Connect with us


Phuket leads the way in managed hotel residences

Bill Barnett




by Bill Barnett of c9hotelworks.comFeature article

“Hotel Residences – properties that sell individual units in the real estate market and operate as either hotels or else are branded by hospitality operators. Other often used terms are condotel, hotel branded residences and hospitality-led real estate.”

Phuket’s love affair with hotel managed properties started in the late 1980’s with the posh Amanpuri ultra villas. Over the past three decades a rising number of chain and independent developments were successful in selling million-dollar pool villas including Banyan Tree, Sri Panwa, Andara and others.

Asia, and more exactly Phuket led a broader push of shifting top-end accommodation out of the box and into spacious villas. Take a trip around the globe today and the volume of hotel residences and mixed-use in the pipeline of leading top-tier brands such as Four Seasons and Ritz-Carlton is profound.

Fast forward some thirty years later and taking a quick look at the incoming Phuket hotel pipeline of new inventory coming online that has now surpassed 15,000 units, and over 8,400 are hotel branded residences. The sheer number tops any other Asian resort market, but looking inside the numbers, the vast majority of keys are relatively small-sized units in condominium hotels. The tables have now turned from luxury to resort-grade entry level and midscale real estate.

To understand the market let’s start at how to define the asset class which C9 Hotelworks terms ‘Hotel Residences’. Essentially this covers properties that sell individual units in the real estate market and operate as either hotels or else are branded by hospitality operators. Other often used terms are condotel, hotel branded residences and hospitality-led real estate. Vacation ownership or timeshare is not included in this classification.

Turning back to Phuket and keying into key trends in the current marketplace, the highlights according to our extensive research is as follows:

Hotel franchising and soft brands

We have seen a number of global hotel brands such as Wyndham rack up numbers in their pipeline through a growing number of franchise-type agreements. ACCOR on the other had has taken a soft brand approach with their MGallery collection which somehow addresses brand standard issues and allows more diverse properties into a chain scenario.

Size and price matter

Post GFC, the reality of a shift away from the legacy luxury markets has continued. Regional Asian segments and a growing number of Thai buyers are not dominant. We often say there are only two moving parts in real estate, how much it costs to develop and how much you can sell it at.

The new demographic is geared to lower absolute selling prices which today often lays in the USD100,000-200,000 range. Most developers now focus on absorption or sales pace of cheaper units instead of trying to push higher yields so it’s a volume play.

While hotel operators have often promoted pricing premiums for brands, today the ultimate absolute selling point is mainly the magnet for faster sales. Freehold has been realigned as the preferred method of ownership for both foreigners and Thais, hence the shift into condominium-type structures which allow foreign ownership of properties.

Mainland Chinese developers

An increasing number of larger projects in the pipeline are now directly or indirectly being sponsored by Mainland Chinese property developers/investors. In many cases, these projects are focusing only on a single geographic source market and their sales and marketing is primarily geared to Chinese. Branding is often a key issue for these volume-oriented projects, which is latched onto the rise of hotel franchise agreements.

Based on our extensive experience in consulting for hotel residences across all of the Asia Pacific markets, there is cause for concern in certain practices and learning from historical demonstrated real estate and tourism cycles:

Investment buyers dominate market

One clear sign that a cycle has topped is when investment or speculative transactions represent the vast majority of property sales. One could call this the opportunistic train and we typically see sales and marketing tactics like double-digit or long-term guaranteed returns or yields aggressively promoted.

A key learning in this area is that investment type returns for hotel residences are a function in resort markets like Phuket of the tourism sector and not real estate driven. Supply and demand are an essential part of the equation as is the ongoing effectiveness of hospitality management.

Given the current challenging tourism conditions in Phuket and mounting concerns over the impact of a China slowdown and decline in tourism numbers, these are signs that the level and term of guaranteed returns are a growing risk to property buyers. While the trend of property developers of hotels is now passing operating and investment risk to unit purchasers in hotel residences offerings.

One final thought on this subject is the risk associated with the security of long-term guaranteed returns to buyers given these are not widely regulated. Typically, these returns are neither secured against bank guarantees or managed escrow accounts which may come under pressure when hotel trading levels drop. Buyer beware.

Mismatch of products – real estate versus hotels

A critical issue facing hotel residences lies in when developers shift the buying base from end users or long- term rental focused and look to compete in the hotel space. Reality bites as the products are rarely apple to apple in comparison.

For hotel residences that are premised on investment returns in the hotel market, the natural competitors are pure hotel properties. In many cases the real estate offerings with full kitchens, an overall lack of outlets and facilities and interior fit-out are being promised to obtain comparable average rates as dedicated hotels. Customer perception is often like serviced apartments, that products like condominium hotels while offering more space, are priced below traditional hotels.

The result is a disconnect for investment buyers in their expected long-term returns. Real estate developers are mostly focused on maximizing saleable space, whereas hotel-type developers in resort markets understand the need to sacrifice some space for aspect, green and inherently lower-density.

One other key factor in this space is the fragmented ownership structure for hotel residences and ability to manage the asset, upgrade and remain competitive in the hospitality sector. Hotels are asset heavy propositions long term and typically over a ten-year period as much as eight per cent of revenue goes into maintaining these assets.

Single owned hotels are able to renovate and upgrade due to a cohesive ownership approach. Once large number of co-owners enter the equation, often hotel residences fail to reinvest at a similar level as their hotel only competitors with the knock-on effect being lower rates and decreasing yields.

Where do we go from here?

There are many good examples of hotel residences having long-term value and returns. In many instances these are mixed-use projects like the Banyan Tree, where a core hotel is operating and a smaller inventory of units are hotel residences so essentially there is a hotel owner ensuring the operating strategy is sound and performance measured to the market.

The influx of Phuket’s hotel residences is now going into unfamiliar territory with many projects having 100% of the units being sold and a co-ownership regime of hotels now a new twist in the market. Whether developers or unit owners are ready for this shift remains a key question?

Finally, on the subject of hotel residences as the only alternative available to developers in a challenged real estate sector, C9’s view is that strong opportunities are appearing in niche segments such as developers building projects to hold product and manage long-term rentals, retirement estates and co-living. All of the aforementioned types are focused on long term sustainable cash flow. As Phuket urbanizes, these may be a preferred development alternative to the current surge in hotel residences which are now facing off in the same playing field as single-owned hotels.


Get more from The Thaiger

📱 Download our app on Android or iOS
👋 Have your say on our Thailand forum
🔔 Subscribe to our daily newsletter
📺 Subscribe / Join for daily shows
👍 Like/Follow us on Facebook
🐦 FOLLOW us on Twitter
📷 FOLLOW us on Instagram


Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Click to comment

You must be logged in to post a comment Login

Leave a Reply

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.

Follow Thaiger by email:

Thailand16 mins ago

Kanchanaburi park ranger reportedly stabbed co-worker, shot himself

Crime58 mins ago

Former Deputy PM Suthep indicted over construction contracts

Transport2 hours ago

New variant casts shadow over Thailand Motor Expo, concerns outbreak could affect the industry

Sponsored7 hours ago

Hungry Hub Bangkok Rooftop Festival 2021

Thailand3 hours ago

Thai porn industry, Forget about Pattaya nightlife, Hualampong station | Thaiger Bites | Ep.72

Transport4 hours ago

Cabinet sets aside over 5 billion baht to improve Bangkok’s public transportation

Drugs4 hours ago

Men arrested at Bangkok airport for allegedly smuggling drugs valued at 95 million baht

Join the conversation on the Thaiger Talk forums today!
Thailand4 hours ago

Victoria’s Secret Thailand supplier faces labour abuse by laid off workers

Coronavirus World6 hours ago

Health officials say Omicron probably in the Netherlands prior to South Africa reports

Thailand6 hours ago

Thailand Top Stories | PCR testing to stay, more restrictions? Lifeguards off duty | Dec 1

Coronavirus (Covid-19)6 hours ago

Most face masks on sale in Thailand do not meet industry quality standards

World7 hours ago

Epstein pilot says Trump, Prince Andrew, Clinton all flew on late financier’s planes

Tourism7 hours ago

Cha-am permitted to sell alcohol in restaurants from December 1

Thailand7 hours ago

Possible lockdown, Crypto in Thailand, Transit system improvements | Good Morning Thailand | Ep.143

World7 hours ago

UN boss says global vaccination is only way out of pandemic

Coronavirus (Covid-19)7 hours ago

Moderna leader says vaccine likely less effective against Omicron

Thailand3 months ago

Morning Top Stories Thailand | Police to end protests, Human Trafficking | September 14

Thailand9 months ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism9 months ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket9 months ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism9 months ago

Phuket Thai food treats you need to try | VIDEO

Thailand9 months ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism9 months ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand10 months ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand11 months ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand11 months ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand11 months ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand11 months ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand11 months ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand11 months ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand11 months ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11