THAILAND - “LIFESTYLE HOTELS” MAKE THEIR MARK

TRAVEL IMPACT NEWSWIRE -- Edition 62 – Thursday, 28 September 2006

Although the expansion and marketing plans of the brandname hotel groups attract most of the publicity, the lineup of exhibitors at the Fifth Annual Thailand Travel Mart 2006 Plus Amazing Gateway to the Mekong Region (TTM+ 2006) suggests that the future lies with the dozens of boutique and lifestyle hotels. These are emerging nationwide, both in Bangkok as well as in the beach resorts of southern Thailand and the landlocked but culturally rich provinces of north and northeast Thailand.

Of the 361 seller organisations participating in this year’s TTM+, which ended yesterday, 227 were hotels. Of these, at least 50 were independently-run, boutique, resort and spa operations. Essentially, this was in line with the Tourism Authority of Thailand’s goal which, according to Deputy Governor Mrs Phornsiri Manoharn, is to “bring in Thailand’s many small and medium-sized enterprises which do not have the large marketing budgets to attend the major international trade shows, and need the buyers’ support to generate growth and business.”

Although international brandname chains are expanding aggressively in Thailand, the smaller lifestyle properties are proving popular with clients seeking more privacy and inividuality. This is in line with the fourth ‘European Lifestyle Hotel Survey’ released in August by PricewaterhouseCoopers LLP which reports that lifestyle hotels “are continuing to raise the bar for the industry through differentiation, innovation and value-for-money. This niche sector continues to have widespread consumer appeal and, although there have been new developments throughout the lifestyle segment, the budget end saw the most action in terms of new names and new ideas.”

The survey said, “There is some evidence that the sector is now becoming more attractive to investors particularly venture capitalists and private equity firms. In the past, lack of scale has tended to make returns insufficient to attract investment groups, but this may be changing.”

Private discussions with the owners and managers of the Thai lifestyle hotels indicate a meeting of minds. Both want to achieve a balanced lifestyle between enjoying their jobs while providing a good product and generating good financial returns. Many of them are run by western expatriate executives who want out from the cut-throat competitive politics of corporate ascendancy. They find greater job satisfaction in running a small, more manageable property and relish the challenge of taking on the “brands” with their more formidable marketing muscle and loyalty programme databases.

Said one operator, “We are to the hospitality industry what the low-cost airlines are to the aviation industry, with the sole exception that we provide a full-service, first class product, and charge accordingly.”

Generally, the Thai hotel industry as a whole is back to normal levels of profitabilty as visitors and business travellers return by the droves. The following is a list of some key hotel developments in Thailand over the last few months, many of which were compiled by the consultancy company HVS International - Asia Pacific:

<> Kingdom Hotel Investments will develop the Raffles Phang Nga Resort and Residences at an estimated cost of US$115 million. Land was recently acquired through a company 80% owned by KHI and 20% by European Hotels Corporation. The proposed Raffles Phang Nga Resort and Residences will open in 2009, with 150 rooms and 25 luxury residential villas located on 240,000 square metres of prime freehold land. It is anticipated that standard rooms will contain a gross area in excess of 100 square metres per unit.

The built up areas of the villas will be roughly 500 sq m per villa. Located 35 minutes from Phuket Airport, the site includes an 80,000-sq-m fresh water lake and has about 400 m of direct beachfront. KHI is targeting to invest US$12 million for an 80% ownership stake in the proposed development. KHI will seek debt financing to fund approximately 50% of the total project.

<> Crown Hotel Investment Inc purchased the Thai Garden Resort in Pattaya, effective as of 4 Sept 2006. The company has taken total ownership control over the 181 unit resort hotel including the popular Moon River Pub & Restaurant located at North Pattaya Road.

<> InterContinental Hotels Group (IHG) will open its first 367-room Holiday Inn property in Pattaya at the end of 2008, while Starwood Hotels and Resorts will debut its first Luxury Collection property in Koh Samui in 2011. The Holiday Inn will have a 450-seat ballroom and two function rooms. Starwood’s Vana Belle Samui Resort and Spa located near to Koh Samui’s popular Chaweng Beach, will have 180 rooms, including 30 standalone villas, four restaurants, meeting facilities, spa and fitness centre, business centre and a swimming pool.

<> The Novotel Suvarnabhumi Airport Hotel opened on 1 Sept 2006. It is a three-minute walk from the airport’s main terminal connected by a 200 m, air-conditioned underground walkway. A direct rail link under construction will connect the 612-room hotel to existing transport systems, downtown Bangkok and its CBD by early 2008.

<> Central Hotels & Resorts is to revamp the Central Hua Hin Village. The new facility will cover 8.43 acres and be renamed The Villas at Sofitel Central Hua Hin Resort. The renovation of the 41 contemporary-style bungalows will be completed this November. The villas will offer either a private five-metre splash pool or oversized Jacuzzi spa. The 41 villas will be available in four types of accommodations.

<> Central Hotels & Resorts, together with an investor, has setup a joint venture company - Karon Phuket Hotel Co., Ltd with 50:50 ownership ratio. On 1 April 2006, the company took over Phuket Islandia Hotel in Karon Beach for US$27 million and will invest US$3.9 million to renovate and rename it to “Central Karon Beach Resort, Phuket.” Central Hotels & Resorts plans to own 22 hotels & resorts by 2010.

<> Kingdom Hotel Investments (KHI) has acquired the Karon Beach Hotel, Phuket, it’s first acquisition in Asia. The hotel, currently managed by Crowne Plaza, has been purchased from LaSalle Investment Management for US$98.5 million, including US$30.5 million of debt. The property is a freehold asset in a prime area of rebounding tourism demand. KHI will re-brand the Hotel as a Mövenpick.

<> Pan Pacific Hotels and Resorts confirmed that the company will manage a new hotel in Chiang Mai. The Pan Pacific Chiang Mai, will be the group’s second in Thailand. Previously a condominium complex, under the V Group Property Co. Ltd, the condominium development is undergoing a conversion to a 300-room deluxe hotel and will open in October 2006.

<> The 20-year-old four-star Pearl Village Resort in Nai Yang Beach has been closed for a US$20.4 million renovation that will transform it into a 290-room five-star property. The Indigo Pearl will feature rooms ranging between 56 and 120 sq m, eight bars and restaurants, three swimming pools, a cooking school, tennis courts, a modern spa, a children’s club, a fitness centre and a meditation pavilion. The resort expects to attract a younger market once the makeover is completed.

<> Accor has launched its Ibis economy hotel brand in Thailand with two new hotels - Ibis Siam Bangkok and Ibis Huamark Bangkok. Ibis has made an impact in countries such as China, Korea, Indonesia and Australia and will make its debut later this year in India. The 180-room Ibis Siam Bangkok is in Bangkok’s Pratunam shopping area within walking distance to Suansantipab Park and Victory Monument BTS Skytrain station. Ibis Huamark Bangkok features 269 rooms and is next to one of Bangkok’s largest shopping malls, the Ramkamheng University and the Huamark Stadium.

<> The Erawan Group PCL, which owns the Grand Hyatt Erawan in Bangkok, has bought land to build its first 3 Ibis hotels as part of its plan to diversify its hotel portfolio into the economy segment. It plans to add 10 Ibis hotels by 2010. The first 3 Ibis hotels will include 1) Ibis Sathorn Bangkok: 210 rooms, targetting budget travellers close to Bangkok’s Central Business District and a short walk to the Lumpini MRT station; 2) Ibis Patong Phuket: 250 rooms between Patong’s first road and second road, catering to the leisure crowd, only 5 minutes walk to Patong beach; 3) Ibis Pattaya: 250 rooms, on Pattaya’s second road in central Pattaya, to accommodate both MICE and leisure markets. All three are projected to open by early 2008. Total investment is roughly 1,250 million baht including land costs.

<> On 9 June 2006, Erawan Phuket Company Limited, a subsidiary of the Erawan Group PCL signed a 30-year Management Agreement with Sarppasamphat Company Limited (a company under Six Senses Group) to operate a resort in Koh Naka Yai. This will be a 67-pool-villa 5-star-deluxe resort with a total investment of roughly 1,250 million baht and opening planned for 4Q 2007.

<> Grande Asset Development PCL, owner of several hotels in Thailand including the Westin Grande Sukhumvit Hotel in Bangkok, plans to launch three projects: 1) Sheraton Hua Hin Resort at an investment of 1,100 million baht 2) The Sails condominium, and 3) Le Meridien hotel, Pattaya. Expected investment cost for Project 2 and 3 are about Baht 2,000 billion, now in the construction process.