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Phuket accommodation pipeline – 55 new hotels under development

Bill Barnett

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by Bill Barnett from c9hotelworks.com

PHOTO: Horizon Beach Resort Hotels Phuket

One of Asia’s leading resort destinations Phuket looks set to weather a perfect storm as soaring hotel supply is forecast to be challenged by declining tourism demand. New research from consulting group C9 Hotelworks in their Phuket Hotel Market Update Mid-Year Edition has revealed an island development pipeline of 15,348 keys set to enter the market over the next five years, which represents an 18% push in total supply.

During the first four months of 2019 which is ranked as high season, year-on-year international passenger arrivals at Phuket International Airport slipped by 3%, while the domestic segment was down 6%. Looking into the data, the first half of 2018 had been a record-setting tourism period, as the succeeding six months experienced a sharp decline due to the retraction of the Mainland China market.

Mainland China remains at the forefront of any discussion about Phuket and the segment remains volatile with a 19% decrease registered this year from January through May. Russian arrivals have yet to fully recover. On the upside, fast-growing Indian arrivals tripled their tourism trajectory during the same period, versus 2018.

Hotel performance has mirrored the current trend, according to STR data this reflects a 12% retraction of RevPAR (revenue per available room), driven largely by lower market-wide occupancy. While May and September are the two lowest months for Phuket hotels, July and August are projected to experience a boosts in occupancy. But the reality remains that non-high season attracts significantly lower room rates and this factor will undoubtedly suppress overall rate growth during the year.

The C9 Hotelworks report also highlights the growing influence of hotel branded residences on the Phuket accommodation market. Over 50% of the incoming pipeline, or 8,337 units, are being developed. Majority of these products are condominium properties with many being affiliated to international hotel groups via management or franchise agreements. Despite the drop in Chinese tourists, a number of Mainland real estate conglomerates have entered the island property sector.

Summarising, Phuket’s forecasted tourism market conditions, C9 Hotelworks view is that with the development of the new Greater Phuket airport by AoT in Southern Phang Nga, the long- term forecast remains positive. It’s probable that current hotel sector will experience a similar cycle that Bali saw between 2014-2018 and that new supply will eventually be absorbed on a medium-term basis, but in the shorter term, demand remains a key risk factor impacting operators and owners.

To read and download C9 Hotelworks full report click HERE.

 

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Bill Barnett has over 30 years of experience in the Asian hospitality and property markets. He is considered to be a leading authority on real estate trends across Asia, and has sat at almost every seat around the hospitality and real estate table. Bill promotes industry insight through regular conference speaking engagements and is continually gathering market intelligence. Over the past few years he has released four books on Asian property topics.

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