Q1 2011 | HOTEL

thailand

Bangkok Luxury & Upper Scale

Hotel Market REPORT

Bangkok Luxury & Upper Scale

Hotel Market
Executive Summary
Hotels showed signs of recovery after a very problematic 2010 with occupancy rates higher in Q1
2011 than the previous quarter. Rates in Q1 2011 are comparable to those registered in Q1 2010.

The trend is still for hotels, especially in Luxury segment, to drive rates down in order to compete
and this looks set to continue. A “risk discount” seems to be being applied in the case of hotels in
market indicators areas deemed prone to further political strife.
Q4 2010/Q1 2011
Middle Eastern, Indian and Chinese visitors continue to be a growing presence in the Bangkok
new Supply tourism industry especially during the low season. However traditional tourist markets, the
mainstay of the Upper/Luxury segment (ULS), have begun to return to the city. The effect of the
RATES reduction in long term bookings after events last April and May appears to be abating.

Occupancy
Future supply in 2011 and 2012 will further test hotels’ ability to fill their rooms. Only continued
RevPAR strong growth in tourism can mitigate this situation. There will be no respite for the industry for
some time to come.

Note Additional Supply by Quarter in Upper/Luxury segments

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 with ratings
below these will be mentioned by their particular category.
Please refer to the appendix for hotel category definitions.

Source: Colliers International Thailand Research

In Q1 2011 a total of around 75 rooms were added to supply in Bangkok in the ULS with the
opening of just one hotel, The Sivatel Bangkok, in the Northern CBD area. The total number of
rooms at the end of Q1 2011 was more than 15,100 in the ULS.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Supply by Location, as of Q1 2011

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 “The Magnificent Mile” is to Chicago, or Nevski Prospekt to St
Petersburg. As such, 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 explains why no Luxury
hotels are located in these areas and only a limited number of Upper
scale rooms. Also, these areas have a limited concentration of tourist
facilities.

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Comparable Supply between Luxury & Upper Scale Hotel and Mid Scale Hotel

Source: Colliers International Thailand Research

The CBD and Riverside are seen as the more high end locations due to from the centre but access to the BTS makes it a popular location for
either being in the centre of the city or by the attractive riverfront. This businessmen and tourists seeking no-frills but still comfortable
is reflected in the greater supply of rooms in the ULS. The Northern area accommodation.
is the main player in the Mid scale end of the market as it is located away

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Future Supply

Cumulative future supply of hotel rooms by grade and year, 2011 – 2013

Source: Colliers International Thailand Research

Nearly 1,400 rooms in the ULS are scheduled to be completed in 2011

and more than 6,000 rooms in the next two years in the ULS are
scheduled to be added to the market.

Due to the political protests during April and May 2010 a number of
construction projects in the Northern CBD area postponed their opening
date to 2011.

It is interesting to note the significant amount of Upper/Luxury scale

hotel rooms that are due to be supplied compared to those in the Mid
Scale category. Normally is would be expected that Mid Scale trumps
the combined supply of the ULS. This would seem to go against the
trend for a greater demand from clientele for no-frills affordable
accommodation as a consequence of the changing dynamics of the
tourism market in the city. Many developers are still keen on the higher
end hotel categories in Bangkok.

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Cumulative future supply of hotel by location, 2011– 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 road. The
eclectic nature of Sukhumvit has meant that it has attracted a significant
number of boutique style hotels that challenge and innovate within the
higher 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.
Although Thailand has been afflicted with a myriad of problems during
the past three years, Bangkok still remains a popular destination for
foreign tourists and business people so there still remains a strong
interest in developing hotels in Bangkok both from domestic and
international investors.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Demand – Occupancy Rate

Average Occupancy Rate of Luxury & Upper Scale Hotel during the years Q1
2009–Q1 201

Source: Colliers International Thailand Research

Average occupancy rates have been rising since Q2 2010 although Q4

2010 and Q1 2011 represent the traditional high season for the city. A
better comparison is between the same quarter for different years which
reflects seasonality. For the Luxury scale segment occupancy increased
significantly in Q1 2011 compared to Q1 2010 from the mid sixties to the
high seventies. However a small decrease was recorded in the Upper
Scale segment with a few percentage points drop.

Although lower room rates are a key factor for the positive numbers in
the Luxury end market, another factor is likely to be the effect of last
years events in April and May had on long term bookings that more
directly impacted the high end hotels that cater for this traditional market.
This probably accounted for the poor figures for Q4 2010 but the
resumption of long term bookings later in 2010 had a beneficial effect on
the occupancy in Q1 2011.

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Demand Drivers Focus

International Tourists Arrivals to Thailand at Suvarnabhumi International Airport by Quarter

Source: Department of Tourism

The figures relate to arrivals to the main airport in Thailand and many Regional situation
arrivals may depart for other resorts and cities rather than visiting
Thailand’s neighbours such as Cambodia, Vietnam, Laos and Myanmar
Bangkok. However the numbers provide some indication as to Bangkok
are recording very robust growth rates in tourism arrivals. Although the
as a destination.
numbers from these four countries together amount to about 60% of the
total figures for Thailand, the continued growth which is far outpacing
Tourism numbers in Q1 2011 were strong compared to the previous
Thailand, will likely lead to further competition in the region as tourist
quarter and the figures in Q1 2011 are the highest in the last 3 years. The
infrastructure is upgraded in these emerging economies. Vietnam
total number of tourist arrivals to Suvarnabhumi in Q1 of 2011 was more
recorded a nearly 35% increase y/y in 2010 and now has 5 million
than 3.4 million, an increase of approximately 9% from Q1 2010 and 13%
visitors compared to Thailand’s 15.8 million. Further afield many other
from the previous quarter, This is despite the disaster in Japan, unrest
countries are showing better tourism growth numbers than Thailand for
in the Middle East and North Africa; and the severe floods and mudslides
2010. Singapore, Taiwan, Maldives, Philippines all grew at a much
in 10 southern provinces of Thailand in March, which inversely impacted
greater rate than Thailand. The new player for 2010
the tourism market to a degree.
was Sri Lanka, which after years of bloody conflict is now gaining a
The disaster in Japan will have affected Japanese tourists, to judge from
peace dividend with a 45% increase in arrivals in 2010 with over
the number of foreign tourists arriving in Thailand at Suvarnabhumi
650,000 visitors in 2010. While Thailand is benefiting from the surge in
international airport by Immigration Bureau. Although Japanese arrivals
Asian tourism, it remains one of the laggards.
increased by 5.8% in March compared to the same month last year, this
was less than the 10% increase recorded for February. As the disaster
occurred at the end of March the real effect will be noticed in Q2 2011.
The Japanese are an especially strong market in Bangkok as well as
Chiang Mai.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Rates

Average daily rate by grade for Q1 2010–Q1 2011

Source: Colliers International Thailand Research

Average daily rate (ADR) for Luxury scale hotels in Q1 2011 fell from the The concern now is that the industry may be in the beginning of a rate
previous quarter by around 16%, due to the competition from Upper reduction spiral especially with the expected future growth in supply in
scale hotels and in a bid to drive up occupancy with, in all likelihood, the Luxury sector. Hotels in this sector already are highly competitive
corresponding pressure for a more competitive pricing in the long term when compared to other cities in the region.
booking sector. This could be termed as a form of ‘risk discount’ in
which rates tend to be reduced due to the risk of political conflict
reoccurring.

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Average Daily Rate of Luxury Hotel by Location, Q1 2010 – Q1 2011

Source: Colliers International Thailand Research

The ADR based on location shows mixed signals and is probably a
throwback from the events of April/May 2010. Most of the disruptions
last year occurred in the Northern and Southern CBD areas. As the
Luxury end market relies on long term booking for a significant proportion
of guests, travel operators have mitigated the risk of making such
bookings in these areas with a corresponding reduction in rates. Tourists
are increasingly sophisticated in their perceptions of a country and
particular areas within that country and even within the cities itself.
Through experience of travelling to Bangkok, talking to friends and the
information provided by the internet, future tourists can assume that the
CBD is more riskier while Sukhumvit less so and this is reflected in the
current rates.
In light of this if current political tensions dissipate then this pricing
effect will wither. However any ratcheting up of the political situation is
likely to manifest itself in the CBD area and this will lead to a continued
drag on rates due to the ‘risk discount’ factor.

Average daily rate of Upper scale hotel by location, Q1 2010 – Q1 2011

Source: Colliers International Thailand Research

The Upper scale hotels are increasingly in competition with Mid Range some locations actually reduced prices for the peak season, in anticipation
hotels for the emerging growth markets and, as a result, rates have of the fierce battle for visitors seeking more affordable accommodation.
remained on the low side. In contrast to Luxury hotels, this sector in

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

RevPAR

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

RevPAR by grade for Q1 2010 – Q1 2011

Source: Colliers International Thailand Research

The big drop in occupancy and room rates in Q2 of 2010 led to a

subsequent dramatic fall in RevPAR in that quarter. After the situation
returned to normal in Q3 and Q4, RevPAR also increased, quarter-to-
quarter until Q4 2010. The increase in RevPAR for the Upper scale
market for Q1 2011 is on the back of an increase in occupancy while for
the Luxury scale segment showed a slight decrease due to higher
occupancy being more than cancelled out by lower room rates. On a
comparison between Q1 y/y RevPAR fell dramatically due to lower rates
in the Luxury segment but was stable for the Upper scale hotels.

However while RevPAR is probably the most important statistic, any

detailed analysis of the profitability of the hotel industry must also factor
in non room revenue especially in the form of food and beverages (F&B).
In some cases in the Luxury scale segment this can provide a very
significant source of revenue. As many functions take place that bring in
revenue not based on room occupancy there can be some disconnect
between the F&B and room revenue components. Also the increase in
occupancy will also positively reflect on F&B revenue as it is expected
that the more guests the more F&B revenue is accrued. Although this
relates to the ULS more than the lower scale segments.

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 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

RevPAR of Luxury hotels by quarter & location, Q1 2010 – Q1 2011

Source: Colliers International Thailand Research

A small recovery in RevPAR was recorded in every area except the a corresponding fall in occupancy. The fact that the Northern CBD was
Northern CBD which showed a steep drop for Q1 2011 compared with the main area where the April/May protests took place is probably the
the same quarter in 2010. This was due to daily rates being reduced and main factor for this.

RevPAR of Upper scale hotels by quarter & location, Q1 2010 – Q1 2011

Source: Colliers International Thailand Research

RevPAR of hotel in all locations except the Riverside increased Q1 y/y recorded especially strong numbers due to its increasing popularity
due to the improved occupancy rate in every location. Sukhumvit among various tourist markets.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

SWOT Analysis from hotel developers and operators perspective

Strengths
Facilities and services in Luxury and Upper scale hotels in Bangkok are
very good value and quality compared with other countries in the
region.

The hotel market contains a significant number of strong brands in all

pricing categories and this looks set to continue. This leads to better
choice for visitors.

A significant boutique hotel component adds flair and a further creative

backdrop in the market.

Weaknesses
A significant number of hotels, especially in the Luxury/Upper scale
segment are due to be completed over the coming few years and will
exert even further pressure on a sector facing many difficulties. Such
supply can only be absorbed if the tourism market in Bangkok shows
continued growth, especially in its traditional markets.

Hotels, especially in the Luxury sector, are under pressure to reduce

prices in order to maintain occupancy. There is a danger that a price
downward spiral is beginning to occur.

Opportunities
The growing intra-Asian tourism market looks set to benefit every area
that caters to tourism and Bangkok is no exception.

With the development of the ASEAN Economic Community and various

free trade agreements between ASEAN and economic heavyweights
such as China, the growth in business travel is set to continue. As
Bangkok remains by far the centre of commercial activity in the country
the city will attract a growing number of business visitors requiring hotel
accommodation.

Threats
While the current political situation in the country has stabilized, tensions
remain and while there remains a risk of an escalation of the situation
then this is likely to affect the industry especially in the areas deemed
most prone to flares ups.

Other countries are becoming more appealing to tourists. Phnom Penh,

Hanoi, Ho Chi Minh City, Vientiane and now Yangon offer the temptations
of a frontier location that Bangkok has difficulty competing with due to
its maturity as a tourism destination. On the other hand more tourism
established cities such as Singapore, Hong Kong and Seoul are
reinventing themselves to appeal to new markets. Singapore is especially
effective in this regard with the development of integrated hotel
complexes and sporting events such as the Grand Prix. Bangkok risks
being squeezed between the two.

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

APPENDIX

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

Hotel classification Upper scale - a degree of luxury as well as quality in the furnishings,
décor and equipment, in every area of the hotel. Bedrooms will also
While the Thailand Hotels Association (THA) categorizes hotels with a
usually offer more space and be well designed, with co-ordinate
star rating, many hotels do not abide by star ratings. Therefore in this
furnishings and décor. The ensuite bathrooms will have both a bath and
study, Colliers International Thailand have produced a classification
a fixed shower. It will employ sufficient staff to provide services like
based on the quality of the hotel as assessed by the hotel management
concierge and porter service, 24-hour room service, laundry and dry
companies and the British Hospitality Association classification.
cleaning. The restaurants will provide high-quality cuisine.

Basic overview of hotel classification
Budget – hotels with limited or no facilities. Rooms are simple, with
basic furnishings and sizes ranging from 12 to 18 sq m.
Economy - comfortable, well equipped accommodation, with an ensuite
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 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.
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.

ZONING

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

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Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011
The centre of Bangkok contains the lion’s share of Luxury and Upper
scale hotels in the city, being the heart of the city, for both business and
tourism.
Sukhumvit road up to Phrom Phong has its own distinct identity, its
location being the main nightlife 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 has a mix of business travelers and family tourists.
The Southern CBD includes the area bounded by Si Phraya, on the south
side of Rama IV, Sathorn and the eastern side of Charoenkrung. It is
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primarily a location for offices with limited shopping facilities and
reasonable entertainment areas that emulate 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 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 apart from the Mid Scale category.
 Bangkok Luxury & Upper Scale Hotel Market REPORT | Q1 2011

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