Samui International Airport, as the major gateway to Koh Samui, is benefiting from a growing number of international flights and an expanded portfolio of codeshare partners. Following the doubling of international passenger arrivals in 2016, the number continued to increase with growth of 15% in 2017. Surat Thani Airport is increasingly an alternative access point to Samui, where aircraft arrivals rose significantly last year by 19% to 8,228 flights. Passenger arrivals at nearby Surat Thani also uplifted by 12% to 1.1 million.
SAMUI INTERNATIONAL AIRPORT ARRIVALS
Mainland China continue to be the fastest growing overseas source market, followed by Germany with 35% growth as of the second quarter of 2017. The market-wide hotel performance showed an increase in both average daily rate (ADR) and occupancy, which grew by 4.4% and 2.7% respectively as of Q2 2018 compared to the same period of previous year.
Future developments continue to focus on the upscale tier with a total of 9 hotels in the pipeline. As a growing trend in all of Thailand’s resort markets, the majority of the new properties will be affiliated with international brands.
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Pattaya’s hotel market which has been volatile since 2014, is showing signs of increased stability and growth among key operating metrics. In 2017, market-wide RevPAR rose impressively by 8.7% due to strong domestic upward demand. As of June 2017 (latest available data), Thais account for 38% of total hotel guests.
PATTAYA HOTEL PERFORMANCE
Looking inside the numbers, three-star branded hotels are facing intense competition from local developers as they compete over Mainland Chinese group business that represents 40% of the broad market. Independent hotels are reacting to the pressure by dropping rates under THB1,000 during low season to retain cashflow as branded players are increasingly targeting South Korean and Taiwanese groups. India has remained a constant market feeder across all hotel tiers.
Looking at new hotels coming in the pipeline, 69% are branded midscale properties, while the remaining are in budget and economy tiers. In the long run, we expect infrastructure investment including U-Tapao International Airport and the high-speed rail system to help attract new waves of tourism and MICE to the Eastern Economic Corridor area.
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Given the distance to Phuket Airport, wholesale travel agents have been powerful in driving demand to the Khao Lak tourism market. They have been able to market the destination by providing one-stop services for guests by arranging their accommodation, transportation, and activities under single packages.
HISTORICAL KHAO LAK HOTEL PERFORMANCE
Traditionally, wholesale travel agents especially those from the European and Australian markets are key providers. However, the number of free independent travelers (FITs) booking directly to hotels and online travel agents (OTAs) has significantly grown in the past few years. Therefore, this trend is becoming key to hotels seeing a slow migration from traditional wholesalers to OTA’s and in effect, this is impacting seasonal trends with higher occupancy in low months.
Without a doubt the biggest game changer looking forward is the plan for a THB60 billion airport in Khok Kloi Phang Nga. If it materializes, the travel time to the Khao Lak tourism area will be reduced to approximately one hour and will in effect create a far broader mainstream tourism market.
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Phuket International Airport hosted a total of 3.5 million passengers during the first four months of the year, representing nearly 19% growth compared to the same period in 2017. While the domestic volume edged up 8%, the significant increase was led by international arrivals which grew by 28% to 2.1 million, accounting for 59% of the overall passengers. The substantial uptick was mainly international flights, which represented a 27% year-on-year growth.
PHUKET’S INTERNATIONAL PASSENGER ARRIVALS
Two factors that attributed to the growing number of flights include the ongoing popularity of low-cost carriers and strong demand from Mainland China and Russia. Demonstrating this trend is that as of May 2018, there were approximately 23 new routes to Phuket, of which 19 routes were direct flights from Mainland China. Viewing the upgrading and expansion of Phuket International Airport, clearly the initiative has helped spur broad growth
The announcement of a new, second Greater Phuket Airport just over the Sarasin Bridge in Khoh Kloi Phang Nga will add greater sustained airlift capacity. To be developed by AoT (Airports of Thailand), the THB60 billion project is expected to commence construction in 2019 and open by 2025.”
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With the development of the Eastern Economic Corridor (EEC), Rayong is increasing its presence as a regional hub for transportation and logistics. New pipeline mega-project plans include the expansion of Map Ta Phut and Laem Chabang, high-speed trains, and growing U-Tapao International Airport. The EEC is expected to result in an economic leap forward for Rayong in the medium to long term.
RAYONG’S TOTAL VISITORS AND ANNAUL GROWTH
The underlying principle behind the EEC development is that the industrial sector will drive the province’s economic structure. That said, the hospitality industry is drawing segmented demand from business visitors during the weekdays and leisure families and seminar groups during the weekends and holidays. Visitor numbers in 2017 hit 7 million with a year-on-year rise of 4%.
Aligning with the industrial estate expansion, the hotel market is expected to tap into this economic prosperity. Much of the fuel in the growth is a spillover from China’s ‘Belt and Road’ initiative which is becoming a global phenomenon.
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Zanzibar achieved impressive compound annual growth of 19% in total passenger arrivals by air and sea from 2013 to 2017, stimulated by a rise in direct flights. The destination has also benefited from increased global recognition of it’s upscale and luxury hotels.
ZANZIBAR’S AIRPORT AND SEAPORT PASSENGER ARRIVALS
In 2017, the island received 433,474 passenger arrivals, which rose by 15% compared to the previous year. Tourists can access the island via both by the seaport and airport. While the proportion of seaport passenger arrivals slightly declined year-on-year, more visitors arrived via the airport. There is new airlift from Italy and increasing frequency in existing popular routes. In addition, the expansion of Abeid Aman Karume International Airport will see the building of a new terminal that will increase airport capacity to 1.6 million passengers per annum.
Currently, only 6% of accommodation establishments in Zanzibar are in the upscale and luxury tiers. With rising direct air service and stronger destination presence, more branded hotel developments are being attracted to the market.
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Bali’s Developers diverge from traditional property offerings, as domestic demand hits plateau – pipeline hotel residences focus on upscale and luxury properties. “As Bali’ Ngurah Rai International Airport closed down due to the volcano eruption of Mount Agung, the island is experiencing one of its quietest high seasons for tourist arrivals. This has significantly affected not only the hotel performance, but also the broader real estate market, which was already shouldering a slowing absorption rate due to supply and demand imbalance.
BALI’S HOTEL NEW SUPPLY
High competition has pushed developers to diverge from traditional product offerings to other alternatives such as vacation ownership and timeshare. Recently, Marriott Vacation Club International and the developer of Swiss-Belhotel Arjuna have launched their units into the market.
Another trend is the shift to international hotel affiliation, as hotel residences seek to widen their target demand to include foreigners while the domestic segment continues to show slow recovery.
With new and rebranded properties presently commanding higher price premiums and lower-tier projects exiting the market, the built-up sales price has risen from the previous year. That said, the increased price points have yet to make up for the declining transaction volume across the market.
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Bangkok has made a new record of international arrivals again, so what’s next? Following a robust year in 2016, the growth momentum continued in 2017, and is fully expected to continue on into 2018. The city’s upbeat performance is a fruition of hoteliers’ hard work and a little bit of luck when China shut the door to South Korea and Mount Agung in Bali did Thailand a big favour. The Bangkok hotel market enjoyed booming demand across the board with gravitation toward intraregional travels.
BANGKOK’S HOTEL PERFORMANCE
Leading Thai developer, Sansiri, invested USD58 million in The Standard Hotel to progress its lifestyle brand and hotel management know-how. Furthermore, Nirvana Bali launched their first hospitality branded property, Banyan Tree Residence which has experienced a strong market reception.
Traditionally, leasehold properties in Bangkok were viewed as less desirable by the Thai market, but the success of the St. Regis offering altered legacy demand.
Today, luxury brands like Four Seasons and lower prices per square meter has seen leasehold units transacting at higher pace than freehold. This has also been stimulated by soaring foreign demand and mixed-use projects offering diverse facilities.
With a rise in average built-up sales prices, the hotel residence market has continued to see a sharp y-o-y uptick in transaction volume from 4.09 to 6.07 units per month in 2017. The rising demand has been triggered by wealthy Thai families who seek a convenient location, lifestyle and hotel services.
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The increasing supply of branded upper upscale and luxury hotels in Kuala Lumpur is sending shivers amongst industry players. With a number of large mixed use development undergoing currently, such TRX, Bandar Malaysia, KL Metropolis and along Jalan Ampang, it is expected more upper upscale and luxury hotels will enter the market over the medium to long term.
KUALA LUMPUR’S ANNUAL GUESTROOM SUPPLY & DEMAND VS. OCCUPANCY
Our market research shows that hotel affiliation is correlated to real estate pricing premiums. Across the market this is translating to a 25–35% uplift in pricing. The luxury hotel residences at Ritz Carlton, Four Seasons, and St. Regis offer various layouts of significantly bigger size units, from one- to five-bedroom duplex units and are seeing strong interest from end-users who are looking at the convenience of a development with extensive facilities, services and prestige of a hotel brand.
We are seeing a new trend of upscale and midscale brands into the sector, which will in turn be opened to a broader range of property buyers. Meanwhile, upscale or midscale hotel residences provide a limited choice of unit configurations from one-, two- and three-bedroom units only. Given less barriers to entry by property developers in this segment, highlighted by lower underlying land cost, this type of offering is expected to gain stronger traction across Kuala Lumpur’s expanding cityscape.
