The hotel business in Thailand is constantly evolving, and hoteliers have mapped out strategies to cash in on the growing tourism industry.
Thai tourism is on track for another record-breaking year, with more than 35 million international arrivals expected in 2017 and 35 million forecast for 2018.
But the Thai Hotels Association (THA) warned the hotel sector in major destinations like Bangkok, Phuket, Pattaya and Chiang Mai is oversupplied, while growth in average room rates nationwide has slowed compared with a decade ago. As such, not every player can benefit from booming tourism.
100 new hotels
According to US-based STR Global and Thai consultancy C9 Hotelworks, high demand is boosting confidence in Thailand's hotel sector, with 100 new hotels and 21,600 rooms in the development pipeline -- many of which will be in Bangkok.
But challenges lie ahead, especially for transport infrastructure to cope with the tourist influx. Hoteliers face strong competition, and average daily rate (ADR), a measure of average realised room rentals per day, remains low.
"Thailand's tourism industry continues to ride the crest of a wave, with record-breaking numbers of global visitors clamouring to experience the country's many attractions," said Bill Barnett, managing director of C9 Hotelworks. "As the country's capital and major international gateway, Bangkok is fast becoming one of the world's great megacities."
A series of multi-billion-baht developments, including transport links, megamalls, attractions, hotels and residential projects, are transforming the cityscape, Mr Barnett said, creating both opportunities and threats for the city.
THA president Supawan Tanomkieatipum predicts that the hotel sector will grow by 5-7% in 2018, thanks to more arrivals and a strong economy.
The association expects a strong rebound from hotels in the South, especially in Phuket, Krabi and Koh Samui, as the Chinese market continues to develop and Russian and other European tourists return. The rest of the country will see more moderate hotel growth, the THA said.
In 2017, the average occupancy rate for registered hotels in the South was 80-85%, compared with 70% for the North, 75% for Bangkok and 65% for the Northeast. Based on occupancy rate, most regions showed a slight increase except for Phuket, which saw a sharp surge.
Bangkok supply up
The latest research from STR Global shows that demand for hotel rooms in Asia and the Pacific region grew by 6% from January to April 2017. But the average daily rate (ADR) fell by 0.5% as supply rose 2.8%.
In Southeast Asia, Thailand remained the largest market in terms of international arrivals in 2016, followed by Malaysia, Singapore, Indonesia and Vietnam, with respective growth rates of 9%, 4%, 8%, 16% and 26%.
Interestingly, hotel supply in Bangkok rose by 3.6% during January-April 2017, outstripping demand growth of 2.2% and revenue per room available room (RevPAR) which climbed just 2%.
At the same time, the number of new hotels in Hanoi was flat but demand jumped 10.5% and RevPAR by 17%. Supply in Ho Chi Minh City was up only 1.2%, but demand increased 9.5% and RevPAR grew 11%.
Property firms circling
In 2017, big property companies such as Origin Property, Singha Estate and Sansiri Plc, as well as small and medium-sized operators, entered the hotel sector.
Some foreign hotel brands also surfaced in Thailand or announced plans to open soon.
Sansiri Plc, for instance, has undertaken an ambitious overseas investment drive in hospitality and lifestyle brands, spending US$58 million (1.9 billion baht) for a 35% interest in US-based boutique hotel group Standard International. The upscale Standard operates numerous hotel brands in Los Angeles, New York and other US cities.
In its home market, Sansiri is set to open three more Escape Hotels in the next 3-5 years after entering the hospitality business four years ago, with two properties in Hua Hin and Khao Yai.
In December, Origin Property and Japan's Nomura Real Estate Development announced an investment partnership on three hotel projects worth 7.5 billion baht in Bangkok and in Sri Racha district, Chon Buri. The new hotels will be managed by InterContinental Hotels Group (IHG) under new brand Staybridge Suites.
Another Thai developer, Singha Estate, plans to spend 51 billion baht on a project in the Maldives, consisting of hotels, duty-free shops, a convention hall, a marina and entertainment complexes. Singha calls it one of the most expensive development projects ever in the world-class tourism destination.
Brand new for launch
Over the next few years, more new brands are scheduled to open in Thailand, starting with Hyatt Regency Bangkok Sukhumvit in the third quarter of 2018. The property will be the first Hyatt Regency hotel in Bangkok, joining sisters Grand Hyatt Erawan Bangkok, Park Hyatt Bangkok and Hyatt Place Bangkok Sukhumvit.
Centara Hotels and Resorts has also mapped out a strategy for launching three new brands in the second quarter of 2018, two in the luxury segment and one in the mid-scale category.
Meanwhile, Minor Hotels announced in December that it had taken a significant stake in British-based Corbin & King. Minor plans to use the close partnership to expand a portfolio that includes restaurants like the Wolseley, the Delaunay and Brasserie Zedel, as well as the Beaumont Hotel.
Brands from overseas have also paraded into the Thai market.
American hotel chain Travelodge is set to operate hotels in Chiang Rai, Chiang Mai, Khon Kaen, Hua Hin, Rayong, Phuket, Khao Lak, Koh Samui and Krabi by 2020. In 2017, Travelodge debuted in Bangkok and Pattaya.
Another brand is Japan's Prince Hotels and Resorts, which recently agreed a deal to manage its first hotel in Thailand (in Prachuap Khiri Khan's Pran Buri district) by 2020.
For local chains like Urban Hospitality Group (UHG), a lifestyle hotel and real estate developer, plans call for building hotels to serve mainly foreign tourists, including the Quarter Riverfront at Chao Phraya River Hotel at a cost of 1 billion baht.
UHG said the location of the project, on the Chao Phraya River in Bangkok's Thon Buri area, has been invigorated with the launch of nearby projects such as IconSiam, the Bangkok Observation Tower, the Thailand Creative and Design Center, the Golden Railway Line, Banyan Tree Residence, Four Seasons Private Residences Bangkok and Lhong 1919 market.
Three megatrends
SCB's Economic Intelligence Center (EIC) has noted three megatrends set to drive the hotel and tourism sectors:
Demographic change, especially the increasing number of senior citizens who will account for an ever-larger share of international trips and travel spending.
Intensified international competition for arrivals and tourist spending as governments ease visas and promote tourism-related investments.
The rising dominance of smartphones and social media in everyday life and among consumers, forcing businesses to adapt.
The EIC suggests some strategies for Thai tourism businesses to cope with change and increase their competitiveness:
Differentiation to attract quality tourists, such as by promoting new market segments that have light competition and relying on the uniqueness of local places and culture.
Partnerships with related businesses in order to add value, such as by taking advantage of Thailand's strengths in medical tourism to create packages for older travellers and foreign retirees.
Using technology and online media to reduce costs and expand customer reach.
These megatrends pose opportunities and challenges. Thai businesses should be proactive and a make adjustments as soon as possible, the EIC said.
