Pressure from Phuket’s pipeline

PHUKET, 15 July 2019: One of Asia’s leading resort destinations Phuket is about to battle a perfect storm as soaring hotel supply is forecasted to be challenged by declining tourism demand.

New research from consulting group C9 Hotelworks in their Phuket Hotel Market Update Mid-Year Edition reveals an island development pipeline of 15,348 keys is set to enter the market over the next five years, which represents an 18% rise in supply.

During the first four months of 2019, ranked as the high season,  year-on-year international passenger arrivals at Phuket International Airport slipped by 3%, while the domestic segment was down 6%.

Looking into the data, the first half of 2018 had been a record-setting tourism period, as the succeeding six months experienced a sharp decline due to the retraction of the Mainland China market.

Mainland China remains at the forefront of any discussion about Phuket, and the segment remains volatile with a 19% decrease registered this year from January through May.

Russian arrivals have yet to recover fully. On the upside, fast-growing India tripled its tourism arrival trajectory during the same period versus 2018

Hotel performance has mirrored the current trends, according to STR data, this reflects a 12% retraction of RevPAR, primarily driven by lower market-wide occupancy.

While May and September are the two lowest months for Phuket hotels, July and August are projected to experience boosts in occupancy. But the reality remains that non-high season attracts significantly lower room rates and this factor will undoubtedly suppress overall rate growth during the year.

C9 Hotelworks report also highlights the growing influence of hotel branded residences on the Phuket accommodation market.

Over 50% of the pipeline, or 8,337 units, are being developed. 

The majority are condominium properties with many being affiliated to international hotel groups via management or franchise agreements. Despite the drop in Chinese tourists, mainland real estate conglomerates have entered the island property sector.

Summarizing tourism market conditions, C9 Hotelworks believes the long- term forecast remains positive due development of the new Greater Phuket airport by AoT in southern Phang Nga.

It’s probable that Phuket’s current hotel sector will experience a similar cycle that Bali encountered between 2014 through 2018.  The island’s tourism will absorb the increase in rooms in the medium-term basis, but in the shorter term, demand remains a key risk factor impacting operators and owners.

To read and download C9 Hotelworks full report click on the following link:https://www.c9hotelworks.com/downloads/phuket-hotel-market-update-2019-07.pdf

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