Hotel Investment in Bangkok Hits a Record High

July 31, 2018

In 2017, Thailand raked in around 17 billion baht worth of hotel investments, hitting an all-time high. These investments were the result of several lucrative transactions.

Though investor interest will continue to rise throughout 2018, JLL consultancy said that transaction volume may likely decline. The current market houses a limited number of investment-grade hotel assets.

12 assets amounting to 17 billion baht were sold last year based on data by JLL Hotels and Hospitality Group. This is a 70 percent increase from 2016, nearly 38 percent higher than the recorded five-year average of 12.2 billion baht (2012 to 2016).

Hotel Investment Breakdown

Majority of the investments went into Bangkok properties. 14 billion out of the 17 billion baht sold were six Bangkok hotel assets, comprising 80 percent of the market.

The said assets included the following hotels:
  • A 34-storey building on Sukhumvit Soi 27, purchased by Singapore's Carlton Hotel Group
  • Former Sukhumvit Premier Inn, purchased by another Singaporean company, the V Hotel Group
  • Edition Hotel and its observation deck at Mahanakorn, purchased by an American private equity firm
  • Swissotel Nail Lert Park, purchased by Bangkok Dusit Medical Services
  • Somerset Lake Point, purchased by Japan railway company JR Kyushu
  • A Thong Lor serviced apartment, purchased by a private investor

The remaining 3 billion baht were asset transactions outside the city of Bangkok, namely:

  • Dusit Island Resort in Chiang Rai
  • Pattaya's Premier Inn, also acquired by Singapore-based V Hotel Group
  • Pilanta Resort located on Phi Phi Island

Japan, Singapore and the United States spearheaded hotel investment activities in Thailand since last year. Foreign investment has subsequently risen since last year with a trade value of 50 percent.

Driving Factors

Mike Batchelor, chief executive at JLL Hotels and Hospitality Group Asia, attributes the “continued growth in visitor arrivals and healthy hotel trading performance” to Thailand's political stability and strong hotel investment levels.

Last year saw more than 35 million visitor arrivals in the country, up by almost 9 percent from 2016. The Tourism and Sports Ministry notes a 10 million increase within a three-year period and expects 2.6 million more visitors this year.

Mr. Batchelor believes this forecast can be achieved. Mastercard crowned Bangkok as the most visited city in the world in 2017. The city has been touted as a culinary destination, after the release of the first ever Michelin Guide to Bangkok.

Areas for Improvement

Circumstances may be favourable but Bangkok still faces the challenge of better connectivity which, according to Batchelor, is a key theme. Expanding current roster of international airports and building new ones everywhere in Thailand, in addition to constructing high-speed railways and low-cost carrier routes, are some ways to enhance intercity connectivity.

Airport expansions will hopefully increase the country's ability to accommodate more visitor arrivals. The projected combined capacity of Suvarnabhumi and Don Meaung airports may soon exceed 100 million passengers.

This year, Pattaya's U-tapao airport will undergo improvements, while Khao Lak and Hua Hin may get their own airports in the future. The Pang Nga airport development project is still underway and will not start until its environmental impact assessment is approved.

Mr. Batchelor sees this “unprecedented” activity level means that the Thailand property market has strong investment foundations and is moving in a positive direction. However, because only a few investment-grade assessments are available, a lower transaction volume in 2018 should not take anyone by surprise.

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