PHUKET: Now that 2012 is in full swing and no doubt many of the New Year’s resolutions have been thrown out of the window, it’s time to get a hold of the purse strings and have a set plan for the forthcoming year.
I have already given my views on what I believe we can expect from the year ahead. The financial rollercoaster ride is certain to continue for the next 12 months, so what would be the best way to survive the turbulence?
One thing that recently seems to have become a lot more popular is the rise of an investment called a structured note. So what is a structured note and what are the positives and also the negatives of this?
Firstly, let me explain what a structured note is.
The concept of a structured note is that in times of volatile markets it will enable you to benefit from good stock market performance while at the same time protecting you against bad market performance. In most cases a selection of stocks will be chosen. This tends to be in specific geographical areas or industries. Each structured note is likely to have an investment time frame from 12 months to 5 years and will have an initial valuation date and a final valuation date.
That’s the easy bit explained. Now the note will provide a pre-determined level of capital protection. In most cases this tends to be 50%. During the life of the note, the investor receives interest on a quarterly basis. What this means is that should none of the stocks selected fall by 50 per cent, the note will pay the interest. Again, this is valued on a quarterly basis.
Structured notes also have the ability to be autocalled. This normally means that should all the stocks selected be above their initial 100% level on the quarterly valuation date, the note will “autocall” and a full return of capital is given plus any interest that has been earned. Sound good?
Don’t get me wrong; as well as good points there are downsides to this and I advise anyone considering investing in one of these notes to do their research or seek professional advice.
So what are the disadvantages?
Well, a structured note is provided by an investment bank, so do your homework on the bank that is providing the note or the capital protection of the note, as we know banks have not had the easiest of rides over the last few years.
Due to structured notes having fixed terms they tend not to be very liquid, so if markets are falling dramatically, selling out of these can be quite hard.
The notes having a maximum return, in rapidly rising markets your growth can also be limited and stock markets may return more than the interest the note provides.
Also, be aware that should any of the underlying stocks within the note fall by more than 50%, on the final valuation day you will only receive the performance of the worst performing stock no matter how well any of the other stocks have performed.
So are they a good thing or a bad thing?
Well, this type of structured investment certainly has its good points and also its bad points. As with any investment, these should be held as part of a larger portfolio and I wouldn’t advise putting all your eggs in one basket.
As markets are volatile, the concept of the note is generally good. However you need to take into account the type of stocks the notes are based on, as well as the quality of investment bank issuing the notes.
For advice or information on structured notes, please contact: [email protected].
— Athony Lymann
Phuket hotel watch – 3 months down, 9 to go in 2019
by Bill Barnett of C9Hotelworks.com
At the beginning of the year Phuket’s tourism and hotel sector was cautiously optimistic after a strong first half of 2018 and humbling second half. Key terms that kept popping up were Mainland Chinese, Thai Baht Appreciation, Elections and Supply Concerns.
So today, with three months of performance under the belt in 2019 what are the key trends in hotel trading? These can best be compressed in the following points –
According to data from hotel benchmarking group STR, Thailand remains Southeast Asia’s leading destination for Mainland Chinese, but the gloss is being diminished by Vietnam’s meteoric rise, and strong numbers by the Philippines and Cambodia.
Market-wide RevPar shunk by 0.04% in 2018 and flat demand at the onset of the year is now shifting into negative territory moving into February and beyond. Turning back to last year, group demand is falling which is as key concern in a wholesale driven marketplace.
One stark positive is that RevPar is being propped up by rates and not occupancy. A key takeaway is that in peak and high season, Phuket hotels are able to drive rates up in key periods and continue to do so. This of course is a broad trend. Good hotels tend to perform at higher levels, while poorly managed ones remain subpar.
Getting beyond the numbers, as I speak to hoteliers the expectation is that wholesalers remain a critical component of the island’s hotel industry and despite the expected shift with technology to more direct bookings, the reality is that wholesale models are sensitive to demand volatility and the result of this feeding frenzy most often will be either flat rates for the year or in some cases a retraction.
We expect the remainder of 2019 to be challenging. Some hotels will look at this as an opportunity to reposition, renovate or cut costs. While others will look at new segments, niche offerings or emerging markets like India to regain momentum.
As for the top critical issues facing Phuket hotels, in my opinion these can be distilled in the following Top 3 Things Keep Me Awake at Night…
• Mainland Chinese – If tourism players or hotels believe the damage to Brand Phuket is over, think again. Talking to key tour operators there remains a hangover from last year’s boat sinking incident and travellers remain keenly concerned over safety. Only time and more concentrated promotion will see a return of the numbers.
• Growing Supply and Demand Imbalance – The current pipeline is just over 8,000 keys in development on the island. What’s more concerning is that projects in planning are not represented in this metric, and by our estimate there are approximately 5,000 more keys in planning. While both the pipeline and planning numbers will see some wash, the sum total exceeds current and forecasted demand.
Moreso, the rise of unlicensed condominiums, apartments, houses and villas is continuing unabated and is further exacerbating supply issues. Every time you see a group of tourists renting a 3 or 4 bedroom villa, that’s three or four hotel rooms that lay empty. Government control of unlicensed properties is a key issue facing Phuket’s tourism industry.
• Diminished Natural Resources and Strained Infrastructure – Water tops the list and there is little doubt we are reaching the tipping point with mounting shortages and soaring demand. Electricity is another concern. Lastly is a rising number of vehicles on the road, a urbanising trajectory and slow development of roads and public transport.
To these point’s lets revisit the hotel development pipeline and reflect that a island long term master plan, zoning for new tourism expansion and requirements for developers to invest in public infrastructure to obtain operating licenses is sorely lacking. Something has to give on this front.
In conclusion am I pessimistic about Phuket’s tourism and hotel future in 2019 and beyond? Absolutely not, direct airlinks are growing and the island has a well-structured capacity for handling tourism, but I firmly believe looking into our problems, discussing and finding ways to resolve these are critical to a sustainable growth pattern.
‘Seastead’ set up off coast of Phuket
PHOTOS: Nation TV
A Thai couple has successfully set up a ‘Seastead’ near Phuket.
Seasteading is aiming to build floating societies with “significant political autonomy”. Nearly half the world’s surface is unclaimed by any nation-state, and many coastal nations can legislate “seasteads” in their territorial waters (like a “homestead” but wetter).
The nation TV reports that website ‘Bitcoin.com’ and ‘Ocean.builders’ report that the Thai couple Chad Elwartowski and Nadia Summergirl are are the first seasteaders who established a small seastead 12 nautical miles off Phuket.
Most of the construction of the Seasteading was built on the island of Phuket. The installation in the sea started on January 9.
Mr Elwartowski reveals that the reason that they have chosen to settle near Phuket as the construction price is cheap. The sea is suitable for the establishment as waves are not too high and can attract many tourists.
SOURCE: Nation TV
Massive 11 hotel project, surf club and waterpark for Kata, Phuket
by Bill Barnett, C9Hotelworks.com
Thai developer K.W. Plaza group has unveiled plans for a large-scale mixed-use project called The Beach Plaza on 15 rai, that will have 11 three and four star hotels with a total of 1.490 rooms. The developer is already pitching the unconstructed project to global hotel interests for an imminent sale.
The properties will have varying room sizes from 25 to 35 square metres and range in size from 78 to 204 rooms. Part of the development scheme will see the hotels individually sold off to hotel investors and/or operators.
Late last year the group built and sold the Surf Resort in Patong which was brokered by JLL to a Singapore-based owner/operator.
Other components of the project include a surf club, waterpark, and freestanding restaurants and retail.
An initial hotel has already obtained EIA approval and is currently for sale, with construction of other properties to be phased. The Beach Plaza is off-beach, behind the Kata Night Market and close to Club Med, Ozo and the Ibis.
For more details on the project click HERE.
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