Phuket Resort Market Attracts More and More International Investors

Thailand, Phuket, resorts, investments

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According to consulting firm JLL (Jones Lang LaSalle), Phuket belong with the Maldives and Gold Coast in Australia to the top resort markets for international investors, a situation which is unlikely to change in the short term…

The Global Resort Report 2019 from Jones Lang LaSalle (JLL) highlights three destinations in Asia Pacific: the Maldives, Gold Coast in Australia and Phuket in Thailand.

The kingdom’s largest island is a well-established tourist resort destination. Its accessibility and affordability have been two of the key success points of the island’s tourism growth. Phuket not only offers the perfect sea/sun holiday for travellers with its beaches and iconic islets, but increasingly, it also offers a variety of outdoor activities, multiple shopping opportunities as well as cultural attractions thanks to its old town with numerous historical buildings being renovated and turned into restaurants, cafes or art galleries.

In 2016, the Phuket International Airport expanded its annual airport handling capacity from 7.5 to 12.5 million passengers, further supporting tourism growth in the resort island. Moreover, plans for a second airport in the nearby Phang Nga have been approved by the board of the Airports of Thailand and are pending the Cabinet’s approval.

Total overnight visitors to Phuket have grown steadily over the past decade (2008 to 2018), with international and domestic visitation registering a CAGR of 10.9% and 9.9%, respectively. During the same period, international and domestic overnight visitors accounted for 72.7% and 27.3% of total arrivals, respectively.

Phuket continues to be one of the most active hotel investment destinations in Thailand. Since 2014, developers have been the most acquisitive group and have accounted for over 65.0% of total transaction volume, followed by hotel operators at 20.0%. Of the resorts that were sold during the period, half of the transacted properties sold for more than US$29 million.

Over the past five years, total transaction volume for the resort market was dominated by Singaporean investors, whilst the remaining comprised investors mainly from the UK and Thailand. 

In the first half year of 2019, total international visitors to Thailand rose by 1.8% compared to the same period of 2018. Whilst visitation from Mainland China to Thailand declined y-o-y as at YTD June 2019 (-4.7%), the notable 24.3% y-o-y growth in visitors from India over the same time period helped ease the void left by the Chinese visitors.

The trend in visitation from India is expected to continue given Indian airlines GoAir and IndiGo’s plans to expand flight service to Phuket, as well as visa on arrival fee waivers for Indian travellers. According to the latest available annual government statistics, Phuket welcomed approximately 9.9 million international overnight visitors in 2018, representing a y-o-y growth of 2.5% and a CAGR of 10.9% over the 10-year period from 2008 to 2018.

Likewise, the number of domestic overnight visitors have grown steadily by 3.9% y-o-y to 3.7 million, registering a 9.9% CAGR over the same 10-year period. The increase in international overnight visitors in 2018 was mainly driven by growth in Phuket’s top three source markets, namely Mainland China (+10.3%), Russia (+3.0%) and Germany (+6.5%) which together, comprise more than 45.0% of the total accommodation nights during the period.

As of June 2019, Phuket had more than 14,300 resort rooms available. Most of the existing supply is in the upscale segment (60.5%), followed by the luxury (20.3%) and midscale (19.2%) segments. An estimated 540 resort rooms are expected to open from H2 2019 to 2021, which translates to an increase of nearly 4.0% on the existing resort supply as of June 2019. The upcoming new supply will mainly be in the upscale (65.0%) and the luxury (35.0%) segments, namely the 189-room JW Marriott Phuket Resort & Spa Chalong Bay; 150-room Melia Phuket Karon; 101-room Melia Phuket Mai Khao and the 100-room Anayara Luxx Panwa.

The planned construction of a brand new airport in neighbouring Phang Nga province with enough capacity to accommodate future traffic will further stimulate demand from tourists as well as international investors concludes JLL report. The future airport should have an initial capacity of 22 to 25 million passengers per year.

(Partial source: JLL)