Reflecting on legacy, economic transmigration, and the Zoom Boom. The resort island of Bali continues to be one of the world’s most desired holiday destinations. Over the past three decades, Bali real estate market has continued to evolve and change. Though, for branded residences in Bali, both in the lead-up and period after the global pandemic it has lagged behind other key Southeast Asian leisure markets such as Thailand and Vietnam.
Turning back the page, the initial wave of branded legacy properties in Bali included Amanusa. Moving into the Millennium, a second wave of mixed-use developments emerged, featuring Alila Uluwatu, W Seminyak, Banyan Tree, Karma Jimbaran, and later Karma Kandara, Anantara Legian, another project in Uluwatu, Peppers Seminyak, and a scattering of others.
In the lead-up to the Global Financial Crisis (GFC), the booming Indonesian economy ignited a considerable number of condominium (condotel) projects aimed at domestic buyers. These often featured guaranteed returns and were concentrated in Kuta, Sunset Road, and peripheral areas.
During the same period, as land prices skyrocketed, a series of master-planned, mixed-use projects were planned in Tabanan, New Kuta/Pecatu, and Pandawa, with luxury brands such as Mandarin Oriental and Rosewood. The economic slowdown and impact of the GFC brought these projects to a halt. At the same time, there was some movement in non-branded developments being sold and converted, such as the COMO Uma Canggu.
Bali’s real estate market during the pandemic experienced an influx of domestic land and villa buyers, most notably from Jakarta. The second most active buyers were Russians and Eastern Europeans, purchasing for both retail transactions and investment. The appeal of investing in a fully foreign-owned Indonesian PMA company, along with visa benefits, was and remains widely popular. Another rising sector has been the development of primary and secondary medium-cost townhomes and smaller villas for foreigners on leasehold ownership in areas such as Canggu, Umalas, Pererenan, Bukit, and Jimbaran.
When looking at the current state of branded residences in Bali, land costs for larger projects—typically featuring a hotel and branded real estate—present significant barriers to entry. Smaller, more entrepreneurial developers, often foreigners, have moved quickly into leased land, successfully launching and selling projects. Meanwhile, larger Jakarta developers are reactivating shelved projects or restructuring stalled developments. The size and complexity of these projects often require longer timelines, making them the “elephant in the room” for the branded properties segment.
In 2022, Samui tourism sector recorded a total of 1.3 million passengers passing through Samui International Airport. The increase in international passengers posted double-digit growth after lifting of Thailand Pass registration scheme in July 2022. C9 forecasts pent-up demand to Samui will surpass 2 million passengers this year, compared to 2.4 million in 2019.
SAMUI TOURISM MARKET PERFORMANCE
The island’s hotel market for FY2022 kicked-off its recovery with market-wide hotel performance, RevPAR uplift. This was mainly triggered by an increase in room night demand. The most popular hotels are broadly concentrated in Bo Phut, Choeng Mon, and Chaweng.
Samui has seen a diversification in key source markets over the last five years. In 2022, key sources of business for Samui were Europe, U.S., and Australia. Asian markets have been slower to recover due to the limited number of international direct flights.
Samui’s visitor trajectory is leveraged on the leisure segment. Hence, its recovery has been slower than other key Thai destinations like Phuket or Pattaya which have a higher volume of business and MICE segments
Our forecast for 2023 is international leisure travel from Europe and Mainland China will be a key factor contributing to a moderate return to stabilized trading. For the foreseeable future, the destination remains highly reliant on Bangkok Airways and its ability to grow international airlift.
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Phuket tourism sector has experienced a profound surge since COVID entry restrictions were lifted on October 1, 2022 . Passenger arrivals increased to 3.9 million in 2022, up from 1 million in 2021 and 2.5 million in 2020. Although 2022 figures were lower-than-expected due to the Russia-Ukraine conflict and closed borders in China.
PHUKET TOURISM PERFORMANCE
C9’s analysis of passenger arrival trends over the past ten years points to a return to cyclical upward growth, which is widely demonstrated in ongoing room night demand in 2023. Rising international flight arrivals consistently grew as island-wide hotel occupancy averaged 48% in FY2022. This compared to 8% in FY2021 when there was a sole reliance on the domestic sector. Last year the market-wide overage rote pushed up by 80% year-on-year, to THB3,942.
Conversion and rebranding activity highlights an active trend by hotel owners with many opting to transition from hotel management agreements to franchise models. Looking forward , we expect that leisure demand from the FIT and Group segments will continue to be strong As the resort island moves out of its seasonal winter peak, all eyes ore on ore Chino The industry recovery outlook can best be summed up as ‘it’s not a matter of will it happen, but how long will it take to regain critical mass.
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Since the easing of travel restrictions in Thailand, pent-up demand has continued to push travelers to Phuket. The first half of 2022 created positive market sentiment, as Phuket welcomed 1.78 million visitors, a 342% increase over the same period last year.
PHUKET TOURISM PERFORMANCE
European source markets delivered higher volumes in the first quarter, while Asian source markets gained traction in international visitation in the second quarter. As regional countries in Asia reopened borders to overseas travel, Phuket has seen an influx of family-oriented travelers.
With an increase in international travelers, Phuket’s hotel sector performance is starting to see a recovery trend in occupancy. As a result of more airlift, the Island registered an overall occupancy rate of 31.5% in H1 2022, up from 5.1% in the first half of 2021. The upswing in demand was highest on the Island’s west coast as the preferred choice of travelers.
Looking forward, a seasonal transition will see international scheduled and charter flight winter schedules come into effect at the end of October and continue through March 2023.
C9 is forecasting an optimistic outlook that Phuket tourism will continue recovering, albeit at a moderate pace moving into 2023. Factors driving this view are the continued zero-COVID policy in Mainland China, and limited airline seats for Russian snowbird travelers this winter season
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The Phuket tourism recovery, underpinned by vaccine rollouts and the government’s less restrictive travel policies, began in earnest in Q3 2021. The widespread vaccine distribution supported many hotels reopening with domestic travel, and resulted in an initial, restrained return to travel.
PHUKET TOURISM PERFORMANCE
After launching the Phuket Sandbox on the 1st of July 2021, there was a methodical rise in the number of passenger arrivals in the second half of the year, with the average growth rate reaching 47% in December 2021 versus the same month in 2020.
Market volatility during the year was heavily impacted by pandemic variants and the slow rollouts of what was to become the Test & Go travel re-entry program throughout Thailand.
Moving into the final quarter of the year, there was a seasonal spike in demand from Europe and Russian winter ‘snowbirds’, though these numbers have dissipated by the end of Q1 2022.
The number of passenger arrivals at Phuket International Airport totaled 918,759 in FY2021. It represents a 64% y-o-y decline from 2020, and it is a mere 10% of the total figure in 2019 when 9.06 million passenger arrivals were recorded.
In 2022, we expect continued volatile trading for hotels highlighted by Thailand’s protracted removal of quarantine restrictions and impact of the Ukraine Russia crisis. In addition, there continues to be a mounting liquidity and lending problem for existing and pipeline hotels which is expected to continue in the second half of the year.
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International visitors are an important foundation in driving tourism growth in Phuket. According to the Airports of Thailand, international passenger arrivals increased for ten consecutive years to reach a record of 5.3 million in 2019 before decreasing by 80% to 1.1 million in 2020 due to travel restrictions under the COVID-19 pandemic. This year total passenger arrivals between January to July dropped to 0.4 million from 1.9 million passengers in 2020.
PHUKET’S AIRPORT PASSENGER ARRIVALS
In FY2020, the market-wide ADR was propped up by the government’s ‘We Travel Together’ program. However, the Bangkok travel restrictions have effectively negated the domestic market and made the island reliant on Sandbox travelers. This has pushed market-wide demand into double digits, though rates have dropped.
Phuket became the first province in Thailand to welcome back international visitors without quarantine requirements. Based on the Tourism Authority of Thailand (TAT), the reopening of Phuket quadrupled its room night demand in July, with further gains registered in August.
Due to the ongoing pandemic, 67% of pipeline project projects have been delayed, mostly to 2023–24. The West Coast remains the most popular development area, led by Kamala, Patong, and Layan. Despite the ongoing COVID-19 impact on hotel owners, only two significant transactions of hotels occurred this year, though more are expected over the new 12–18 months.
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Unlike other Thai leisure destinations that are heavily reliant on international visitors, Hua Hin’s tourism and hotel market is strongly leveraged in the domestic market. Pre-COVID, 74% of the total visitors originated domestically.
The destination’s legacy is a weekend and holiday getaway for Greater Bangkok. There is robust domestic demand on Friday and Saturday nights, which results in the highest rates of the week. Typically, average occupancy is 90% and above during the weekends and public holidays.
HOTELS OCCUPANCY RATE ON WEEKENDS VS. WEELDAYS
In FY2020, the Hua Hin hotel market posted the highest domestic occupancy with 39% surpassing top tourist destinations such as Pattaya, Phuket, and Bangkok. Although Hua Hin’s average room rates were slightly lower than Phuket’s, the market-wide RevPAR in Hua Hin was the highest.
Hua Hin Airport has become an important demand generator as demonstrated by 233% passenger growth between 2018 and 2019. The main market feeders included international visitors on AirAsia and high-net-worth holiday travelers flying in on private aircraft.
Hua Hin hotel supply is anticipated to continue to grow at a moderate pace. In 2021 incoming inventory will rise 4%. Of the 2,161 new hotel keys in the pipeline, 74% are in the upper-midscale category, 15% in upper-upscale segment, and 11% at the luxury tier. All the hotels in the pipeline are branded to chains.
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Prior to the COVID-19 outbreak, Koh Samui’s demand growth relied heavily on Samui International Airport and Surat Thani International Airport’s airlift. The number of total passengers at Samui International Airport hit 2,417,246 in 2019 and dropped down to 869,235 passengers in 2020.
HOTEL PIPELINE IN SAMUI
Koh Samui is expected to gradually emerge from the pandemic as a desirable upscale boutique destination for regional and international visitors. One favorable factor is it has avoided the crush of mass market hotels that have risen in many other Thai and Southeast Asian resort locations.
Due to airlift restrictions, low-cost airlines use Surat Thani International Airport on the mainland. The growing prominence of the Surat Thani airport as a secondary hub has improved accessibility to Koh Samui and increased broader access for the island.
Presently, there are 629 registered accommodation establishments with 23,797 keys in Koh Samui. Between now and 2025, there are eight confirmed pipeline projects identified, with an additional 1,443 keys coming on stream. C9 Hotelworks market research revealed the flow of incoming properties remains largely intact, though some projects are delayed.
Based on the Thailand Ministry of Tourism and Sports timeline, the Samui Plus program is scheduled to kick off on July 15th. Koh Samui, Koh Phangan, and Koh Tao are planned to reopen for fully-vaccinated travelers. Koh Samui’s success going forward is anticipated to be leveraged by the recent Phuket Sandbox opening progress.
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Despite Thailand shutting the door on international tourists in March 2020, Krabi Airport trafficked over one million domestic passengers last year. Outside of Bangkok the destination had the fifth-highest airport passenger tally in the country.
While hoteliers are looking at the reopening of international markets in October as a second-phase of Sandbox initiative, many wonder how long is the next cycle back to stabilized trading of the pre-Covid 2019 era?
KRABI AIRPORT TRAFFIC
In the South of Thailand, with Phuket firmly encamped in mass tourism and Samui hampered by airlift limitations, Krabi is reaching a critical intersection on what market model to pursue. In contrast to Phuket, Samui or Phang Nga, Krabi had the highest level of domestic guests at accommodation establishments, with Thais accounting for 43% in 2019.
Prior to COVID-19, the destination hosted 4,186,069 guests at accommodation establishments in 2019. Mainland China was the largest international source market, representing 14% followed by the European market weighing in with 27% of the share, highlighted by the UK, Germany and France. The existing hotel supply in Krabi is highly concentrated with unbranded midscale properties.
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