Thai hotel investment value declines

Thai hotel investment value declines

Investor demand remained healthy but supply was limited, says JLL

Centara Ao Nang Beach Resort & Spa Krabi, a beachfront resort, opened in October 2019.
Centara Ao Nang Beach Resort & Spa Krabi, a beachfront resort, opened in October 2019.

The total value of hotel investment in Thailand declined to 3.7 billion baht in 2019 from a record 20.5 billion in 2018. This reflected lower availability of investment-grade hotel assets that were put up for sale, according to JLL Hotels and Hospitality Group.

The country witnessed just four major hotel investment transactions in 2019: Four Points by Sheraton Bangkok; the old Customs House (leasehold, a historical building by the Chao Phraya River to be converted to a hotel by U City Plc); Anantara Baan Rajprasong (leasehold, currently Dusit Suites Hotel Ratchadamri Bangkok); and Beach Garden Hotel Cha-am.

The 268-room Four Points by Sheraton Bangkok represented the largest transaction by value, selling for 2.25 billion baht to TA Global Berhad of Malaysia.

"Both international and domestic investors continued to show keen interest in acquiring hotels in Thailand, particularly Bangkok, Phuket, Samui and Chiang Mai," said Chakkrit Chakrabandhu Na Ayudhya, executive vice-president for investment sales with JLL Hotels and Hospitality Group Asia. "However, limited investment-grade hotel assets were up for sale in 2019 following two record years."

Aside from the shortage of hotel stock for sale, delays in some hotel investment transactions also contributed to the decline.

"There were a few notable hotel deals where the sale and purchase agreements were signed last year but the ownership is scheduled to transfer in 2020," said Mr Chakkrit. "Some of these deals are significant in value and will give a considerable boost to the hotel investment volume in 2020."

Despite strong interest, investors generally are adopting a more cautious approach. According to STR Global, average revenue per available room (RevPAR) for hotels in Thailand in the year to November 2019 declined by 5.6% from the year before.

"The decline in hotel performance last year in several resort destinations made some investors more cautious in their assessment," he said. "However, long-term strategic investors who understand the cyclical nature of the tourism industry remained focused, with Thailand being known as one of the most resilient markets in Asia."

While foreign investors were still actively searching for investments in Thailand, several groups were monitoring their entry points closely because of the appreciation of the baht, said Mike Bachelor, chief executive for JLL Hotels and Hospitality Group Asia.

"Nonetheless, Thailand offers relatively higher yields than the rest of the key markets in Asia, and from a price per room standpoint it is still significantly cheaper," he said.

JLL expects hotel investment activity in Thailand to rebound in 2020 with the value increasing to 10-12 billion baht.

In Asia overall, hotel investment rose from US$7.2 billion in 2018 to $12 billion in 2019, driven by multiple large transactions across key markets. Japan remained the region's most liquid market, with deals worth $4.9 billion, a 109% increase from 2018. Singapore saw the largest growth, a tenfold increase from $129 million in 2018 to $1.4 billion in 2019. Thailand contributed just 1% to the Asian total last year, compared with 9% in 2018.

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