Investors eyeing Pattaya hotels

BANGKOK, 9 November 2020: Pattaya is poised to become another bright spot for hotel investment in Thailand in 2021 as more investors are exploring investment opportunities.

Historically, demand in the Pattaya hotel market relied very much on international tourists. However, many investors are reimagining the market’s prospects based on domestic demand potential, in addition to the ongoing development of the Eastern Economic Corridor (EEC), according to property consultancy JLL.

Pattaya has a hotel inventory ranking second after Bangkok and slightly ahead of Phuket at almost 64,000 rooms. The city has been put on a spotlight as its hotel sector benefits from its close proximity to Bangkok and the development of the EEC.

Many ongoing infrastructure projects supporting the new economic zone are expected to stimulate demand for hotels from both leisure and corporate standpoints. In addition to U-Tapao Airport’s plan to increase capacity to five million passengers, Pattaya is well-positioned to benefit from the planned high-speed railway project connecting Suvarnabhumi, Don Mueang and U-Tapao Airports, which is planned for completion in 2025.

Despite positive long-term fundamentals, Pattaya is among Thailand’s major hotel markets that have suffered badly from the pandemic. But the market is also getting a radar of more investors.

“In recent months, we have been getting an unprecedented level of enquiries from investors who are looking for opportunities to acquire investment-grade hotels in Pattaya. We have yet to see a wide trend of deeply discounted hotels in the market, particularly institutional-grade assets. However, the situation is delicate, and the landscape could potentially shift swiftly,” says JLL’s Hotels and Hospitality Group executive vice president of Investment sales – Asia, Chakkrit Chakrabandhu Na Ayudhya. “Owners are being pressured by the extended burn rate.  As the crisis prolongs, the pricing gap between owners and investors will naturally become narrower.”

Investment activity in the Pattaya hotel market is likely to resume in 2021 according to Chakkrit.

“Pattaya has seen no major hotel transactions since 2018 due largely to the lack of investment-grade assets being offered to the market. It is to be seen whether the pandemic will unlock some of them over the next 12 months.”

Over the last five years, property sales in Thailand focused on hotels with 180 keys or more while  Pattaya on average, most hotels have 50 to 100 keys.

Chakkrit noted that “with a lower-key count, it is harder to achieve sufficient economies of scales from an investor point of view.” 

“Due to border restrictions, we are naturally seeing more engagement from domestic investors compared to what we saw in almost 40 hospitality deals (over THB 40 billion in volume) that we brokered in Thailand since 2010. We also see more enquiries from corporates with diverse income streams and private equity funds since the pandemic started,” he concluded.

JLL’s Hotels & Hospitality Group in conjunction with The Thai Hotels Association has planned a series of hotel investment conferences in Thailand’s key hotel markets this year. The last event was held in Pattaya and the next one is planned for Phuket on 11 November.

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