One of Asia’s leading resort destinations Phuket looks set to weather 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 has revealed an island development pipeline of 15,348 keys set to enter the market over the next five years, which represents an 18% push in total supply.
During the first four months of 2019 which is ranked as 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 fully recover. On the upside, fast-growing India tripled its tourism arrival trajectory during the same period versus 2018.
Hotel performance has mirrored the current trend, according to STR data this reflects a 12% retraction of RevPAR, driven largely 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 incoming pipeline or 8,337 units are being developed. Majority of this products are condominium properties with many being affiliated to international hotel groups via management or franchise agreements. Despite the drop in Chinese tourists, a number of Mainland real estate conglomerates have entered the island property sector.
Summarizing Phuket’s forecasted tourism market conditions, C9 Hotelworks view is that with the development of the new Greater Phuket airport by AoT in Southern Phang Nga, the long- term forecast remains positive.
It’s probable that current hotel sector will experience a similar cycle that Bali saw between 2014 through 2018 and that new supply will eventually be absorbed on a medium-term basis, but in the shorter term, demand remains a key risk factor impacting operators and owners.
Download C9 Hotelworks full report here
C9 Hotelworks is an internationally recognized consulting firm with extensive experience in the Asia Pacific region. Its core business focus includes: Hotel and Resort Development Asset Management / Ownership Representation Project Feasibility and Analysis Key competencies include international hotel operator search, selection and contract negotiation, mixed use hotel and residential planning and operation reviews. A wide range of both institutional and private developers and a comprehensive portfolio of completed projects give C9 the skill set and background to focus on key issues, evaluate complex ones and assist clients in achieving solid results. Based in Phuket, Thailand and led by Managing Director Bill Barnett, who has 28 years of experience in Asia Pacific, the firm is well positioned to serve an increasingly demanding marketplace.
Bill Barnett Managing Director, C9 Hotelworks Company Limited 9 Lagoon Road, Cherngtalay, Thalang, Phuket, 83110, Thailand (Office located at the entrance of Laguna Phuket) T: +66 (0)76 271 535 / F: +66 (0)76 271 536 info@c9hotelworks.com / www.c9hotelworks.com
