Hoteliers warn on a risky business

Hoteliers warn on a risky business

Design, location crucial, seminar told

A BTS Line passes residential areas in Bangkok. Investors may consider building small hotels near the mass transit system or acquire old buildings or shophouses and convert them into small hotels.PATTARACHAI PREECHAPANICH
A BTS Line passes residential areas in Bangkok. Investors may consider building small hotels near the mass transit system or acquire old buildings or shophouses and convert them into small hotels.PATTARACHAI PREECHAPANICH

Investing in the hotel business in Thailand is currently unattractive because of excessive supply and the world's sluggish economy, a hotel investment seminar heard yesterday.

According to Chamnong Buakai, managing director of property consultant Agency for Real Estate Affairs, putting money in a large hotel is quite a risky investment relative to a smaller hotel.

"Boutique hotel businesses reach break-even point the fastest," he said. "Some riverside boutique hotels now generate higher revenue per room in a month than many five-star hotels in prime locations."

Kunawat Damrongmanee, executive director at I Residence Hotel Group, which runs two hotels in Silom and Sathon area, said as hotel business nature has high fixed costs, the success in hotel business relies mainly on full occupancy.

"Empty rooms mean no revenue as the shelf life of hotel rooms is only one day," he said. "You should not rely on one or two marketing channels but as many channels as possible, such as offline and online travel agents, websites, third-party websites, and so on."

Mr Kunawat said the hotel business is not an easy venture, citing in a month, hotel owners are required to earn revenue to cover hotel staff over the first 10 days, revenue for business suppliers in the next 10 days, with revenue in the last 10 days as a profit.

"Hotels today face high competition. If your hotel is near a mass transit line, your competitors are no longer neighbouring hotels, but others located near the mass transit line's stations," he said.

Hotel operators market to segments as there are various segmentations of tourists. They are Europeans and Chinese who have different requirements, as do groups and solo travellers.

Mr Chamnong said successful locations include old town areas or locations that are charming to travel to. Hotel investors may consider acquiring old houses or shophouses and convert them into small hotels.

Hotel investors should avoid suburban locations like Min Buri, Nong Jok or Lam Luk Ka, said Sopon Pornchokchai, president of Agency for Real Estate Affairs.

"Hotel design is another key factor in the success of small-sized hotels. Simplicity and elegance with singular design is called for," he suggested. "Good or unexpected services like free laundry can create repetition of stay and word-of-mouth."

According to Mr Sopon, locations that offer promising prospects for hotels include heritage sites and traditional communities, as well as the areas that are close to the mass transit system.

"Previous experience has taught us that homestay businesses run in areas that are not within the country's tourism spots are hardly successful," he said. "Running resort-style hotels at little-known tourism destinations are generally subject to failure, while conventional hotel businesses catering for conference or seminar are difficult to operate, as they require high connectivity with government units."

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