Thailand Hotel Business Growing But Supply Growth Could Harm Sector

29 Sep 2017

Thailand Hotel Business Growing But Supply Growth Could Harm Sector

These are booming times for Thailand’s hotel industry with more visitors helping boost occupancy rates and increase demand. The sector has also successfully fended off a challenge from Airbnb but could face issues with over supply in the coming years, according to CBRE research. Hotels will also need to cater to millennials who will likely fuel further demand.

“Growth in hotel demand is largely driven by demographic changes and shifting preferences to quality experiences rather than physical goods. While the older generation tends to spend a fair proportion of their income on recreation and leisure activities, nowadays it is millennials who further spur hotel demand with their travel desire” says Chotika Tungsirisurp, CBRE Associate Director, to the Bangkok Post.

In Thailand, hotels have many reasons to celebrate. Airbnb hasn’t provided too much competition because of the country’s hotel laws. Meanwhile, the number of tourist arrivals to Thailand has created more demand for rooms in both central Bangkok and across the country. Tourist arrivals to the Kingdom rose 8 per cent year-on-year.

That helped Bangkok hotels record their best performance in years in the 2nd quarter of 2017. The occupancy rate was approximately 73 per cent, a 3.7 per cent increase when compared to the previous year. The increase also comes at a time when the government is focusing on bringing in quality tourists instead of quantity of arrivals. This has encouraged developers to build more hotels.

“Developers are continuing to increase hotel supply. There are around 10,600 rooms under construction in central Bangkok to be completed over the next 4 years. The Phloenchit/Sukhumvit area continues to remain the most popular location for hotels in downtown Bangkok, followed by the Silom/Sathorn area,” says Chotika.

This has caused some concern, but Thailand’s hotel sector has been one of the country’s best performing real estate markets. CBRE believes the outlook of hotels remains positive since demand is expected to increase, but it may be difficult for owners and operators to raise rates with supply also growing.

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