Condotels have emerged as a popular property development format in major tourist destinations such as Pattaya, Phuket and Bangkok.
Chakkrit Chakrabandhu Na Ayudhya, executive vice-president for investment sales at JLL's Hotels and Hospitality Group, said although condotels are not new to Thailand and can be found across the country, especially in holiday destinations such as Pattaya and Phuket as well as Bangkok, they still represent a small part of Thailand's real estate industry.
"However, our research shows condotels are becoming an increasingly popular development option and are likely to grow in number over the next few years," he said.
The trend is driven by strong demand from individual investors looking for more flexible rental assets and property developers looking for new opportunities in an alternative real estate sector.
According to JLL data, condotels are more prominent in Phuket, where the supply across the island will surpass the 3,000-unit mark by the end of 2021, accounting for over 30% of total new hotel rooms.
Blue Horizon Developments recently launched a 189-room condotel project, Best Western Plus The Beachfront Rawai, and is developing five further projects with over 1,500 units set to open over the next three years.
Pattaya is another up and coming condotel market, with more than 1,100 new units being projected to enter the market by 2021.
Habitat Group is the market's most active player, operating two developments, X2 Vibe Pattaya Seaphere Residence and X2 Pattaya Oceanphere. The firm is also planning four new projects scheduled to be operational by 2022.
Bangkok has a limited stock of condotels that meet industry standards. However, property development firm Siamese Asset has recently put the spotlight on the capital's condotel sector.
In addition to its existing condotel development, Blossom Condo @ Fashion, the company has launched two more projects in Bangkok -- The Siamese Exclusive and The Collection -- where 50% of the total units will be condotels.
Upon completion, the two new projects will be operated by Greenland International Hotels from China.
Mr Chakkrit said for condominium developers, condotels offer new opportunities in an alternative sector and give their projects an advantage that is much needed in Thailand's key condominium markets, particularly Bangkok, where sales have slowed and the market for long-term leases is highly competitive.
A condotel is a condominium development with a hotel licence allowing for the use of the condominium as hotel accommodation that can be offered for short term-leases (daily or weekly), whereas Thai law does not allow owners of condominiums to rent out their units for less than 30 days without a hotel licence.
To obtain a hotel licence, a condotel development must meet the minimum requirements in terms of specifications, facilities, operation and management under the Hotel Act of 2004.
In the majority of purpose-built condotels, developers generally plan to obtain a hotel licence when the construction of the project is completed.
Among the international brands operating condotels in Thailand are Boutique Hotel Management Asia, Best Western and Wyndham.
Pitinut Pupatwibul, senior vice-president of strategic advisory at JLL's Hotels and Hospitality Group, said short-term leasing has become more popular in Thailand's major condominium markets. But without a hotel licence, it remains a grey area.
"Condotels are a development option that help prevent co-owners offering units for short-term leasing from facing potential litigation," said Ms Pitinut.
"At the same time, the clear structure and purpose of use of condotels can help overcome resistance from buyers for private use who may be unwilling to welcome short-term guests into the building."