thailand offers good food, interesting culture and hospitality. As soon as we’re back to normal, they [foreign tourists] will always come back,” Mr Wigley said.
The company projects the long-haul markets like Europe and North America will recover quickly while the sensitive Asian market will naturally follow travel advisories issued by their governments. If they are lifted, Asian tourists will come back within three months.
At home, Mr Wigley said there is still room to grow in the tourism industry even though some destinations are facing oversupply. With his 18-year experience here, room rates could not rise easily while labour costs have been increasing.
“If you have to plan to build a 5-star hotel in Thailand, you can only quote your room rate similar to the four-star hotel when it’s finished. However, you still have a good return on investment if you can control the budget,” he said.
“If I have $20 million, I will build a 3-star hotel on Patong beach, Phuket. In the high season, a large number of flights come to Phuket every week. If you compare it with Bali, Phuket has better infrastructure than Bali. Traffic in Bali is worse than Phuket’s.”
Mr Wigley said attractive countries for hotel investments are Indonesia and the Philippines.
“I’m not talking about Myanmar because it needs to establish its financial, legal, and infrastructure systems first. In my opinion, 7 of 10 people who go to do business in Myanmar will lose their money and end up crying, not smiling, because its legal and financial infrastructures are not in place,” he said.
Mr Wigley said the investment situation in Myanmar is similar to Vietnam in early 1992 when a lot of people rushed to invest there and ended up with losses and then left the country.
For Myanmar, Absolute has a wait-and-see approach to investing.
“We can wait until we are sure, as hospitality is a long-term investment,” he said.