Developers of resort condominiums in Phuket are patiently waiting for a recovery despite limited sales performance given the weak market conditions created by the coronavirus pandemic.
While their peers in Bangkok have been using price promotions to clear unsold inventory, Phuket developers have adopted a "wait-and-see" approach and shifted their attention to the daily-rate market while waiting for conditions to improve.
Phuket resort condominiums rely heavily on foreign investors who are attracted to developments with rental programmes and guaranteed returns. With limited domestic demand, and as restrictions and quarantines globally obscure the outlook for international tourism, marketing gimmicks normally used to successfully stimulate buyer demand cannot be applied.
That leaves the daily-rate market as an option for generating some revenue. Considering that most of the newer Phuket resort condos are entry-level projects with units priced from 4-8 million baht, they offer a daily-stay experience comparable to that of a 3- to 4-star hotel.
This puts most Phuket condominiums in direct competition with actual hotels, which are offering heavily discounted prices to attract Thai customers who are eligible for benefits under the We Travel Together campaign, in which the government subsidises accommodation costs up to 3,000 baht.
With price becoming a major determining factor in the selection of property, luxury-grade hotels have a competitive edge over lower-grade daily accommodation in entry-level resort condominiums and hotels, given the larger range of price discounts available.
These discount schemes have proved to be successful, as evidenced by a significant number of wealthy individuals unable to travel abroad who have instead decided to travel locally.
Under the current market conditions, price along with other factors such as brand, location, sea-view availability and complimentary offerings all have an impact on the elastic demand.
Because of Covid-19, Phuket has been temporarily stripped of the international demand on which the island has built its prosperity. With the focus shifting back to the Thai market, Phuket condominiums and hotels find themselves in a strange situation where they are all competing for this target group of customers that was arguably ignored in the past, largely because of expensive pricing schemes better suited to the foreign market.
But the current focus on a Thai customer base could prove rewarding in the longer term as a way of risk diversification and tapping into a new target group. Targeting Thais could potentially lead to faster growth from word of mouth and shared posts on social media. By way of example, the emergence of nearby Khao Lak as a surfing hot spot has been fuelled by content posted by influencers on their social media channels.
Aaron Aerni Kuvanun is a senior analyst at Research and Consulting, CBRE Thailand. He can be reached at bangkok@cbre.co.th