Bangkok Hotel Market Report Q2 2010

c o l l i e r s i n t e r n at i o n a l | T H AILAN D
The Knowledge Report

B a n g ko k Lu x ury & U pp e r S c a l e H ot e l M a rk e t | 2 n d Q U A RT E R | 2010
Executive Summary
The protests and rioting over April and May wreaked havoc for the hotel market for Q2 with
occupancies plummeting to all time lows, some even to single digits.
A number of hotels were forced to close their doors as they were located next to or within the
Market Indicators
protest area.
Q2 2009 - Q2 2010 June provided a silver lining as occupancies rose dramatically when Bangkok ceased to be the centre
of media attention.
SUPPLY (Q1-Q2) Middle Eastern and Indian visitors returned to Bangkok providing welcome support during the low
season.
demand
The focus of attention is on Q4 2010 figures which will provide guidance on whether the Bangkok
hotel market has fully recovered, further disruptions permitting.
Rates
Concerns remain as to the nation’s course for the future and whether further protests or sporadic
Occupancy violence occurs. Travel advisories based on the continued State of Emergency continue to be a dark
cloud on the horizon.
RevPAR
Future supply in H2 2010 will further test hotels’ ability to absorb the shocks of the past 18
months.
The Northern CBD has overtaken The Riverside as the biggest supplier of Luxury/Upper Scale
rooms. However this is likely to be short lived with Sukhumvit set to dominate in the coming
years.
www.colliers.co.th
The Knowledge Report | 2nd Quarter | 2010 | Bangkok Luxury & Upper Scale Hotel Market
Hotel classification
While the Thailand Hotels Association (THA) categorizes produced a classification based on the quality of the hotel as seen
hotels with a star rating, many hotels do not abide by star rating. through the eyes of the hotel management companies and on the
Therefore in this study, Colliers International Thailand have British Hospitality Association 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 straightfor-
ward 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 furnish-

ings, 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 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 atten-
tion 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, combin-
ing 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.
2 Colliers International
ZONING
Colliers International 3
The centre of Bangkok contains the lion’s share of Luxury and The Southern CBD includes the area bounded by Si Phraya, the
Upper scale hotels in the city due to it being the heart for both south side of Rama IV, Sathorn and the eastern side of Charoen-
business and tourism. krung. It is primarily a location for offices with limited shopping
facilities and reasonable entertainment areas that partially rival
Sukhumvit road up to Phrom Phong has its own distinct identity Sukhumvit. This area bordered the protest site area and was seri-
due to the location being the main night life entertainment area ously affected by the protests and later riots. One hotel, the Dusit
in the city for foreigners. As these entertainment facilities ex- Thani, suffered some limited damage as a result of rioting during
tend some way into many of the sois, a large number of hotels are the May 19 crackdown.
also located away from the main Sukhumvit road. Even within
this road many sois have there own micro-identities such as sois The Riverside is the biggest player in the Upper scale and Luxury
4, 7, 8 11 and 22. It is interesting to note that for almost all of segment due to its attractive location. However supply is lim-
duration of the protests the area went about it business largely ited in this market and no Mid-scale hotels can be found in the
unaffected. Hotel occupancies, whilst down, remained resilient area. The Thonburi side of the area is considered as the same
during this time. market as the hotel shuttle boats that regularly ply between the
two banks are an added attraction for most tourists. While not
The Northern CBD has its borders defined by Phetchaburi to the directly affected by the protests and riots, the area suffered by be-
north to Chalermahanakorn Expressway down to Rama VI but ing isolated from other parts of Bangkok as a result.
also including the area up to Ratchadapisek south of Sukhumvit.
This area contains most of the large upper scale shopping malls as The Western area contains the old city as well as the backpacker
well as offices. The emphasis is on a mix of business travelers and area located in Bamglampoo. Whilst this area is awash with ho-
family tourists. As the Northern CBD was largely included in the tel rooms, there are no Upper or Luxury scale hotels located here
protest sites, the area was very seriously affected with a number and as such is not considered in this report. The initial protests
being forced to close during May. that occurred in April affected this area more.
Historical Supply
Total Supply end of Q2 2010
Source : Colliers International Thailand Research

Remark : E = Estimated supply
Supply of Luxury and Upper scale hotel rooms in Bangkok con- is set to continue for this year and the next. As of Q2 2010 there
tinued to grow after the Asian Financial Crisis in 1997 fulfilling was a total supply of approximately 14,400 rooms with around
the demand from the ever increasing number of tourists visiting 700 rooms added in the first half of 2010 and more than 1,300
the city partially ignited by the weakening of the Baht during scheduled to be completed and opened during the second half of
that time. About an average of 400 rooms per year were added 2010. This year is likely to witness the greatest addition of new
from 1998 to 2006. However after this, supply grew more quickly supply ever in Bangkok.
with over 1,000 rooms added each year after that and the trend
Luxury & Upper scale hotel in Bangkok by year & location, 1995 - Q2 2010

Remark : E = Estimated supply
Supply in the Northern CBD has shown the biggest movement scale and Economy scale range, these are mostly not covered in
in the past 15 years from approximately 1,100 rooms in 1995 to this report. In terms of the Luxury/Upper end the area currently
more than 3,400 rooms by Q2 2010, an over three fold increase. lags behind the CBD and Riverside areas but has shown rapid
It has already overtaken Riverside as the biggest supply of rooms. growth in the latter part of the last decade due to Sukhumvit’s
While the Sukhumvit area is the dominant player in the Mid diverse attractions and ever growing popularity.
Breakdown of Luxury & Upper scale hotel rooms in Bangkok by location, Q2 2010
The highest number of hotel rooms are located in the Northern expected to be completed in 2013. The lack of available land in
CBD area representing 26% of the total, but in the next 2 – 3 this small area will constantly hamper growth and in some ways
years the Sukhumvit area will have the biggest share, due to most existing hotels on the Riverside can capitalize on their exclusiv-
of the future projects being located in the area and supply in ity.
Riverside area still remaining static until one new hotel is
Supply by Zone, as of Q2 2010
While in every area Upper scale hotels are in greater supply, contains a much greater share of Upper scale hotels.
their proportion in relation to Luxury hotels reflects the nature
of each area. The Northern CBD contains the high end shop- The freewheeling nature of Sukhumvit means far more Upper
ping malls comparable to what the Champs-Élysées is to Paris or scale hotels in comparison. In the next 2 years this area will
Myeong-dong is to Seoul. Therefore many Luxury scale hotels contain more Upper scale hotel rooms, as more than 1,500 rooms
are located there. The Riverside is also known as a prestigious are scheduled to be completed. The distance of the Eastern area
area due to its scenic location and again Luxury hotels make and Northern area from the centre explain why no Luxury hotels
up a large slice of the hotel market. The Southern CBD is split are located in this area.
between the eastern part of Sathorn road and Rama IV con-
taining more Luxury hotels whilst the older CBD area of Silom
Future Supply
Future supply of Luxury & Upper scale hotel by year, 2010 - 2013
Nearly 2,000 rooms are scheduled to be completed in 2010 and The recent instability has directly impacted the tourism
more than 4,000 rooms in the next 3 years will be added in the market especially in the city. Many of the hotel projects under
market. Two hotels in the Luxury end of the market are due to construction in Bangkok, especially in Northern CBD area, tem-
open their doors in 2010. The Siam Kempinski (306 rooms) porary stopped construction during the protests at Rachaprasong
located in the Northern CBD, is scheduled to begin operations junction in April and May and this might lead to delays in
in August 2010, although on 22 July they plan to have a soft completion and opening.
opening. The 198 room St. Regis Bangkok is scheduled to be
open its doors from October 2010.
Future supply of hotel rooms by grade and year, 2010 - 2013
Although Thailand has been afflicted with a myriad of problems the total are for Mid scale hotels followed by Upper scale and
during the past 3 years, Bangkok still remains a favorite desti- Luxury scale, with 25% and 20% respectively. As tourists seek
nation for foreign tourists; so many investors retain interest in value for money, the case for Mid scale segment development is
developing hotels in Bangkok, although approximately 55% of a compelling one.
Future supply of hotel by grade and location, 2010 - 2013
Sukhumvit is the most popular area for developments in the innovate within the high end categories. Many in the area are
future, representing 34% of all future supply for Bangkok. Many independent, non branded hotels. This represents an interesting
developers have selected to develop hotels in this area due to the investment niche for the foreseeable future. However the North-
convenience to the BTS provided along Sukhumvit road which ern CBD continues to be the main focus for Luxury scale projects
is suitable for tourists and business people alike as well as the due to its location amongst the most prestigious retail area and
vibrant nature of the Sukhumvit road and its many lively sois. BTS connections.
The eclectic nature of Sukhumvit has meant that it has attracted
a significant number of boutique style hotels that challenge and
Demand - Occupancy Rate
Average occupancy rate of Luxury & Upper scale hotel in Bangkok by

grade, for Q1 and Q2 2010
The protest at the centre of Bangkok seriously impacted the num- so occupancy is expected to suffer in comparison. The occupancy
ber of foreign tourists, so average occupancy rate in Q2 dropped rates of Luxury & Upper scale hotels improved after the media
approximately 50 - 55% from Q1 2010 in both hotel categories shifted focus to other conflicts around the world and the situa-
and some hotels in the area around the protest site were forced tion calmed.
to close. However Q2 2010 represents the traditional low season
Occupancy Rate
Occupancy rate of Luxury & Upper scale hotels, 2005 - Q2 2010
Occupancy rates declined steadily for three years from 2005. This bers of international travelers stranded exacerbated by the severe
was the result of growing instability including the 2006 coup as global economic downturn. The recovery that started to occur in
well as a number of health scourges. The previous low point for 2009 and continued into 2010 stalled in Q2 2010.
occupancy was at the end of 2008 with the closure of the airport
as a result of the “yellow shirts” blockade which left large num-
Occupancy rate of Luxury & Upper scale hotels by quarter
Occupancy rates were low even compared to the previously low 2009 took another severe blow in April and May 2010 as the city
rates recorded in Q2 2009. The emergence of the Bangkok tour- took centre stage for all the wrong reasons.
ism market from the airport blockade and rioting during April of
Occupancy rate of Luxury & Upper scale hotels, 2005 - Q2 2010
In Q2 2010 the occupancy rate of luxury hotels in the Sukhum- scale hotels. The Northern CBD showed the greatest falls from
vit area was higher than other areas, while Southern CBD and Q1 to Q2 due to the location of a significant proportion of the
Sukhumvit area has shown a highest occupancy rate for Upper protests in this area.
Demand drivers focus
Tourism
International passengers to Suvarnabhumi Airport minus those in transit
Source : Airports Authority of Thailand, Colliers International Thailand Research
While Q1 showed a healthy increase from the same quarter the May. It must be stated that many of these arrivals were likely to
previous year the corresponding Q2 showed a decline. However travel to other parts of Thailand that were less affected by the
this was minimal and is somewhat surprising after the protracted riots.
and then dramatic events that culminated in violent rioting in
Guest arrivals at accommodation establishments in Bangkok during the year 2007 - Q2 2010
Source : Office of Tourism Development, Colliers International Thailand Research

Remark : E = Estimated by Colliers International Thailand Research
Tourists (Thais and foreigners) who stayed in hotels in Bangkok showed that already green shoots for the hospitality industry are
during Q2 2010 dropped roughly 35% from Q1 2010, due to the evident but it is still too soon to evaluate if this will lead to a
political turmoil but also the traditional low season that occurs revival in numbers for the beginning of the high season in Q4
in Q2 and Q3 of each year. The comparison with previous Q2s and continued sporadic disruptions and violence is a significant
shows the effects of events in April and May but that the fall was caveat underpinning this.
not as dramatic as once predicted. The pick up in visitors in June
Main markets of Bangkok tourism.
The traditional mainstay for the Bangkok tourism market, East The effect is more pronounced as people from the latter two
Asia, has been in strong decline since 2006. The coup of that visit usually during the low season when temperatures in their
year and ongoing Thailand political instability hereafter has de- own countries can be unbearable. Although this represents an
terred travelers from this region as they are more sensitive to exciting area for development such growth comes from a low base
such situations. Other traditional markets have remained fairly and does not offset the declines in East Asia. With continued
stagnant with Europe affected by the global economic crisis and expansion of these heavily populated new markets, they are
currency weakness. However significant growth has come from likely to affect the dynamics of the tourism market in Bangkok
newer markets in the form of Russia, India and the Middle East. in the coming years.
Rates
Average daily rate by grade 2005 - Q2 2010
Average daily rate of both grades in Q2 2010 have fallen from aftermath of the May riots to attract customers as well as the
Q1 by approximately 18%. Hotels have reduced rates in the usual drops in rates during the low season.
Average daily rate of luxury hotel by grade & location, Q2 2010
Hotel rates decreased from Q1 2010 in every location, even the site. It is also likely that Sukhumvit also contains a greater num-
area outside the protest zone, such as The Riverside although ber of returning visitors who are less sensitive to the travails of
Sukhumvit has taken a lesser hit due its location away from the Thailand and room rates were already lower in comparison.
Average daily rate of Upper scale hotel by grade & location, Q2 2010
In Q2 2010 the average daily rate in Sukhumvit actually locations during April and May. The higher rates charged by the
increased from Q1 2010, while there were falls in other other locations was then reflected in the rates offered in Sukhum-
locations. This can be partially explained by the fact that many vit for this time. It is therefore very likely that this represents an
guests moved or rebooked to Sukhumvit and away from other aberration rather than a trend.
RevPAR
Historical revpar
The twin falls in occupancy and room rates led to a subsequent This reflects the full effects of the April/May period on the hotel
dramatic fall in RevPAR by approximately 58% from Q1 2010. market in Bangkok.
RevPAR of luxury hotels by grade & location, Q2 2010
Steep falls were recorded in all locations with the Northern CBD showing the steepest declines as many hotels shut their doors due
to the events.
RevPAR of upper scale hotels by grade & location, Q2 2010
RevPAR in the Southern CBD and Sukhumvit areas were higher and rioting in May. Few, if any hotels, were spared the effects of
than other areas due to the specific locations during the protests events in April and May 2010.
Forecast
Even in good times the hotel market faces strong challenges in the form of signifi-
cant new supply entering the market over the course of the next few years and ever
growing competition from the serviced apartment sector. But these are far from
good times. The maelstrom of April and May rocked the industry like never before
and it is still feeling the after effects exacerbated by the extension of the State of
Emergency further justifying travel advisories from a number of countries.
While the situation has calmed and fears of a repeat have receded for the time
being, the development of the industry in Bangkok will remain a nervy one for
the foreseeable future. But the scene of tourists cramming the narrow pavements
on Sukhumvit road and elsewhere at the end of June can only motivate those
prepared to tough it out.
Investors focus
The issue of abundant supply in the Luxury hotel segment in the next few
years should cause pause for thought for investors wishing to enter this market.
Movement into the Upper scale range still offers promise but the acquisition of
economical land in a reasonable location would weigh heavily in any decision.
Future investors should also judge between focusing on specialized products such as
smaller scale boutique style concepts which would allow the hotel to focus on
niche markets or develop properties large enough to benefit from economies of
scale such as in targeting the MICE market, use of banqueting halls or even aiming
for the serviced apartment market.
Larger scale hotels should consider reducing the number of restaurants and focus
on other peripheral revenue generating outlets such as specialist spas and health
clubs. Thailand may follow the trend in the west by subcontracting out F&B and
other outlets to specialist operators.
Operators focus
Even with high occupancy, hotels will have to continue with the trend of falling
prices as consumers become more price savvy due to the copious amount of infor-
mation on the internet and the range of hotels rooms at all price levels being avail-
able. Food and beverages continue to be a significant revenue stream and hotels
will have to be more proactive and inventive in maintaining this from both guests
and non-guests through the promotion of MICE and other revenue generating
activities such as birthdays and anniversaries. The need to attract niche markets is
becoming increasingly prevalent and operators should try and differentiate them-
selves as much as possible from their competitors and dissociate from a “me too”
approach. While branding may aid this process in specific cases, it is not the be-all
and end-all and the guest experience goes far beyond this.
The growing markets in the Middle East and South Asia can be further engaged by
targeting individual countries within each region. A further breakdown on tour-
ism statistics for the Middle East would be useful. The South East Asian market,
spurred by low cost carriers and short term decision making can be targeted with
long weekend getaway packages.
As sixty percent of visitors have visited Thailand before, hotels would be wise in
offering incentives for existing guests to return such as anniversary packages for
honeymooners. Some hotels respond to online travel forums such as Tripadvisor to
both positive and negative comments regarding their establishment. This helps to
create a more personal touch and increase the chances of guests returning. Other
options include creating special pages on social networking sites to keep people
informed of new developments and offers. The nurturing of niche markets, the
creation of innovative revenue generators and growing a loyal customer base will
focus the minds of operators in these very challenging times.
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c o l l i e r s i n t e r n at i o n a l | T H AILAN D

The Knowledge Report

Basic overview of hotel classification

Budget - hotels with limited to no facilities. Rooms are simple

Economy - comfortable, well equipped accommodation, with an

Mid scale - hotels are usually of a size to support higher staffing

Upper scale - a degree of luxury as well as quality in the furnish-

Luxury - spacious and luxurious accommodation throughout the

Total Supply end of Q2 2010

Source : Colliers International Thailand Research

Source : Colliers International Thailand Research

Source : Colliers International Thailand Research

Supply by Zone, as of Q2 2010

Source : Colliers International Thailand Research

Source : Colliers International Thailand Research

Future supply of hotel rooms by grade and year, 2010 - 2013

Source : Colliers International Thailand Research

Future supply of hotel by grade and location, 2010 - 2013

Source : Colliers International Thailand Research

Demand - Occupancy Rate

Average occupancy rate of Luxury & Upper scale hotel in Bangkok by

Source : Colliers International Thailand Research

Occupancy rate of Luxury & Upper scale hotels, 2005 - Q2 2010

Source : Colliers International Thailand Research

Occupancy rate of Luxury & Upper scale hotels by quarter

Source : Colliers International Thailand Research

Occupancy rate of Luxury & Upper scale hotels, 2005 - Q2 2010

Source : Colliers International Thailand Research

Demand drivers focus

International passengers to Suvarnabhumi Airport minus those in transit

Source : Airports Authority of Thailand, Colliers International Thailand Research

Source : Office of Tourism Development, Colliers International Thailand Research

Main markets of Bangkok tourism.

Source : Colliers International Thailand Research

Average daily rate by grade 2005 - Q2 2010

Source : Colliers International Thailand Research

Average daily rate of luxury hotel by grade & location, Q2 2010

Source : Colliers International Thailand Research

Source : Colliers International Thailand Research

Source : Colliers International Thailand Research

RevPAR of luxury hotels by grade & location, Q2 2010

Source : Colliers International Thailand Research

RevPAR of upper scale hotels by grade & location, Q2 2010

Source : Colliers International Thailand Research

COLLIERS INTERNATIONAL THAILAND 480 offices in 61 countries

1.1 Billion square feet under

COMMERCIAL / INDUSTRIAL /RETAIL

FACILITY / PROPERTY MANAGEMENT

Bangkok Office : 17/F Ploenchit Center, 2 Sukhumvit

PATTAYA OFFICE Pattaya Office : 519/4-5, Pattaya Second Road

This report and other research materials may be found

www.colliers.co.th Colliers International 19

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