Phuket hotels put launches on hold

Phuket hotels put launches on hold

New investment up in the air as coronavirus spreads

New hotels in Phuket scheduled to open in the first half have postponed plans indefinitely, while new investments are in doubt. Yet long-term investors remain bullish on the Andaman island.

In 2020, Phuket was set to have 5,009 new rooms from 21 properties, adding 6% to the hotel supply. The majority of pipeline projects are in the upscale and mid-scale tiers, according to C9 Hotelworks, a Phuket-based hospitality and property consultancy.

The ongoing spread of the coronavirus in the province has caused some investors to delay openings planned for this year and rethink future development.

"Projects well into development are mostly pushing forward, but those still in the earlier stages have hit the pause button," said Bill Barnett, managing director of C9 Hotelworks. "This is a very fluid situation at present."

The weaker investment confidence coincides with increasing infections in Phuket, where the provincial government has issued an order to shut down all hotels temporarily.

Mr Barnett said that despite concerns about the virus, Phuket is still attracting long-term investment because it remains desirable for two key markets: Chinese and Russians, who make up a combined 40% of international arrivals in the province.

"We are seeing signs of domestic recovery in China already and expect by mid-year we will start to see an inflow that will push upward in the third and fourth quarters," he said.

As Chinese tourists may start travelling domestically first, the geography of Phuket is key to driving the market in the winter season, when the Russian market also picks up.

Suksit Suvunditkul, head of the Thai Hotel Association's southern chapter, said 550 registered hotels in Phuket have stopped operations, in line with the order from Phuket's government.

There are 1,400 hotels across the island, with most of them unregistered.

"We have to exchange today's losses for a strong rebound in the future," Mr Suksit said. "Around that time, I think investment will return to being robust."

He said the province is looking for cooperation from hotels to provide isolation areas for coronavirus patients as existing hospitals approach capacity. Several hotels have agreed to join the scheme to help patients and receive recurring income from the Public Health Ministry.

One luxury investment property, Wyndham Grand Nai Harn Beach Phuket, which was scheduled to commence services in the first quarter, has postponed its opening, said Autthanop Pandkamnerd, president of Cissa Group.

As tourism operators in Phuket suffer from the pandemic and the timeline for recovery remains unknown, the group has revised the long-term investment plan for future projects as well.

Cissa Group, as a hotel and property investor, aims to develop other projects such as nursing homes to diversify its portfolio.

Mr Autthanop said Phuket remains a worthwhile investment destination and can withstand every challenge to bounce back stronger.

In addition, competition in the luxury segment is still lower than in the mid-scale segment.

Mr Autthanop said the outbreak keeping people at home for months will stimulate pent-up demand for travel. When the pandemic is over, an influx of global holidaymakers is expected.

Cissa Group recently helped support stranded tourists and front-line medical staff by allowing them to stay at the 106 rooms of Natai Beach Resort and Spa, just 20 minutes away from Phuket airport, for free.

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