BUSINESS SUPPLEMENTAN INCREASING NUMBEROF INVESTORS EYEINGPATTAYA HOTELSPattaya is poised to become anotherbright spot for hotel investmentin Thailand in 2021 as more investorsare exploring investment opportunities.Historically, demand in the Pattayahotel market relied very much oninternational tourists. However, manyinvestors are reimagining the market'sprospects based on domesticdemand potential, in addition to theongoing development of the EasternEconomic Corridor (EEC), accordingto property consultancy JLL.Pattaya is one of Thailand's majortourism markets with hotel inventoryranking second after Bangkok andslightly ahead of Phuket at almost64,000 rooms. The city has beenput on a spotlight as its hotel sectorbenefits from its close proximity toBangkok and the development of theEEC. Many ongoing infrastructureprojects supporting the new economiczone are expected to stimulate demandfor hotels from both leisure andcorporate standpoints. In addition toU-Tapao Airport's plan to increasecapacity to five million passengers,Pattaya is well-positioned to benefitfrom the planned high-speed railwayproject connecting Suvarnabhumi,Don Mueang and U-Tapao Airports,which is planned for completion in2025.Despite positive long-term fundamentals,Pattaya is among Thailand'smajor hotel markets that havesuffered badly from the pandemic.But the market is also getting a radarof more investors"In recent months, we have beengetting an unprecedented level ofenquiries from investors who arelooking for opportunities to acquireinvestment-grade hotels in Pattaya.We have yet to see a wide trend ofdeeply discounted hotels in the market,particularly institutional-gradeassets. However, the situation isdelicate, and the landscape couldpotentially shift swiftly," says ChakkritChakrabandhu Na Ayudhya, ExecutiveVice President of InvestmentSales - Asia, at JLL's Hotels andHospitality Group. "Owners are beingpressured by the extended burn rate.As the crisis prolongs, the pricinggap between owners and investorswill naturally become narrower," heexplains.Pimpanga Yomchinda, Vice Presidentof Investment Sales - Asia, atJLL's Hotels and Hospitality Group,says "Since the pandemic started,we have seen a lot of engagementfrom hotel owners. They want to understandthe implications of varioushold and disposal scenarios to getthemselves prepared to make themost informed decisions. As there isno one-size-fits-all approach, the bestway for us to understand the situationis to meet owners on the ground, lookinto their needs and help them customisetheir asset/portfolio strategy."Adding to Ms Pimpanga's statement,Mr Chakkrit says "The disposalprocess will need to be refined toaccommodate the current situationby allowing more flexibility with additionaldeal features such as vendorfinancing, income guarantee, stagedpayments or delayed handover. Thiswill, in turn, optimise deal certaintyand proceeds."Investment activity in the Pattayahotel market is likely to resume in2021"Pattaya has seen no major hoteltransactions since 2018 due largelyto the lack of investment-grade assetsbeing offered to the market. It isto be seen whether the pandemic willunlock some of them over the next 12months," says Mr Chakkrit.According to JLL, the averagenumber of keys for hotels sold inthe last five years in Thailand wasapproximately 180. While hotels inPattaya have approximately 100keys on average, almost half of thehotels across the city have less than50 keys.Mr Chakkrit explains, "With a lower-keycount, it is harder to achievesufficient economies of scales froman investor point of view. In addition,investors are more interested in Pattaya'supscale hotel segment that accountsfor less than 20% of the city'stotal hotel stock. In contrast, the balanceof the stock is in the midscaleand budget segments with strongcompetition.Traditionally, investor demandfor Pattaya hotels would lean moretowards rarer and more sought-afterupscale and upper-upscale segmentsbecause the midscale andbudget segments are viewed asoffering lower profitability and beingdifficult to differentiate due to largesupply of rooms."Domestic investors to dominatethe market"Due to border restrictions, weare naturally seeing more engagementfrom domestic investors comparedto what we saw in almost 40hospitality deals (over THB 40 billionin volume) that we brokered in Thailandsince 2010. We are also seeingmore enquiries from corporates withdiverse income streams and privateequity funds since the pandemicstarted," says Mr. Chakkrit.Read Online Atwww.thailand-business-supplement.comHigh Tower Co., Ltd. Tel: 038 411 009For all your advertising enquiries - Tel: 0846 77 43 60
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