This year, the hotel market in Samui has been shaken by declining demand and reduced airlift to the island. The China slowdown is widely cited as a key factor, together with high airfares. According to Bangkok Airways, half of the company revenue is generated by flight routes connecting with Samui.
SAMUI INTERNATIONAL AIRPORT FLIGHT ARRIVALS
The carrier reported a loss in the first half of 2019 followed by a strategy to cut costs with reduced frequencies for domestic flights. In addition, it has suspended direct flights from Guangzhou and decreased frequencies for flights from Chongqing and Chengdu by 50%. According to the latest available statistics, airport passenger arrivals to Samui had a marginal growth last year as flight arrivals declined by 3% y-o-y during the same period. We anticipate the downward trend will continue in 2019 as a result of reduced flight connections. Much of the island’s tourism future is linked directly to how Bangkok Airways will address shifting market profiles.
Currently, there are 6 hotels representing 913 keys expected to come on stream by 2021. Over 46% of the pipeline are in upscale and luxury tiers. With the current limitation to the island’s accessibility, the stronger competition will put pressure on hotel rates in the mid to long term.
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Overview: Despite typhoon disruptions that hit the Prefecture last year, visitors to Okinawa hit a record-high total of 9.84 million. The demand was mainly driven by overseas source markets, which grew 14.2% y-o-y compared to domestic arrivals of 1.2%.
OKINAWA’S HOTEL SUPPLY
This has pushed total market share of international travelers from 4.1% in 2008 to 29.5% in 2018, whereby the CAGR of total inbound visitors for the period averaged 6.4%. Nevertheless, those arriving from Mainland Japan still account for 76.8% of guest nights in accommodation establishments on the island, as the majority of domestic travelers are Japanese from Tokyo, Osaka, Kobe, Fukuoka and Nagoya.
With demand on the rise, hotels are seeing improved performance in occupancy, while spending on accommodation has slightly declined as more nontraditional hotels are entering the market, such as condominium rentals and guest houses.
Nevertheless, mainstream hotel operators remain positive on the prospect of performance going forward despite stronger competition. Demand is expected to significantly increase with a second airport runway. However, the lack of labor in the industry is a major concern for existing and upcoming hotels.
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Our latest research has recorded a total of 56 properties or 15,463 keys in the pipeline, representing 18% growth in the next five years from the existing supply of 84,707 keys. These pipeline projects are categorized into three types: hotels, hotel residences with mandatory or optional rental management programs.
PHUKET’S HOTEL AND HOTEL RESIDENCES PIPELINE
Of the total 56 pipeline properties, more than 46% are hotel residence developments with either mandatory or optional rental management programs. These hotel-managed properties either offer guaranteed returns or revenue share generated from the rental pool program. The most popular locations for hotel residences are Kamala and Patong, which have 2,169 and 1,353 units, respectively. Management and franchise offerings with international brands and operators is rising.
Properties with an international brand affiliation totaled 7,537 keys, representing over 49% of the total pipeline. With the Phuket tourism market in a mature cycle, the massive hotel pipeline has raised oversupply concerns for both existing hotels and projects under development, with increasing stress on island infrastructure inevitable.
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Chiang Mai airport’s passenger arrivals surpassed 5 million for the first time in 2018 with a boost during the low season from the end of February to June. March and April jumped from a low period in 2017 to high months in 2018.
CHIANG MAI AIRPORT PASSENGER ARRIVALS
Chiang Mai Airport’s passenger arrivals for the first half of 2018 grew by 15% compared to the same period in 2017. However, this year the situation changed with a heavy haze covering the northern part of Thailand, leaving challenges for hotels with booking cancellations and declining demand. This is reflected in data from STR that shows for the period of January through June 2019 market-wide hotel occupancy dropped by 5.1% vs. the same period in 2018.
Nevertheless, international arrivals increased by more than 17% in 2018 due to increasing flight connections. One market to eye is Taiwan as AirAsia and Eva Air launched direct daily flights. The number of Taiwanese passengers rose from 2,773 passengers in H1 2018 to 30,669 passengers in H2 2018.
Even though hotel supply increased by 33% in 2018, both occupancy and ADR were fairly stable with RevPAR standing at THB2,417. There are 5 hotels in the pipeline with the majority in the upscale tier and most with brand affiliations. Looking forward, 2019 looks to have challenging trading conditions for hotels and tourism across the board.
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Overview: Looking at Zanzibar’s tourism market for the past decade, the number of arrivals expanded by 15% CAGR between 2008 and 2018. Last year, passenger arrivals to Zanzibar achieved more than half a million, indicating over 20% increase compared to the previous year. It is the third consecutive year for the island to reach double-digit growth, followed by 28% in 2016 and 15% in 2017.
ZANZIBAR’S AIRPORT & SEAPORT PASSENGER ARRIVALS
Tourists can access Zanzibar either by international/domestic flights or ferries from Dar es Salaam. Through the past three years, airport passenger arrivals are the key indicator to drive the escalating total arrival numbers. Passengers entering by air rose 25% in 2018 compared to 19% in 2017. Domestic flights are a key segment which surged by 36% y-o-y to over 140,000 passengers. In contrast, arrivals through the seaport have declined slightly for two consecutive years since 2016.
Looking forward, both public infrastructure and the real estate sector is expanding on the island. With more upcoming international branded hotel developments, the destination is forming set to widen its global awareness and recognition.
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Overview: Jakarta hotels hosted more than 13 million guests last year, representing an increase of 9.4% from the previous year with the 2018 Asian and Para Asian Games being the key drivers for demand. Consequently, hotel performance has experienced a strong uplift with a market-wide ADR up by 2.6% and occupancy grew by 4.9% year-on-year for FY2018, which resulted in a remarkable RevPAR growth of 7.7% for the same period.
JAKARTA’S REVPAR GROWTH
However, prior to the sport events (Q2 2017 to Q1 2018) the hotel market was highly competitive with over 4,000 keys added to Jakarta’s hotel inventory during the previous three-year period. The strong competition resulted in a drop of both ADR and occupancy, especially for properties in North Jakarta and the Golden Triangle area. A decline in RevPAR of -5.9% and -3.5% was posted respectively, compared to the same period from Q2 2016 to Q1 2017.
Accessibility to major demand generators is one of the key factors to drive the demand for hotels. Traffic congestion is a major obstacle to tourism development at the moment. However, the traffic situation is expected to improve in the next five years as Jakarta continues to grow public transportation between key business districts.
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Despite Bali’s tourism market recovery, the resort real estate market remains challenged. Along with the growth of tourism over the past decade, Bali’s hotel residence sector has risen as more developers are looking to sell hospitality-oriented real estate. Currently, in the market, 74% of the units for sale are in completed hotel projects and the remaining being off-plan or under construction.
BALI’S BRANDED RESIDENCES PRICING
In terms of buyers’ profile, it is a market largely focused on domestic investors with a combination of investment and holiday use purposes, due to sustained domestic tourism demand.
Foreign investment remains challenged with foreign ownership restrictions being the key barrier to entry. Foreign buyers are mostly from western countries including Australia.
Although mainland Chinese has become the top geographic source market since 2017 with over 1.3 million passenger arrivals, demand for the real estate sector is expected to pick up slowly with the main concern being natural disaster risk.
In the short term, the real estate sector is expected to be stable with the key market feeder concentrating on domestic.
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KOH SAMUI VS. POH PHA NGAM/KOH TAO
