Bangkok December 2020

BUSINESS SUPPLEMENT
AN INCREASING NUMBER
OF INVESTORS EYEING
PATTAYA HOTELS
Pattaya is poised to become another
bright spot for hotel investment
in Thailand in 2021 as more investors
are exploring investment opportunities.
Historically, demand in the Pattaya
hotel market relied very much on
international tourists. However, many
investors are reimagining the market's
prospects based on domestic
demand potential, in addition to the
ongoing development of the Eastern
Economic Corridor (EEC), according
to property consultancy JLL.
Pattaya is one of Thailand's major
tourism markets with hotel inventory
ranking second after Bangkok and
slightly ahead of Phuket at almost
64,000 rooms. The city has been
put on a spotlight as its hotel sector
benefits from its close proximity to
Bangkok and the development of the
EEC. Many ongoing infrastructure
projects supporting the new economic
zone are expected to stimulate demand
for hotels from both leisure and
corporate standpoints. In addition to
U-Tapao Airport's plan to increase
capacity to five million passengers,
Pattaya is well-positioned to benefit
from the planned high-speed railway
project connecting Suvarnabhumi,
Don Mueang and U-Tapao Airports,
which is planned for completion in
2025.
Despite positive long-term fundamentals,
Pattaya is among Thailand's
major hotel markets that have
suffered badly from the pandemic.
But the market is also getting a radar
of more investors
"In recent months, we have been
getting an unprecedented level of
enquiries from investors who are
looking for opportunities to acquire
investment-grade hotels in Pattaya.
We have yet to see a wide trend of
deeply discounted hotels in the market,
particularly institutional-grade
assets. However, the situation is
delicate, and the landscape could
potentially shift swiftly," says Chakkrit
Chakrabandhu Na Ayudhya, Executive
Vice President of Investment
Sales - Asia, at JLL's Hotels and
Hospitality Group. "Owners are being
pressured by the extended burn rate.
As the crisis prolongs, the pricing
gap between owners and investors
will naturally become narrower," he
explains.
Pimpanga Yomchinda, Vice President
of Investment Sales - Asia, at
JLL's Hotels and Hospitality Group,
says "Since the pandemic started,
we have seen a lot of engagement
from hotel owners. They want to understand
the implications of various
hold and disposal scenarios to get
themselves prepared to make the
most informed decisions. As there is
no one-size-fits-all approach, the best
way for us to understand the situation
is to meet owners on the ground, look
into their needs and help them customise
their asset/portfolio strategy."
Adding to Ms Pimpanga's statement,
Mr Chakkrit says "The disposal
process will need to be refined to
accommodate the current situation
by allowing more flexibility with additional
deal features such as vendor
financing, income guarantee, staged
payments or delayed handover. This
will, in turn, optimise deal certainty
and proceeds."
Investment activity in the Pattaya
hotel market is likely to resume in
2021
"Pattaya has seen no major hotel
transactions since 2018 due largely
to the lack of investment-grade assets
being offered to the market. It is
to be seen whether the pandemic will
unlock some of them over the next 12
months," says Mr Chakkrit.
According to JLL, the average
number of keys for hotels sold in
the last five years in Thailand was
approximately 180. While hotels in
Pattaya have approximately 100
keys on average, almost half of the
hotels across the city have less than
50 keys.
Mr Chakkrit explains, "With a lower-key
count, it is harder to achieve
sufficient economies of scales from
an investor point of view. In addition,
investors are more interested in Pattaya's
upscale hotel segment that accounts
for less than 20% of the city's
total hotel stock. In contrast, the balance
of the stock is in the midscale
and budget segments with strong
competition.
Traditionally, investor demand
for Pattaya hotels would lean more
towards rarer and more sought-after
upscale and upper-upscale segments
because the midscale and
budget segments are viewed as
offering lower profitability and being
difficult to differentiate due to large
supply of rooms."
Domestic investors to dominate
the market
"Due to border restrictions, we
are naturally seeing more engagement
from domestic investors compared
to what we saw in almost 40
hospitality deals (over THB 40 billion
in volume) that we brokered in Thailand
since 2010. We are also seeing
more enquiries from corporates with
diverse income streams and private
equity funds since the pandemic
started," says Mr. Chakkrit.
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