by Bill Barnett of c9hotelworks.com
There is one key underlying fundamental for hotel branded residences returns, and the truism that best sums it up is that returns are a function of hotel trading performance and marketplace.
In Asia, the largest branded residences market is Thailand. According to C9 Hotelworks market research, the country represents 29% of regional supply with key markets being Bangkok, Pattaya, Phuket, Hua Hin and Chiang Mai.
In an evolving hotel ownership model that has developers passing on risk to residential property buyers, the question has to be what risks are inherent in this, given the current Covid-19 crisis? The answer is twofold in that some owners of existing units are currently under guaranteed return programs or those who are buying new projects and are expecting contracted returns.
One indication of stress in the market has come out of Australia, where the Quest Group who operate 160 serviced apartment properties in Australia, New Zealand and the Pacific have told investors who own units that have lease-back arrangements that they cannot pay due to the Covid-19 downturn.
Her in Thailand there are a variety of rental programs ranging from top line rental revenue splits to bottom line profit splits between the hotel and unit owner, and the increasingly popular lease-back arrangement. The latter was thought to be beneficial to the operator so that tenure is ensured in the project, and for unit owners who thought the lease amounted to a fixed-rental guarantee.
Commercially in Thailand, these types of contractual obligations are reflected in civil contracts and in the case of guarantees rarely are they backed by corporate undertakings, escrow accounts or bank guarantees. So in the case of a default, the only real remedy is a direct legal action. This sadly is often too costly or time consuming for single unit buyers to pursue.
With Covid-19, if force majeure is considered to be in place, a court action will have to determine who’s right and wrong. So essentially, let’s just say it’s complicated. During this past week we have seen three different projects in Thailand suspend guaranteed returns to buyers, and you can expect the number to jump in coming weeks.
The warning which is important for buyers of branded residences is that they are not purchasing a traditional real estate model, with the likely end game of capital appreciation. They are becoming de facto owners in a hotel, and as such need to carefully understand Thailand’s hotel supply and demand and performance metrics. Hotels are capital intensive and require a different standard of fit-out, operation and reinvestment vs pure residences.
It is still early days in the Covid-19 crisis, and it remains to be seen how developers who have promised guaranteed returns will fulfill these obligations, or look to negotiate a suspension of payments. For buyers of off-plan projects it’s a good time to pay closer attention to guaranteed return returns that are for extended periods of time or at high return percentages. If something looks too good to be true it probably is!
The local Covid-19 crisis will undoubtedly reset the Thai hotel industry and it’s a serious mid-term path to recovery, so expect branded residences to face these same challenges and adjust the investment outlook accordingly.Keep in contact with The Thaiger by following our Facebook page.
Thai Fruit Golden Month festivals to be held in 8 Chinese cities
8 Chinese cities will host Thailand Fruit Golden Months Festivals as local governments there begin easing lockdown measures and travel restrictions. The director-general of the Department of International Trade Promotion made the announcement yesterday, saying the the festivals will promote Thai fruit exports around China.
“The campaign aims to increase the export of durian, mangosteen, longan, mango, rose apple, coconut, pomelo and banana. China will host the festivals from May to July in Shanghai, Qingdao, Nanning, Chengdu, Chongqing, Xian, Xiamen and Kunming.”
“For offline activities, sales booths will be set up at leading department stores in each city. As for online activities, the department and the local authorities will jointly host online business matching from May onwards to invite Chinese retailers to order Thai fruits online to sell in their stores as well as hold promotional campaigns with Chinese mobile applications, like Geso and Hema, to increase sales.”
“The department will also promote Thai fruits in other markets, such as Singapore, Myanmar and Laos in a similar manner once the local governments ease lockdown measures.”
In April, at the height of the Covid-19 pandemic, China opened 2 border gates in its southern Guangxi province to allow imports of Thai fruits from the Vietnamese side. Chinese are big importers of Thai fruit, especially Thai-grown durian.
SOURCE: Nation ThailandKeep in contact with The Thaiger by following our Facebook page.
Pattaya hoteliers complain about alleged “quarantine kickbacks”
Hoteliers in Pattaya have made an official complaint about a group of people, claiming to be officials who can ensure their properties will be chosen as quarantine centres, are demanding kickbacks of up to 40%. They are urging the government to look into the issue, but officials have been quick to deny any involvement by legitimate authorities.
Government spokesperson Narumon Pinyosinwat said yesterday that PM Prayut Chan-o-cha has ordered an investigation into the allegations. He has promised to take tough action against anyone “taking advantage of people and business operators during this difficult time.”
The assistant spokeswoman for the Centre for Covid-19 Situation Administration also said yesterday that the centre has never sent anyone to coordinate or demand “change” for turning a place into a state quarantine facility.
On Friday Manager Online reported that a “number of people” have been approaching hotel operators in the resort town, offering to ensure their properties are chosen for state quarantine if they pay them up to 40% of what they receive from the government.
The government will pay participating hotels 1,000 baht per person per day for hosting people during their mandatory 14 day quarantine periods. Around 80,000 Thai nationals who have returned from abroad have been placed in quarantine facilities nationwide as a precaution against the spread of Covid-19, some of them hotels..
State agencies choose quarantine sites based on a set of criteria that include hotel licences, a capacity of more than 200 non-carpeted rooms and separate air conditioners for each room. There are several hotels that meet the criteria in Pattaya, where about 10,000 rooms have already been used for the purpose. Since all hotels have been temporarily closed by government order, operators are eager to make any kind of deal that could earn them some money.
But the acting president of the Chon Buri chapter of the Tourism Council of Thailand says a number of hoteliers in Pattaya are reluctant to pursue the deal.
“Although they will be paid 1,000 baht per person per day for 14 days, costs of meals are included, not to mention staff and utility costs. Besides, accepting the deal will disqualify their employees from social security benefits.”
He was referring to compensation their employees would receive from the Social Security Fund, which would end if they are re-employed, even for 14 days. The chapter sent a list of 20 hotels willing to turn their facilities into state quarantine centres, but they have not been inspected by authorities.
“Importantly, a group of people claiming to come from unidentified state agencies have approached us, saying they could make our hotels state quarantine places and we would get 1,000 baht per person per day. The catch? We’ll have to pay them an ‘operation fee’ of 40%.”
The chairman of the Pattaya Business and Tourism Association confirmed the kickback demand at rates between 30% and 40%.
“Even if a hotel does not meet the criteria, these people promised they could coordinate to make it happen. So it’s possible this is teamwork.”
A PBTA adviser confirmed several operators of large and mid-sized hotels had been approached but most had turned down the offer as they viewed it was not worth it to reopen their hotels.Facebook page.
Pattaya Council mulls a mass transport monorail system
Nothing like the middle of a pandemic to announce a new monorail project. Undeterred, the Pattaya City council have announced a new 9 kilometre monorail as part of its Eastern Economic Corridor projects. They cite the need to ease traffic congestion caused by rapid urban growth in the seaside party town. They say the inner city area is in desperate need of a proper public transport system.
The City’s deputy mayor Manote Nongyai says that an “efficient system will be in high demand after the Covid-19 crisis eases, which will see an influx of tourists return to the city”.
“Pattaya has a wealth of potential for economic development, it has been plagued with traffic problems caused by rapid urban growth.”
But the planning is still in the early days and it’s not the first time that the monorail has come up. Just 5 months ago the Council was all excited about a new light rail tram system for the city. That appears to have fallen off the mayor’s desk and been replaced with this latest monorail project. Yesterday’s announcement was a chance to discuss the feasibility study, assess the environmental impacts and come up with designs for the development of a Pattaya monorail system.
The 9 kilometre monorail track would run from the Pattaya railway station along a motorway, to Northern Pattaya Road, Pattaya Sai 2 Road, Thap Phraya intersection to the Bali Hai Pier. The route passes some of the main locations for daily commuters, according to the deputy mayor.
The deputy mayor said Pattaya city hall is allocating a budget of 70 million baht for the feasibility study and said that the proposed monorail would link with the government’s ‘pin up’ EEC infrastructure which spans three eastern provinces of Chachoengsao, Chon Buri and Rayong. The council had already hired a consultants to study designs and environment impacts. There was no timeline for a completion of these components of the project.
He also said the monorail project could be an investment under a public-private partnership.
But some of the basic components of the system appear to have been decided already with the deputy mayor announcing that the the monorail system sit up on elevated steel-reinforced concrete pylons, with each pylon only 1.8 metres wide carrying the monorail tracks.
“That means they do not take up much space during the construction, which makes them suited for the narrow road surfaces in Pattaya.”
He also stressed that there would be no need to expropriate a lot of land along the proposed route for the construction process, meaning there would be less impact on local residents.
SOURCE: Bangkok PostKeep in contact with The Thaiger by following our Facebook page.
12 curfew violators arrested in Pattaya after breaking through a checkpoint – VIDEO
Thailand News Today – Monday, May 25
Thai food giant to provide a million meals priced at 20 baht
Thousands of people have been travelling between provinces
Students to wear mask, get temperature checked at school
Phuket chef hands out over 2,000 free meals
Ayutthaya welcomes visitors after restrictions lift
2 new cases of Covid-19 reported in Thailand with one additional death (May 25)
Cross-border drug trafficking is a “leading concern”
Street vendor on-selling community pantry donations
Gang raids virus screening checkpoint and empties community pantry
Horse riding makes a comeback on Hua Hin beaches
Curfew violators made to volunteer at temples
Opposition criticises Thai government over economic toll of Covid response
Relatives claim British pensioner was mistreated and starved by Thai family
“Off the charts” – biggest drug seizure in decades
Criticism over bad English lesson in Thai online class
Hotels across Thailand angered by European tour group’s failure to pay up
Thai massage shops may reopen soon, from the waist down only
Thai Airways files for bankruptcy protection
Thai company steps up to ease condom shortage
Most of Thailand placed on storm alert
Ex high ranking Buddhist officials convicted of embezzling millions
Thais on repatriation flight from London were reported with ‘fevers’
Pattaya officials inspect beaches for compliance with closure order
Phase 4 of relaxations may come sooner according to CCSA
“Amazing Trusted Thailand” – tourism rebrands
19 kilograms of crystal meth, valued around 10 million baht, seized on Thai train
More trouble for ailing Thai Airways as Airbus calls in its debts
Thailand scores highest for mask-wearing in survey of ASEAN nations
Thailand News Today – Wednesday, April 22
Thailand News Today – Tuesday, April 21
Thailand News Today – Monday, April 20
Thailand News Today – Friday, April 17
Thailand News Today – Tuesday, April 16
Thailand News Today – Wednesday, April 15
Thailand News Today – Tuesday, April 14
Thailand News Today – Monday, April 13
Thailand News Today – Friday, April 10
Thailand News Today – Thursday, April 9
Thailand News Today – Wednesday, April 8
Thailand News Today – Tuesday, April 7
Thailand News Today – Friday, April 3
Thailand News Today – Thursday, April 2
Thailand News Today – April 1, 2020
- Business3 days ago
Thailand’s property market set to experience brokerage megashift
- Chiang Rai3 days ago
Accomplice in Chiang Rai robbery found hanging in Phayao forest
- Crime3 days ago
Police arrest 3 involved in mystery woman’s marijuana syndicate
- Crime3 days ago
Man arrested for growing 1,200 cannabis plants
- Coronavirus (Covid-19)3 days ago
Phase 3 of lockdown relaxations could begin June 1: CCSA
- Economy4 days ago
Second company in Thailand to be granted license to import natural gas
- Bangkok3 days ago
Car bursts into flames on the way home from dealer – VIDEO
- Coronavirus (Covid-19)4 days ago
Thailand’s contact tracing app currently unable to alert users