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What makes a good rental villa?

Ian Macaulay

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What makes a good rental villa? | Thaiger

Not everyone who has gone through the process of owning or building a villa will want to rent it out. Even if you don’t, rentability can have a significant impact on the asset and resale value so it’s well worth being aware of a given property’s potential appeal to the rental market.

Here are a few things to consider:

Location

No, we won’t say this 3x, but it always should be remembered as a major factor.

Every location has its advantages, which can range from the mundane – number of parking spaces (for when you want to have a gathering of friends), or accessibility to restaurants as some examples. How close is the villa to the major spots of appeal for visitors?

Views and surroundings are also valued and appreciated by guests, and consequentially impact desirability.

Some places will win because they are close to the action, others are be able to play the card of being away from it all – the first may have better occupancy, the latter may enjoy a better price per night.

The more sought-after the location, the more the rental appeal which will normally convert to good rental rates and solid occupancy levels.

Equal size bedrooms

We don’t think of this so much in the houses we live in, but when rental clients start looking for a rental villa for a group of friends or family, suddenly not only the room sizes get important but the relative size of each of them.

If people are splitting the bill evenly, in a case where there are two bedrooms each twice the size of the remaining two, or even more challenging, something like three gradients of rooms – it has the unfortunate effect of reducing desirability.

The rental market seeks rough parity in room sizes. There is rarely a problem if the master bedroom is larger than the other rooms as long as the other rooms are roughly equal in facilities and have en-suite bathrooms.

Owing to the fact there is often someone in any given group more equal than others; whether it be the couple who organised the villa booking or the parents being granted respect, having one bedroom being disproportionate with the others is not going to be a major issue, as long as the other bedrooms offer decent size and facilities and are themselves roughly equal.

What makes a good rental villa? | News by Thaiger

En-suite bathrooms

The expectation of most clients in the villa world is to have each bedroom with a private access to a bathroom, or en-suite bathrooms. If any of the bedrooms in a rental villa have separate bathrooms (access through a hall, whether that walk be long or short) it will impact on the overall pricing of the villa.

If there is a shared bathroom in a villa that will substantially impact both price and appeal – because now by its very nature the villa is needing 2 rooms of guests who are willing to share a bathroom with one another, as opposed to choosing another villa which doesn’t suffer from this issue.

If it is a big villa that sees lots of entertaining, additional service bathrooms are welcomed and desired for maximum guest comfort (notably few people will weigh up this aspect when selecting a villa for a gathering).

Number of bedrooms

I am commonly asked questions like “What rents better? 4 bedrooms, or 6?” The answer is the market is really divided into one-bedroom villas (normally found only in resorts or villa complexes) and then multiple-bedrooms villa options.

Admittedly there are more people looking for 2-bedroom villas than 8-bedroom villas, but the moment you have more than one person/couple making a decision on accommodation it falls into the same booking parameters as every multi-room accommodation (there are roughly the same number of 3-bedroom requests as 4-bedroom ones).

Rental guests tend to shape their stays around what is on offer. Someone finds a 5-bedroom villa being presented as a holiday option, and they fall in love with it – they will find another 4 bedrooms of friends and family to come and share and help them enjoy it

The other way rounds is 5 bedrooms of friends or family decide on a trip together and then cast around for options. In parallel, 4 bedrooms of friends are looking for 4 bedroom villa options.

So there is no ideal configuration for market appeal. It should be noted that the more bedrooms a villa possesses the better the economies of scale from both operational as well as a marketing and distribution perspective which will impact on yield.

What makes a good rental villa? | News by Thaiger

Facilities

The more facilities that the villa can offer (this can be a barbeque, to a private movie theatre, to spa facilities), the better. It helps distinguish it from other villas, it offers differing levels of appeal to its guests, and in the internet age we live in, the more additional features which can put on a listing will help to underpin the pricing ask.

Quality of those facilities and features is very important. If a villa claims to do or offer something, it needs to do that well – or you wind up with dissatisfied guests and a loss in market appeal in a review-based modern world, which is especially relevant to travel options, one must be careful about execution of such.

As the villa industry grows from a cottage industry to an increasingly developed one, a growing list of heavily desired aspects, bordering on ‘musts’ for villas at the luxury end, include:

  • A swimming pool
  • Wi-Fi connection
  • Reliable and reasonably high speed internet connection
  • Backup power facilities
  • TVs in every bedroom*
  • Privacy

(*Personally I think that people renting a house in the tropics should have access to an absolute minimum of 2 screens in any house – one for the adults and one for the children. Having said that there is a large portion of the market who expect a personal AV solution for each bedroom as that is what they have come to expect from the hotel market/personal preferences – so this impacts on desirability.)

Events

One of the dimensions of villas that sets them apart from hotels is the ability to entertain. Villas will normally be expected to able to host its sleeping capacity without question. If it’s a large villa, one thing that should be reviewed carefully is its suitability for events – events normally translate into weddings in the commercial market. Sunset facing and proximity to ocean are the biggest selling factors externally for this.

Then it becomes about what the villa offers internally. Is there a large flat space, either on the deck, or the lawn that is suitable for hosting a group of people? With the unpredictable weather these days, having the space to do a wet weather solution – either a marquee on the lawn or a large room inside the villa which can host in inclement weather will add value to the villa’s commercial appeal.

Maintenance

Good maintenance is something that is not easy to accomplish, but looking after the materials and equipment of the villa has a direct impact on its desirability in the rental market (and also its appeal to the property market).

Regular guests from rental bookings can assist with this – houses in the tropics do much better when they are lived in and being used. Taps get turned, switches get flipped. Anything fails, it will be reported by either the owner or guests to the onsite staff and it gets repaired. Staff stay on their toes and service levels are consistent.

Quality of Cooking

Food is one of the major reasons visitors come to Thailand. If you haven’t got the food right there is a problem and it will complicate everything else you do.

Clients can get sold on the architecture and stay once, but they will not return if they do not have a good culinary experience when they are at the villa, nor are they going to recommend it to others, ruining potential word of mouth business which is critical in the villa industry.

Quality of staff

Service is the secret sauce which makes everything else work to its potential. Reasonable levels of English are important to let foreign guests interface with the staff and enjoy their holidays.

Consistent delivery in terms of client requests is needed. Staffing can be done at various levels from housekeeper to butler but what clients care about the most is its smooth functionality and reasonable delivery of standards promised/expected.

It should be remembered that good service will hide a number of sins and potential drawbacks in a property if done well.

Having a professional management company which can structure the onsite team and provide backup resources is normally the most efficient way to succeed in this area.

Marketing materials

Building, designing and decorating a fantastic villa is one challenge, being able to convey to remote parties as in over the internet the villa’s wow factors, facilities and appeal, and achieve top rental rates is a separate one.

Top end professional photograph is a must. A visual identity for the villa must be established and woven carefully through all the villa’s marketing materials to present to potential holiday renters.

Pricing

Pricing needs to reflect all the other variables referenced above. Comparable villas should be carefully reviewed to ensure that pricing is realistic vis-à-vis the market.

When pricing, dimensions such early bird pricing offers, reduced occupancy prices, last minute booking price should be considered. These are not all necessarily required however let’s remember villa time is like an airline seat so extracting some value before the plane flies empty often makes sense.

Summary

The sum of all these above factors which will determine its appeal to the market. You have a fantastic villa but if it’s not priced correctly, it will have very low chances of success. A great looking villa with poor operational management will underperform. Great service and operations, but poor marketing will also bring sub optimal results.

Think through every dimension of the guest experience, work to your villa’s strengths and do what you can to compensate for its shortcomings, and things will come out well.

 

PHOTOS: Christopher Leggett

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Interested in more property news or buying property in Thailand - check out FazWaz today!

Previously living in Bali for over a decade, Ian Macaulay, has now been living in Phuket for 2 years. Ian founded and ran one of the largest villa companies in Asia and now heads a company specialising in marketing & distribution of rental villas, the Luxury Villas of Asia, which recently brought the 7 bedroom Aquila to market.

Business

The ‘office’ is SO last century. Say hello to the world of remote working.

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The ‘office’ is SO last century. Say hello to the world of remote working. | Thaiger

Do you work from home? Or can you work anywhere have a laptop and wi-fi? Are you a trader or selling stuff online? You’re part of a growing trend in modern work practices as the fancy city office becomes an expensive relic of the ‘old normal’.

2020 became the year of people working from home. In same case, it was the year of being told to stay home so there wasn’t much option. During Thailand’s lockdowns in April and May, offices were closed and employers had to scramble to find alternatives to the “office”. With the rise of Zoom and other video conferencing software, ways of tracking time-on-keyboard and hundreds of other monitoring apps, employers suddenly discovered they could actually run their businesses without an office. There were certainly new dynamics and unforeseen challenges, but for the most part, it worked.

Companies had worked from central office locations for a hundred years. The remote/work-from-home option was a new test for everyone involved but many early wrinkles have been ironed out after an accelerated learning curve due to the Covid-19 situation.

In the early days, most companies weren’t ready to close up the office and send their workers home claiming that some basic operations such as accounting and invoicing were not yet able to be done online (Thailand has a love of hard-copies and paperwork).

Team meetings were also more clumsy online. There were even companies that told their staff to keep coming in to the office as there was no legal barrier preventing them from doing so. But many smaller and less digitally-savvy firms required workers to come in and risk contracting the virus.

In the US, the Bureau of Labour Statistics found only 29% of jobs in the US could be completed from home, while in Thailand (a far less digitised and service-based economy) the percentage was probably lower.

But larger Thai firms, such as Unilever and True Digital allowed nearly 100% of their white-collar employees to work from home early during the lockdown phase. Other companies adapted quickly and found that working remotely, or from home, allowed their businesses additional flexibility. Many workers also say they enjoyed the lack of office interruptions too.

While Unilever was unable to send its factory workforce home, it was able to shift all sales and executive personnel fully online to avoid possible Covid exposure finding hitherto unknown improvements in the firm’s e-commerce presence.

Thai startups such as Eko (“your complete employee experience platform”) was able to capitalise on the rise of work-from-home with its “work anywhere” employee application. Eko experienced 200% year-on-year sales growth in the first half of 2020 as companies looked for solutions to connect employees from home.

Teleconferencing juggernaut Zoom was trading shares at US$88 at the start of 2020, to rise to $568 by mid-October, only to trail off to $337 by the end of the year – the fickle nature of a fast-rising tech start-up.

Employees, generally, prefer the shift to working from home and the flexible hours. It doesn’t suit all businesses or all employees, but it suits many. A study by by recruitment specialists Robert Walters Thailand found 75% of workers want opportunities to work-from-home and only 25% want a return to full-time work at the office.

Last month the police and the Bangkok Metropolitan Organisation police urged businesses to allow employees to work from home at least once a week to cut down on traffic-induced pollution.

The Covid-19 pandemic also forced countries to rethink their supply chains and reliance on foreign goods. China, for example, responded to the outbreak by shutting down factories, some of which other countries relied on for medical equipment needed to fight the virus, and vital components needed for manufacturing of goods in China and other countries.

Whilst there was an initial push-back on China, the international supply chain has become so entwined with Chinese businesses and manufacturers, and China with other countries, that it would take decades to unwind.

One of the biggest winners this year has been the rise of the delivery services. Grab Bike, Food Panda, We Serve and Line Bike are the best known but there are start ups making inroads into the growing delivery space as well as many smaller and larger businesses that have their own deliveries.

These businesses have been able to thrive on the ‘new normal’ stay-at-home culture. Eat at home, work at home, shop from home, watch movies at home – the trend is growing as people realise that they can get almost everything delivered, timely, efficiently and at little additional cost, usually free.

The big test will be once the Covid situation settles down, whatever that means and whenever it happens, and companies look back at the successes and failures of their employees working from home. But there’s no doubt the pandemic and the imposed restrictions ave accelerated the need to develop new ways of allowing employees to work safely, remotely or from home.

The successful transition of some office work to work-at-home will also put continued pressure on the commercial real estate market. Many employers are looking at their monthly office rental outgoings and starting to measure the return on their investment.

The rise of the work-at-home phenomenon and the digital nomad will be the main trends for office work in 2021.

This article was written laying on a couch, at home, at 6.15am in the morning… because we can.

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Business

Future of Thai department stores is being redefined

Thaiger

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Future of Thai department stores is being redefined | Thaiger

While department stores have been a familiar destination for Thai people for many decades, CBRE, an international property consultant, is witnessing a decline in popularity and stunted growth, particularly in 2020 when Covid-19 adversely impacted the sector. CBRE believes that to adapt to e-commerce disruption and the changing consumer behaviour, department stores in 2021 (and beyond) will have to fine-tune their business model in terms of customer shopping experience, inventive activities and value-added programmes to continue their status as the second home for Thai shoppers.

Jariya Thumtrongkitkul, Head of Advisory and Transaction Services – Retail, CBRE Thailand explained… “While department stores offer shoppers convenience, saving them time with many varieties of goods grouped in different departments and allowing the shoppers to find and compare products and choose what they want, the traditional department store model does not fit the needs, lifestyle and behaviour of its shoppers anymore, especially the new generations.”

According to CBRE Research, the total retail supply in Bangkok as of Q4 2020 increased to 7.8 million square metres, a 1.16% increase year-on-year. Out of this, only approximately 3% was reported within the department store format. The department store market in Thailand is mainly dominated by two domestic retail giants, with Central Group and The Mall Group holding the largest market shares. They do not only concentrate in Bangkok, but have also opened department stores in many major cities throughout the country which allowed them to build bigger networks and grow their customer base.

In the past few decades, Japanese investors had also shown interest in entering the Thai market and offered local features that are well-known in Japanese department stores: simplicity, premium quality and services. However, with strong competition many Japanese department store operators have ceased their expansion plans. Some have exited the country due to the fierce competition against the local players, their performance in Thailand and the shrinking Japanese department store business, especially in overseas countries.

“The department store concept as a one stop shopping place is still in demand for certain groups of customers. However, with the e-commerce disruption and changing consumer behaviour, department store operators need to adapt their models, offerings and value-added services to their customers to cope with the challenging economic and market conditions.”

Adaptability of department stores can be highlighted into 3 main parts: customer shopping experience, inventive sales and marketing activities, and value-added programmes. While more and more younger generations prefer to shop online to save time and money, the brick-and-mortar store is still believed to be the second home for Thai shoppers. Department stores should be more agile in the era of e-commerce and adopt some technological innovations such as in-store automation and mobile payment solutions to reach the younger crowds.

Design is another aspect that plays an important part in customer shopping experience. Department stores can be more creative in remodelling traditional department store space into some ingenious and interactive space with a great design and right product portfolio mix for their customers.

The Mall Group, for example, has launched its first “Lifestore” concept at The Mall Ngamwongwan at the end of 2020 by redesigning and renovating its traditional department store space to enhance customer shopping experience and enjoyment.

The second part to be considered for the adaptability comprises inventive activities related to sales and marketing. The prices of products being sold in a department store are normally set high to cover the higher establishment and operating costs by operators, narrowing their target to only upper- to high-income customers.

Brand offerings may also no longer meet fast-changing customer needs since today’s shoppers have more choices in buying products online, not to mention the declining footfall due to the growth of e-commerce. CBRE Research has seen domestic players pushing hard to drive sales growth via numerous promotions, marketing campaigns and activities and collaboration with credit card companies during seasonal sales.

The third part consists of value-added programmes such as personal shopper, customer loyalty programme, on-demand solution and service personalisation, which have become a new trend as customers, including the aging population, are now more sophisticated and demanding.

The retail landscape has changed drastically in the past few years from various factors like technological advancement, consumer behaviour and preference as well as Covid-19. Cookie-cutter strategy will be a thing of the past, especially for department stores where the format and offerings have remained the same for decades.

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Bangkok

Bangkok’s commercial property market struggles through 2020

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Bangkok’s commercial property market struggles through 2020 | Thaiger

This year Thailand’s developers had to work around the effects of government lockdowns and restrictions because of the Covid-19 pandemic. Indeed significant changes have occurred to the commercial property market in Thailand. CBRE Research reports that the Bangkok office market suffered a significant change in the net up-take, whilst the retail market consumer confidence index fell and the hotel market struggled to maintain the cash flow.

It wasn’t a good year.

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During the initial lockdown, during April and May, adoption of work-from-home not only changed how we implement social distancing during the Covid-19 pandemic period, but showed businesses and employees that the workers could work remotely, and effectively. Many organisations have now revisited their workplace strategy, and some have started changing how and where each business unit operates.

Coupled with financial pressure on businesses, the situation resulted in a contraction in space sizes by many tenants, especially in Grade B Non-CBD locations where tenants are more sensitive to financial illiquidity. In addition, some tenants were unable to move into their office space as the office fit-out could not commence due to the lockdown. CBRE Research found that in the first nine months of 2020, the net take-up increased by 21,000 square metres compared to 128,000 square metres in the same period last year. However, CBRE Research also reported that office pre-leases were seen in the growing businesses such as e-commerce and technology platforms where the demand for workspace has doubled.

According to CBRE Research, the total office supply in Bangkok as of Q3 2020 was 9.17 million square metres, increasing by 2.1% year on year, with key completions being Spring Tower and The PARQ in Q1 2020. While this year has new office supply of 345,900 square metres, the negative take-up has resulted in the increase in vacancy rate from 6.9% at the end of last year to 8.9% as of Q3 2020.

While the overall occupancy in the Bangkok office market has slightly dropped to 91.1%, the best performer this year is in the Grade A Non-CBD segment where the total supply is only 674,000 square metres, representing 7.4% of the total supply in the market. The expansion of mass transit systems and urban development have increased the attractiveness of high-quality buildings in Non-CBD locations where rents are much lower compared to CBD locations.

RETAIL

Thailand’s retail industry has slumped as shopper have experienced a drop in spending power. The consumer confidence index also fell to its lowest point in 20 years in April 2020 at 47.2. Even though the confidence has improved in the following months, it is still a long way from its pre-Covid-19 levels. Due to business disruptions and increasing financial burden, the household debt as of Q2 2020 was at 83.8% of the total GDP, increasing from 78.9% last year.

CBRE Research reports that the Bangkok retail supply totalled 7.8 million square metres as of Q3 2020, increasing by 2.4% year on year from the opening of 12 new retail developments with combined retail space of 100,000 square metres with Siam Premium Outlet near Suvarnabhumi Airport being the biggest development this year.

While the occupancy rate across the market remained high at 96%, CBRE Research has started seeing a drop in retail developments in downtown areas of Bangkok which are more dependent on demand from tourists rather than locals like those in the midtown and suburban locations.

How fast the retail industry can recover from Covid-19 will largely depend on how effective the stimuli from the government such as “Kon-La-Khrueng” (Let’s Go Halves) and “Rao-Tiew-Duay-Gun” (We Travel Together) campaigns are as well as when international travel restrictions will be lifted. The amount of retail space in the market, especially in Bangkok, cannot be sustained only by domestic demand in the long run.

HOTELS

Tourism, one of the key sectors that drives the Thai economy, has suffered greatly this year as there were no inbound international tourists from Q2 onwards. The total tourist arrivals for the first nine months in 2020 stood at only 6.7 million compared to almost 30 million in the same period last year. Of those 6.7 million, the vast majority visited during Q1 before the border closures.

Bangkok hotels have seen the average occupancy drop to as low as 6.7% in April after the country went into lockdown but managed to recover slightly to 13.7% in Q3, solely relying on ‘staycation’ travel. Despite the lifting of the lockdown measures in June and hotels being allowed to resume operations, there was no significant sign of improvement in the market as international travel restrictions have been still in effect.

Some hotels have decided to open partially with heavily discounted pricing while some operate only their F&B outlets to generate some revenue to keep cash flow going. Some hotel owners are facing a situation that they have never planned for, a scenario where there have been no tourists for more than 9 months. This has put them under pressure and some have decided to put their properties on the market.

As of Q3 2020, the total hotel supply in Bangkok was at almost 50,000 keys, increasing from the previous year by only 2.8% as there were limited hotel openings this year. Based on what has been announced, CBRE Research has estimated that there will be 9,200 more keys that will be added into the Bangkok hotel market by 2023 which will further intensify competition.

SOURCE: CBRE

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