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New report from C9 Hotelworks reflects a blurring of the lines between global hotel brands and real estate as destination development hits new heights. Phuket has seen an unprecedented onslaught of overseas buyers transform the island into the largest leisure branded residences real estate market in the world. The current supply of branded properties has now eclipsed a staggering USD2.3 billion and is expected to grow further according to new data from hospitality consulting group C9 Hotelworks.
One of the most compelling storylines of Phuket’s economic shift from a tourism-dependent economy into a property giant is the blurring of lines between hospitality and real estate. A key example is Phuket’s largest developer, Laguna Phuket, which has undergone a massive change in focus from hotels to branded real estate.
Earlier this year Singaporean tourism icon KP Ho’s Banyan Group announced that an adjacent land bank to their Laguna Phuket integrated resort would be developed into a USD2 million lifestyle-led branded real estate offering. Ho’s longer-term strategy has changed from what was once a hotel-led strategy with the Banyan Tree brand at the forefront to a multi-brand strategy that has witnessed a renaming of the chain and creating a property-led growth trajectory.
Tracking the change of investment sentiment from hospitality to mixed-use projects, C9 Hotelworks’ Managing Director Bill Barnett says “post-pandemic we have seen a flood of Thai-listed real estate groups return to Phuket, spurred by an accentuated return to trading of the resort market and stabilization of tourism. Added motivation for developers though is soaring demand created by an influx of affluent overseas and domestic property buyers who are relocating to the island, or viewing investment in branded property as a safe haven.”Some of the brands to enter the market recently include The Standard in Bangtao, an area that has been the epicenter of growth in the last year, including announcements by leading Bangkok developer Sansiri and Dubai-funded green-space real estate play Gardens of Eden spread over 73 rai (29 acres) of ocean-facing land.
Turning the page, Phuket’s tourism market in 2023 was all about higher room rates which for most hotel owners grew bottom lines. Market-wide hotel performance data from STR that compared last year to the high-water years of 2018 and 2019 reflecting higher average room rates by 20-30 per cent. Despite lower occupancy with muted Chinese demand by 2-10%, hotels experienced a net growth in profits.
In terms of hotel trading stability, Thai banks who went to the sidelines during the COVID-19 crisis re-emerged and are starting lending again to greenfield projects. With Phuket real estate showing strong transaction levels and rentals soaring, developers have quickly pivoted to mixing hospitality and property with the expectation of driving premium sale price through the use of brands.
Another factor has been necessity, where land prices across the island are skyrocketing. The only way to underwrite hotel projects is by adding a real estate component.
According to Barnett, it has become a game changing post-COVID19 mix of rising global migration spurred by geopolitical events coupled with urban flight. Added to this is the rising work-from anywhere culture and a graying global population who are retiring earlier or making lifestyle choices to move to leisure destinations. Thailand’s aggressive government policy on visa-free travel and progressive incentives such as long-term retirement visas and the long-term Thailand Elite program are further fueling the demand for property in Phuket.
Also highlighted in C9 Hotelworks’ research is a leading demand driver – a rising number of international schools that currently number thirteen and is expected to double over the next few years.
Speaking to the changes in Phuket from a once tourism-leveraged economy, Bill Barnett adds “this is not about the island changing, but how the larger world is undergoing unprecedented volatility coupled with the islands’ growing attraction as an international community.
The appetite for branded residences reflects a notable change in buyer values and we expect not only more hospitality affiliations but a significant new addition of non-hotel brands such as those from the fashion, automotive and restaurant sectors. Phuket, with its record setting resort-grade branded residences property supply, now stands side by side with urban best-in-class destinations Miami and Dubai as billion-dollar marketplaces.”
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Source: traveldailymedia