Are There Too Many Hotels in Bangkok?

Thailand, being known as the gateway to Asia, is also known for continuously improving its infrastructure, and facilities to make it more attractive to tourists. Part of the continuous development is the efforts to attract more companies to invest on hotels, resorts, and other properties geared towards making foreigners' stay in Bangkok more comfortable. The government is doing a good job in attracting all these investors. However, there is also a growing concern on the number of competition. The market is so open and there are too many hotels in Bangkok that some investors find it harder to get their investments back.

 

Current Trend

If you ever get a chance to go around Bangkok, the number of new developments is staggering and even with the recent flood, it seems developments are just going faster. Numbers already dictate that there might well be a 28 percent increase in hotels in Bangkok by the end of 2014. Most of the hotels and other properties that are being developed in Bangkok are luxury ones, with few 3-star hotels. There are a lot luxury hotels in development in the central business district but it is also surprising to see many 5-star hotels and other properties in areas like Rama III.

 

Advantages

This is good news for the Thais and for the government. Development means new jobs and a bourgeoning tourism means more income for the government. However, it also drives the question on whether the government is doing enough to make sure that these investors are getting the return on their investment? Hotels need more than just tourists to sustain itself.

 

Challenges

In 2011, it has been reported that the occupancy rate in Bangkok hotels rooms plunged. It may be argued that this is because of the flood. That is valid. However, the trend was examined with all those things in consideration and it's still low. There is also a low daily room rate on 5-star hotels at USD200. That is low compared to most Asian countries. Many hotels can afford to increase their rates because there are too many competitions and they don't want to lose their customers. They get stuck with the same room rate even with the increase in their operational cost. Old hotels that may have already recovered their initial investment is not safe. They also need to do maintenance work, renovations, and daily operational cost. As new hotels crop up, old hotels need to keep on improving their staff, their facilities, and renovating their facilities. New hotels being developed, on the other hand, are paying for higher raw materials and manpower cost but will have to charge at the same room rate as the old ones. This results to a longer Return On Investment period. It is highly discouraging for investors to keep on adding to their investments just to keep their business going.

 

Final Words

The beneficiary of the developing industry is the consumer. However, it is the developing industry that's forcing the property developers and owners to increase their operational expense. The government needs to make sure that they don't just attract investors to come in but also put in place policies and programs that will make it attractive for them to stay.