Q3 2010 | hotel

thailand

Bangkok Luxury & Upper Scale

Hotel Market REPORT

Bangkok Luxury & Upper Scale Hotel

Market
Executive Summary
The hotel market continued to show weakness on account of the after effects of the April/May
disturbances and the traditional low season.

Middle Eastern and Indian visitors continue to bolster the Bangkok tourism industry which is a
welcome support during the low season. However traditional tourist markets, the mainstay of the
market indicators Y/Y Upper/Luxury segment, remain in the doldrums
Q2-Q3 2010
The focus of attention is on Q4 2010 figures which will provide guidance on whether the Bangkok
Supply hotel market has fully recovered; further disruptions permitting.

Demand Concerns remain as to the nation’s course for the future and whether further protests or sporadic
violence occurs. Travel advisories based on the continued State of Emergency continue to be a
Rates
dark cloud on the horizon.
occupancy
Future supply in Q4 2010 and 2011 will further test hotels’ ability to absorb the shocks of the past
RevPAR 18 months.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010
Hotel classification
While the Thailand Hotels Association (THA) categorizes hotels with a
star rating, many hotels do not abide by star rating. Therefore in this
study, Colliers International Thailand have produced a classification
Basic overview of hotel classification
Budget – hotels with limited to no facilities. Rooms are simple with basic
furnishings with sizes ranging from 12 to 18 sq m.
Economy - comfortable, well equipped accommodation, with an en-suite
Bath / shower room. Reception and other staff aim for professional
presentation that offers a wide range of straightforward services,
including food and drink.
Mid scale - hotels are usually of a size to support higher staffing levels,
and a significantly greater quality and range of facilities. Reception and
the other public rooms will be more spacious with a number of
restaurants. All bedrooms will have fully en suite bathrooms and offer a
good standard of comfort and equipment, such as a hair dryer, telephone
and toiletries.
Upper scale - a degree of luxury as well as quality in the furnishings,
decor and equipment, in every area of the hotel. Bedrooms will also
usually offer more space and be well designed with co-ordinated
furnishings and decor. The en-suite bathrooms will have both bath and
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based on the quality of the hotel as seen through the eyes of the hotel
management companies and on the British Hospitality Association
classification.
fixed shower. It will contain a high enough staff to provide services like
concierge and porter service, 24-hour room service, laundry and dry-
cleaning. The restaurants will provide high quality cuisine.
Luxury - spacious and luxurious accommodation throughout the hotel,
matching the highest international standards. Interior design should
impress with its quality and attention to detail, comfort and sophistication.
Furnishings should be immaculate. Services should be formal, well
supervised and flawless in attention to guests’ needs, without being
intrusive. The restaurant will demonstrate a high level of technical
aptitude, creating dishes to the highest international standards. Staff will
be knowledgeable, helpful, and experienced in all aspects of customer
care, combining efficiency with courtesy.
For the purposes of this report the use of the word “hotel” shall refer to
the Upper Scale and Luxury hotel ratings that are the subject of this
report. Hotels below these will be mentioned by their particular
category.
 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

ZONING

HISTORICAL SUPPLY BY YEAR

cumulative supply in Bangkok

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010
Zoning
The centre of Bangkok contains the lion’s share of Luxury and Upper
scale hotels in the city due to it being the heart for both business and
tourism.
Sukhumvit road up to Phrom Phong has its own distinct identity due to
the location being the main night life entertainment area in the city for
foreigners. As these entertainment facilities extend some way into many
of the sois, a large number of hotels are also located away from the main
Sukhumvit road. Even within this road many sois have there own micro-
identities such as sois 4, 7, 8 11 and 22.
The Northern CBD has its borders defined by Phetchaburi to the north
to Chalermahanakorn Expressway down to Rama VI but also including
the area up to Ratchadapisek south of Sukhumvit. This area contains
most of the large upper scale shopping malls as well as offices. The
emphasis is on a mix of business travelers and family tourists.
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The Southern CBD includes the area bounded by Si Phraya, the south
side of Rama IV, Sathorn and the eastern side of Charoenkrung. It is
primarily a location for offices with limited shopping facilities and
reasonable entertainment areas that partially rival Sukhumvit.
The Riverside is the biggest player in the Upper scale and Luxury
segment due to its attractive location. However supply is limited in this
market and no Mid-scale hotels can be found in the area. The Thonburi
side of the area is considered as the same market as the hotel shuttle
boats that regularly ply between the two banks are an added attraction
for most tourists.
The Western area contains the old city as well as the backpacker area
located in Bamglampoo. Whilst this area is awash with hotel rooms,
there are no Upper or Luxury scale hotels located here and as such is
not considered in this report.
 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

Historical Supply

Historical supply by quarter

Source: Colliers International Thailand Research

As of Q3 2010 there was a total supply of approximately 14,700 rooms scheduled to be completed and opened during Q4 2010. This year has
with around 300 rooms added in Q3 of 2010 and about 340 rooms heralded a significant addition of new supply in Bangkok.

Additional supply during the year 2000 – 2010

Source: Colliers International Thailand Research

Remark: E = Estimated supply

Since 2007 onwards more than 1,000 rooms were added every year and 1,100 rooms already completed.
approximately 1,460 are scheduled to be completed in 2010, with around

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

Luxury & Upper scale hotel supply in Bangkok by LOCATION

Source: Colliers International Thailand Research

Remark: E = Estimated supply

Supply in the Northern CBD has shown the biggest movement in the past
2 years from approximately 3,160 rooms in Q1 2009 to more than around
4,000 rooms by Q3 2010, an over 26% increase. It has already overtaken
the Riverside area as the greatest supply of rooms. This is not surprising
at it is located not only in tourist and shopping areas but also in amongst
offices and large embassies. While the Sukhumvit area is the dominant
player in the Mid scale and Economy scale ranges, these are mostly not
covered in this report. In terms of the Luxury/Upper end the area
currently lags behind the CBD and Riverside areas but has grown by
28% since Q2 2009 due to Sukhumvit’s diverse attractions, ever growing
popularity and access to the BTS.

Breakdown of Luxury & Upper scale hotel rooms in Bangkok

by location, Q3 2010

Source: Colliers International Thailand Research

The highest number of hotel rooms is located in the Northern CBD area,
representing 27% of the total. In the next two to three years the Northern
CBD area will still have the biggest share due to many of the future
projects being located in the area and supply in Riverside area still
remaining static until one new hotel is expected to be completed in 2013.
The lack of available land in this small area will constantly hamper
growth and in some ways existing hotels on the Riverside may benefit
from this exclusivity in the future.

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

Supply by Zone, as of Q3 2010

Source: Colliers International Thailand Research

While in every area Upper scale hotel rooms are in greater supply, their
proportion in relation to Luxury hotels reflects the nature of each area.
The Northern CBD contains the high end shopping malls comparable to
what Calle Florida is to Buenos Aires or Bourke Street is to Melbourne.
Therefore many Luxury scale hotels are located there. The Riverside is
also known as a prestigious area due to its scenic location and again
Luxury hotels make up a large slice of the hotel market. The Southern
CBD is split between the eastern part of Sathorn road and Rama IV
containing more Luxury hotels whilst the older CBD area of Silom
contains a much greater share of Upper scale hotels.
The Sukhumvit area contains a greater proportion of Upper Scale rooms
compared to Luxury ones. The more down to earth nature of this area
means that fewer Luxury hotels are located here. The distance of the
Eastern area and Northern area from the centre explain why no Luxury
hotels are located in these areas.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

Future Supply

Future supply of hotel rooms by year, 2010 – 2013

Source : Colliers International Thailand Research

Nearly 1,460 rooms are scheduled to be completed in 2010 and more
than 5,600 rooms in the next three years are scheduled to be added in
the market. At the end of 2010 one luxury hotel will have been added to
supply for the whole year. The Siam Kempinski (306 rooms) located in
the Northern CBD, began operations in August 2010.
especially in Northern CBD area, temporary stopped construction during
the protests at Rachaprasong junction in April and May and this might
lead to delays in completion and opening. Also the overall tourism
downturn and future problems in this regard may lead to some projects
slated for 2012 and 2013 not being completed at the scheduled time.

The instability in Q2 has directly impacted the tourism market especially

in the city. Many of the hotel projects under construction in Bangkok,

Cumulative future supply of hotel rooms by grade and year, Q4 2010 – 2013

Source : Colliers International Thailand Research

Although Thailand has been afflicted with a myriad of problems during
the past three years, Bangkok still remains a favorite destination for
foreign tourists and so many investors retain interest in developing
hotels in Bangkok. Approximately 55% of the total rooms are in the Mid
scale category followed by Upper scale and Luxury scale, with 25% and
20% respectively. As tourists seek value for money and the new growth
markets in India for example generally focus on the lower priced
categories, the case for Mid scale segment development is a compelling
one. Developers may consider readjusting their plans to take account for
this.

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

Cumulative future supply of hotel by grade and location, Q4 2010 – 2013

Source : Colliers International Thailand Research

Sukhumvit is the most popular area for developments in the future,
representing 34% of all future supply for Bangkok. Many developers
have selected to develop hotels in this area due to the convenience to the
BTS provided along Sukhumvit road which is suitable for tourists and
business people alike as well as the vibrant nature of the Sukhumvit road
and its many lively sois. The eclectic nature of Sukhumvit has meant that
it has attracted a significant number of boutique style hotels that
challenge and innovate within the high end segments. Many in the area
are independent, non branded hotels. This represents an interesting
investment niche for the foreseeable future. However the Northern CBD
continues to be the main focus for Luxury scale projects due to its
location amongst the most prestigious retail area, offices, embassies and
BTS connections.

Demand – Occupancy Rate

Average occupancy rate of Luxury & Upper scale hotel in Bangkok by grade, for Q1 – Q3 2010

Source : Colliers International Thailand Research

The protest at the centre of Bangkok seriously impacted the number of represents the traditional low season so occupancy is expected to suffer
foreign tourists, so average occupancy rate in Q2 dropped approximately in comparison. The occupancy rates of Luxury & upper scale hotels
50 - 55% from Q1 2010 in both hotel categories and some hotels in the improved in Q3 after the media shifted focus to other conflicts around
area around the protest site were forced to close. However Q2 2010 the world and the situation calmed.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

Occupancy rate of Luxury & Upper scale hotels by quarter

Source : Colliers International Thailand Research

Although Q3 2010 represented a strong bounce from the lows recorded
in Q2 during the protests and rioting, occupancy still remains in the
doldrums with a y/y comparison with Q3 2009. It is clear that the after
effects of the Q2 events continue with many traditional tourist markets
remaining fragile. In fact while overall tourist numbers are up y/y for Q3,
Upper and Luxury scale mainstay markets such as USA, Germany, UK,
Scandinavia and Japan recorded downturns. This is likely as many
tourists in the quarter make longer term bookings due to the school
holiday period and many were probably put off by the events that
appeared on their TV sets in April and May.

Occupancy rate of Luxury & Upper scale hotels, Q1 2010 - Q3 2010

Source : Colliers International Thailand Research

The Riverside hotels showed the poorest figures for occupancy as the western tourists and the traumatic events of May meant that a far greater
traditional markets in Europe, USA and Japan have not picked up since rebound for Q3 was expected. Now the focus of attention will be on the
Q2. Overall, although the numbers are up from Q2, the picture for Q3 is peak season and advanced bookings so far are not promising.
very disappointing. Q2 represents the low season for Bangkok for

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

Demand drivers focus

Tourism

Guest arrivals at accommodation establishments in Bangkok during the year 2007 – Q3 2010

Source: Office of Tourism Development, Colliers International Thailand Research

Remark: E = Estimated by Colliers International Thailand Research

Although tourism numbers were strong compared to the previous quarter
the figures only showed a small increase in comparison from Q3 2009.
The bounce back from Q2 2010 provides scant encouragement as a
large proportion of this increase came from new markets such as India
and Iran, which with exceptions, are not traditional occupiers of Upper
and Luxury hotel rooms. This can be seen in the disconnect between
fairly positive visitor numbers against that of low occupancy rates for
Upper and Luxury scale hotels. However some of these hotels are
noticing more reservations from these new markets for Upper and
Luxury scale rooms.

Rates

Average daily rate by grade Q1 – Q3 2010

Source: Colliers International Thailand Research

The Luxury sector has been more prone to the political situation and narrowed as the tourists now visiting Bangkok are demanding more
many have offered steep discounts to attract guests and maintain a value for money.
reasonable occupancy. The gap between Luxury and Upper scale has

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

Average daily rate of Luxury hotel by location, Q3 2010

Source : Colliers International Thailand Research

The need to retain occupancy has meant that rates are being driven to enter into a price war. The Luxury scale hotels have felt greater
down in the Riverside and Southern CBD. This may be due to the fact pressure as they have reduced rates to attract customers wishing to
that hotels reduced rates for advanced bookings in the wake of events in economise.
May. However the appeal of the Sukhumvit area has meant less pressure

Average daily rate of Upper scale hotel by location, Q3 2010

Source : Colliers International Thailand Research

The Upper scale hotels were able to maintain pricing except for the are already competitively priced for the product that they offer.
poorly performing Riverside area. It would appear that Upper scale hotels

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

RevPAR

RevPar is the ADR multiplied by the occupancy rate and is arguably the industry.
most important metric for analyzing the current health of the hotel

RevPAR by quarter in Bangkok

Source: Colliers International Thailand Research

The twin falls in occupancy and room rates led to a subsequent dramatic segments picked up for Q3 with Luxury hotels making gains by reducing
fall in RevPAR by approximately 58% from Q1 2010. This reflects the full pricing to increase occupancy.
effects of the April/May period on the hotel market in Bangkok. Both

RevPAR of Luxury hotels by quarter & location, Q3 2010

Source: Colliers International Thailand Research

The strong recovery in RevPAR was recorded in three areas while the a mix of business travelers in the other hotels. The more refined nature
Riverside continues to languish. The overall poor performance of the of the Riverside area may attract the type of tourist who is more likely to
Riverside area is likely in part due to the reliance on tourists rather than be repelled by the events in May in Bangkok.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

RevPAR of Upper scale hotels by grade & location, Q3 2010

Source : Colliers International Thailand Research

As in the Luxury sector the Riverside recorded poor RevPAR figures for entertainment scene; events occurring in other parts of the city do little
the same reason as stated above. Sukhumvit’s resilience to the travails to affect the day to day life there. It is also probable that many of the
of the city was evidenced by a robust Q3. In some ways the area is self guests in this area are returnees who are familiar with the ups and
contained with a mix of residential, hotels, retail as well as a lively downs in the city and continue to return.

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010
Forecast – Two views
At this juncture it is difficult to predict where the hotel market is heading
in the future. Therefore two opposing forecasts have been adopted for
The positive view
The tourist represents the eternal phoenix from the ashes. Undaunted by
natural and man-made disasters, within a year or two they return again
to enjoy the wonders of the affected country. Thailand is no exception.
The land of smiles remains despite the events of May and around 60%
of tourists to this country are returnees. This is an important number as
many are less likely to be fazed by recent events and maintain a close
connection with the country. By contrast the figure for Malaysia is less
than 20% and so any serious negative event would impact tourism far
more. The hospitality that Thailand is so famous for cannot be simply
replicated.
Although traditional markets are slow in returning to the country this is
likely due to fewer advance bookings being made during the events of
April and May. In all likelihood now that time is becoming a thing of the
The dark view
The tectonic plates of Thailand’s tourism industry may be shifting and
Bangkok in particular. While the country is benefiting from the stellar
growth of the “RIM” markets (Russia, India & Middle East) who accounted
for nearly 16% of total foreign arrivals by air in Q3 2010, these new
markets do not represent at the present time strong growth opportunities
for the Upper to Luxury end of the market as many visitors are keen on
more affordable, no-frills accommodation.
The mainstay of the Upper/Luxury market is now under threat even in
the longer term. While the appeal of Bangkok remains for European,
American and Japanese tourists, many now may be avoiding Bangkok
and head directly for the resorts as many now offer international
accommodation, retail and entertainment facilities that can even rival the
capital. Frequent alcohol bans, cumbersome immigration regulations,
armed police on the streets and traffic gridlock are gradually eroding
Thailand’s and especially Bangkok’s special status among western
tourists.
Other big cities are luring tourists more than ever. Singapore as sin city?
Hair cuts at the border a distant memory, think now of casinos and a
this particular report. Hopefully by the end of Q1 2011 a more clearer
picture will emerge of where the industry is headed.
past more bookings will made and tourists will come flocking back to the
country for the high season. While the new supply of hotels will provide
challenging times for the industry, new markets in India, Russia and the
Middle East are growing rapidly and are also providing strong numbers
for the traditional low seasons of Q2 and Q3. The strong growth of
tourism in Asia will soon be witnessed again in Thailand.
Bangkok bounced back strongly from the events in May and retains its
strong blend of culture, entertainment and shopping which will continue
to entice tourists to visit the City of Angels.
vibrant nightlife. Manila has built more tourist attractions and has seen
numbers rise. Hong Kong still attracts shoppers and theme park visitors
from around the world. New cities appear on the radar screen with
dynamic Saigon and Hanoi in Vietnam and the colonial and cultural
appeal of Phnom Penh. Time was when a visit to Bangkok brought kudos
to the traveler in his or her own country, now the city is not much more
exotic than Benidorm in the eyes of many and other less ventured cities
become more appealing as a ‘wow’ destination. With the significant
amount of new supply coming on stream, Luxury and Upper scale
hoteliers cannot rely on sophisticated, generous travelers returning to
their establishments. The hotels may hold their noses when the busloads
of baseball hat wearing package tourists following flags enter their doors,
but they must embrace them because they are the only means of
survival.
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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q3 2010

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