Outlook for hotel investment 'bright'

Unlike Thailand, other nations in Asia Pacific, especially Australia, allow foreign investors to hold a 100-per-cent stake in an acquired company. Also, financial regulations have been eased for foreign investors. Till September 2013, foreign investors contributed 82 per cent of total hotel investment, according to Robert McIntosh, executive director for CBRE Hotels in Asia Pacific.

He said there were more hotel deals to be inked next year in Thailand, but declined to give any details. Foreign investors coming here would focus on mid-term and long-term investment. Mainly, they are regional players. 

In Thailand, capital investment in hotels was $176 million with five properties in 2010, eight properties for $334 million in 2011, and 10 properties for $384 million in 2012. This year, it is $12 million with 3 properties, according to the company’s report. 

Kulwadee Sawangsri, executive director for investment and land services of CB Richard Ellis (Thailand), added that existing barriers to hotel investment in Thailand was that hotels had to be owned by local investors for the long term, and not merely build the hotel for sale. 

However, McIntosh said that Thailand was still an attractive destination for hotel investment, thanks to a strong influx of foreign tourist arrivals, especially from Russia and China. Bangkok, Phuket and Pattaya are among major destinations for such an investment. Clearly, hotel investment has offered a higher yield of 2-3 per cent than other property investment.

 

Arrivals healthy

The rising number of foreign arrivals will also help increase the country’s occupancy rate and room rate, offering business opportunity. At present, there are more new rooms to be added in the industry, more than 10 per cent annually, but the number of foreign tourists has increased 20 per cent a year. In addition, its boost would also come from the opening of the Asean Economic Community in 2015, which would help drive up the tourist numbers.

Compared to Indonesia and Malaysia, their room rates are quite stable due to adequate balance of demand and supply. This leads the two nations to earn high rates. 

According to CBRE report, occupancy rate in Thailand is on the rise. After the global financial crisis, it had dropped close to 50 per cent in Bangkok and below 55 per cent in 2011. But now it is at 75 per cent. The room rate is still similar to 2011, with an increase of between 5 and 10 per cent over the period. However, revenue per room is up between 25 per cent and 30 per cent. That means profits have increased by 50 per cent.

Hotel investment in Asia in the second quarter of this year was approximately $2.6 billion, up from $750 million in the first quarter, thanks to higher yields of the investment compared to other properties. Excluding India and Thailand, investment volume transactions inked in Japan in the first half of this year was on top with 55 per cent, followed by Singapore and Vietnam (9 per cent each), Hong Kong (8 per cent), Malaysia (6 per cent), and South Korea (4 per cent).

Meanwhile, there are Thai companies going out the country for investment abroad. One of them is Minor International Plc, operator of the Anantara hotel brand.

Australia was the top destination country for Thailand’s investors from 2008 with 5 properties valued at about $188.21 million, followed by two in Japan for about $23.66 million, one in Singapore for about $91.12 million, one in US for $70 million, and six others for a total of $96.89 million.

During the 12-month period ending last month, public listed companies/REITs were the most active investor group for cross-border capital inflows to Asia Pacific with 40 per cent, followed by institutional 32 per cent, and private 28 per cent.