January 2013

Spotlight on Thailand
Hotel Investment Market
Hotels & Hospitality Group
2 OnPoint Spotlight on Thailand Hotel Investment Market

A Glimpse of Thailand
The outlook for Thailands economy remains positive with strong Gross
Domestic Product (GDP) growth expected over the next five years. In 2011,
Figure 1: International Visitor Arrivals to Thailand
GDP grew marginally by 0.1% to USD 345.6 billion due to the effects of the Number of Visitors (million) Annual Growth (%)
floods; however, a 5.4% increase is expected in 2012. The unemployment FLOOD 25%
AIRPORT
24 COUP CLOSURE
rate is also on the decline, dropping from 1.5% in 2009 to 0.7% in 2011. TSUNAMI
22 20%
Unemployment is expected to stabilize around 0.6% and 0.7% for the next GFC
20
five years. The hotels and restaurant sector contributed USD 16.8 billion
18 15%
to the total GDP in 2011, representing a 4.7% share and the sector is 9/11 SARS
16
anticipated to have grown 4.5% in 2012.
14 10%

The countrys tourism market has continued its recovery from the global 12
5%
financial crisis and unstable political situation with the number of visitors 10
to Thailand increasing from 14.6 million in 2009 to 19.1 million visitors in 8
0%
2011. In 2012, visitor arrivals recorded a 16.0% growth over 2011 with 22.3 6
million arrivals. Overall, Thailands 14-year Compound Annual Growth Rate 4 -5%
(CAGR) (1998 2012) is at a healthy level of 7.7%. Asian markets such as 2
China, Japan and Korea, remain Thailands top source markets. The further 0 -10%
emergence of these markets is attributable to the establishments of low cost 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

No. of Visitors (million) Annual Growth (%)

carriers in the region and the increase in Asian individual travellers.
Note: 1998-2012 CAGR = 7.7%
Growth in the countrys tourism sector is expected to continue and the F: Forecast
Tourism Authority of Thailand (TAT) has forecasted 24.5 million visitors in Source: TAT and Jones Lang LaSalle
2013.
Figure 2: Thailand Economy
10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

-2.0%
2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F

-4.0%
Population Growth Real GDP Growth Unemployment Rate

Source: IHS Global Insight

 OnPoint Spotlight on Thailand Hotel Investment Market 3

Thailand
2012 - An Active Year for Investors
2012 was an exceedingly strong year for hotel investments in Thailand.
Phuket remains the hotspot with four major transactions of over THB 1
billion each, three of these being undertaken by Jones Lang LaSalles Hotel
& Hospitality Group.
The Movenpick Resort & Spa Karon Beach was sold early in the year
on behalf of Kingdom Hotel Investments to Malaysias TA Global, for
approximately THB 2.8 billion or THB 8 million per key, showing a circa 9%
initial yield. The 338-key property (excluding residences) is situated on an
expansive 52 rai plot of land fronting Karon Beach and offered numerous
expansion and redevelopment opportunities to the incoming investor.
A trend in recent recorded transactions is the presence of an international
investor on one or the other side of the transactions. These have included
Malaysian, Indian, Singaporean and United States (US) buyers, as well
as a Hong Kong entity as a seller. Having a structure such as a Type II or
Type IV property fund which allows a 100% foreign ownership, is a strong
selling point in attracting foreign investor interest. As these structures are
no longer available in Thailand (being a remnant from the 1997 financial
crisis), a similar effect can be achieved through investment promotion
incentives given by the Board of Investment (BOI). Developers of hotel
properties should be aware of the BOI incentive, available for projects over
THB 500 million, and the flexibility it offers to the owners if an exit strategy is
considered.

The Evason Phuket Resort & Bon Island, situated on over 110 rai of freehold
land in the south of the island and featuring a private beach on Bon Island,
traded in a circa THB1.4 billion deal to an interest associated with LC
Development out of Singapore. The property has been subsequently closed
with the purchasers believed to be considering a major redevelopment of the
resort and extensive land holdings.
Unlike the two deals described above, the sale of Laguna Beach Resort
to Outrigger Hotels & Resorts did not involve a public company investor
and, as such, much of the transaction information remains confidential.
The transaction involved the Laguna Beach Resort (acquired last year by
RECAP) which was subsequently closed for a major renovation. The resort
is expected to be completed in 1Q 2013 and will open as the Outrigger
Resort & Spa.
Our Hotels & Hospitality Group is currently marketing two properties in
Phuket in the midscale and upscale segments, one of which is eligible for
BOI incentive allowing majority foreign ownership.
Elsewhere around the region, our Hotels & Hospitality Group has recently
successfully closed transactions in the Seychelles and Maldives where there
is strong investor demand for premium resort properties.
Figure 3: Hotel Transaction Volumes
Hotel Transaction Volumes in Thailand
(In THB billion)
18
16 15.2

The final transaction recorded in Phuket involved the sale of the Bundarika 14

Villas & Suites on Layan Beach to Minor Hotel Group. The deal, which was 12
worth USD 95 million or close to THB 3 billion, comprised of the existing 77
10
villas and suites on 23 rai of beachfront land, funds to refurbish the existing 8.4
7.9
8
property and further expansion on a 32 rai plot of land also acquired as part
of the transaction. The Siri Sathorn, a serviced apartment in the Saladaeng 6 5.5
4.7
area of Bangkok, was reportedly sold. The 111-room property was acquired 4
by a local business group from HKR International. Other smaller purchases
2 0.9
have also been reported in Bangkok, including a circa USD 10 million deal
by an Indian group.
2006 2007 2008 2009 2010 2011 2012
Source: Jones Lang LaSalle
4 OnPoint Spotlight on Thailand Hotel Investment Market

Phuket
One of Asias Strongest Hotel Markets in 2012
Phuket has emerged as Thailands strongest hotel market. As at year-
to-date (YTD) December 2012, Phuket showed a strong performance,
recording occupancy of 72.4% along with an Average Daily Rate (ADR) of
THB 3,902 which resulted in Revenue per Available Room (RevPAR) of THB
2,824, above other markets in Thailand, with the exception of Bangkoks
five-star hotel market. As at YTD December 2012, Phukets RevPAR was
10.1% above the same period last year. The strong hotel performance is
primarily due to the continual growth of international visitors, which have
risen steadily from 2.3 million in 2009 to 4.3 million in 2011.

As at YTD June 2012, visitor arrivals recorded a year-on-year increase of

9.7% to 2.7 million. The number of domestic visitors to Phuket also grew
from approximately 3.5 million in 2009 to 4.1 million in 2011. As at YTD June
2012, domestic visitors registered a 6.6% year-on-year growth to 1.2 million.

China, Russia, Korea and Australia markets were the fastest growing source
markets for Phuket. Between 2009 and 2011, China and Russia have Figure 4: Tourist Arrivals to Phuket
showed an impressive CAGR of 119% and 109% respectively, while Korea
Number of Arrivals FLOOD
and Australia grew by 38% and 37%, respectively. Sweden has remained as 9,000,000 70.0%
COUP
the only European country in the top five source markets following the global 60.0%
8,000,000 AIRPORT
economic crisis. CLOSURE
50.0%
TSUNAMI
7,000,000 GFC 40.0%
The total number of domestic and international tourists accounted for
approximately 6.0 million arrivals between 2007 and 2009, followed by 6,000,000 30.0%

a significant growth to 7.0 million in 2010 and almost 8.5 million in 2011. 5,000,000 9/11 SARS 20.0%
The fast pace of growth has put the islands infrastructure under pressure, 10.0%
especially the Phuket International Airport (PIA). Having exceeded its 4,000,000
0.0%
original handling capacity of 6.5 million passengers per year, PIA received 3,000,000 -10.0%
an estimated 9.4 million travellers in 2012. -20.0%
2,000,000
In early September 2012, the Airports Authority of Thailand announced -30.0%
1,000,000
the appointment of a main contractor to lead the THB 5.7 billion expansion -40.0%

of the PIA. The expanded airport will see the addition of an international - -50.0%
YTD YTD
passenger terminal, boosting its capacity to 12.5 million travellers a year. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
June June
2011 2012
An expanded airport is expected to attract major international carriers to Domestic Arrivals International Arrivals
fly direct to Phuket such as Emirates Dubai Phuket route which is set Note: 2001-2012 CAGR = 9.0%
to commence flights in December 2012 and direct flights from London Source: TAT, Jones Lang LaSalle
scheduled to commence in late 2013. Construction of the new terminal is
estimated to completion by 2015.

Despite the significant growth in hotel supply, with 2,756 additional rooms Table 1: Top 5 Source Markets to Phuket
anticipated by 2015, the increase in visitor arrivals has provided demand
2011 Growth 2010 - 2011
and the outlook remains positive. Given the current rate of growth, airport
expansion plans and an increase in affluent Asian travellers with greater China 342,890 76.6%
spending power, Phuket is poised to retain its position as one of Asias most Australia 273,084 26.7%
popular tourist and investment destinations.
Russia 266,998 46.6%
Korea 218,704 51.6%
Sweden 112,233 12.2%
Source: TAT
 OnPoint Spotlight on Thailand Hotel Investment Market 5

Bangkok
Conditions Improving as Demand Soaks Up Supply
Figure 5: Top Ten Source Markets YTD Nov 2012
The Bangkok hotel market has shown some signs of recovery over the
last 24 months. Strong visitor growth has benefitted the hotel industry, Germany
contributing to one of the fastest increases in RevPAR in the region. With 6%
Singapore China
most of the upcoming new supply scheduled to open in 2013 and assuming 6% 23%
the political situation remains stable, hotel trading performances are likely to
Australia
show healthy growth across the city. 7%

Since the onset of the global financial crisis, Bangkoks international USA
visitation bottomed in 2009 at 9.7 million travelers and has since entered a 8%

recovery phase. In 2010, visitor arrivals increased marginally to 10.4 million Japan
arrivals, with 2011 showing a healthy 18% growth to 12.3 million, almost UK 15%
8%
reaching the previous record in 2006. While 2011 did not finish as a record
year due to widespread cancellations caused by the floods, 2012 is strong Russia
8%
with 12.9 million visitor arrivals as at YTD November 2012, as compared to
India
11.2 million in the same period last year, representing a 15.2% increase. Korea 11%
9%
Bangkoks largest international source markets continue to be from Asia with Source: TAT
China, Japan, India and Korea representing the top four markets. China has
emerged as the top source market after overtaking Japan in 2010. In 2011,
Figure 6: Bangkok Hotel RevPARs
approximately 1.3 million Chinese visited Bangkok, reflecting a year-on-year
increase of almost 50%, followed by 1 million Japanese and almost 0.8 4,000
million Indian visitors. As at YTD November 2012, this trend has continued
3,500
with approximately 1.8 million Chinese, 1.2 million Japanese and 0.9 million
Indian visitors travelling to Bangkok. China showed a significant increase of 3,000
52.0% year-on- year in YTD November 2012.
2,500

As at YTD December 2012, RevPAR of the three-star and four-star hotels 2,000
showed an increase of 11.6% and 20.7% respectively. The five-star hotel
1,500
sector has been the best performer, with RevPAR having risen steadily from
a low base of 50.8% occupancy in 2010 and an ADR of THB 4,662 to 68.5% 1,000
occupancy and THB 4,956 as at YTD December 2012. This resulted in a
500
RevPAR of THB 3,396 as compared to THB 2,770 in YTD December 2011.
Despite a significant year-on-year increase of 35% in room supply in 2010*
2008 2009 2010 2011 YTD Dec 2012
and a further increase of 5% in 2011** to 91,032 rooms, the increase in hotel
performance is encouraging. 3-star 4-star 5-star Serviced Apartments
Source: STR Global
An estimated 8,000 rooms across all segments are in the future hotel
pipeline between 2013 and 2015, which may limit further RevPAR growth
in the short term. However, given the rate of land price appreciation, hotel Figure 7: Major Future Supply by Category*
projects will become harder to get off the ground, with a slower rate of new
room supply potentially assisting in a market recovery in the medium term.
We expect increasing hotel property transactions in the Bangkok market as
investors find it more feasible to purchase old assets, which may be selling 3-star 5-star
18.3% 31.1%
at 20-40% below the replacement cost, with a view to refurbish rather than
to build anew. We find that attractive investment opportunities exist in the
three-star market segment, which generally provides the highest internal
rate of return (IRR) and comprises the smallest portion of major future
supply in the Bangkok market.

* Office of Tourism Development

4-star
**Tourism Thailand Marketing Database 50.5%

*excludes projects on hold/deferred

Source: Jones Lang LaSalle
6 OnPoint Spotlight on Thailand Hotel Investment Market
Market Snapshot
Pattaya
The Pattaya tourism market is one of Thailands key markets with total
revenue of THB 87.8 billion in 2011. Total visitors to Pattaya increased by
8.2% from 8.3 million in 2010 to 8.9 million visitors in 2011. Russia continues
to be Pattayas top source market with 2.2 million visitors in 2011. Overall,
the top three source markets, Russia, China and Germany, make up 56.6%
of the total international visitors. One of the fastest growing markets is the
Middle Eastern market, rising from 214,000 in 2010 to 389,000 visitors in
2011.
Pattaya benefits from its close proximity to the Bangkok Suvarnabhumi
Airport and having its own airport, the U-Tapao Airport, which is an emerging
international gateway. Bangkok Airways flies from Pattaya U-Tapao to
Samui and Phuket. Solar Air has launched two new routes in November
2012, with a capacity of 18 passengers per flight from Pattaya to Siem Reap
and to Chumporn. Majority of the flights are chartered flights to U-Tapao
from Kazakhstan and Russia with about 200 passengers per flight. During
the peak season from October to April, there are three to four chartered
flights per day. The average length of stay for the tourists from Russia
and Kazakhstan is seven days, while the average length of stay for other
international tourists is 3.37 days and 3.06 days for domestic tourists.
In early November 2012, the Ministry of Transport announced the expansion
and renovation of U-Tapao Airport to increase commercial flight capacity
during peak season. The expansion will raise the airport capacity from
750 passengers per hour to 1,500 passengers per hour. The expansion
project includes constructing a new terminal, improving existing departure
and arrival concourses and replacing old technology with state-of-the-art
technology and equipment. It is expected to be completed in June 2013.
According to the latest data available, there were 394 registered hotels with
an estimated 48,741 rooms in 2011, showing a year-on-year increase of
0.7%. Hotel occupancy rates dropped significantly from 57.5% in 2007 to
41.7% in 2008. However, according to the latest data available, as at YTD
July 2011, marketwide occupancy has recovered to 50.6% from 46.4% in
2010, representing a 4.2 percentage point increase. Pattaya hotel trading
performance is expected to improve as demand continues to increase year
on year. Notable hotel openings in 2012 are a 192-room Tune Hotel Pattaya
located on Second Road and a budget and boutique hotel, B2 The View
Figure 8: Pattaya International Arrivals and Room Occupancy
Number of arrivals Occupancy (%)
7,000,000 70.0%
6,000,000 60.0%
5,000,000 50.0%
4,000,000 40.0%
3,000,000 30.0%
2,000,000 20.0%
1,000,000 10.0%
0 0.0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
International Tourists Room Occupancy*
*Latest room occupancy data is 2010
Source: TAT
and Cape Dara. Most of the future hotel supply in Pattaya is concentrated
in the Jomtien area, making up 41.3% of the supply. Approximately 1,854
new rooms will be added to the market from 2013 to 2016. Internationally
branded hotels opening in the next few years are the Movenpick Resort &
Spa and the Holiday Inn Express. The investment market in Pattaya remains
opaque with a transaction reported in early 2011 of an approximately 75-
key boutique hotel and another in late 2011 of the Mercure Hotel Pattaya.
Unconfirmed reports suggest hotels continue to trade directly between
owners and investors.
Samui
Samui is predominantly an international market with 84.1% of foreign
visitors. Visitor arrivals to Samui hit a record high of 1.8 million visitors in
2007. However, the number dropped significantly to 0.9 million visitors in
2008 as a consequence of the global financial crisis. In 2011, visitation to
Samui remains at 0.8 million, limited by perennially low and expensive airlift.
However, there is a potential increase in daily flights from 38 to 50 which will
raise the seat capacity by over 40%.
According to the latest available data, Samuis top source markets in 2011
were Germany, United Kingdom (UK) and Australia. The islands emerging
markets are Spain, China, the Middle East and Korea. Samui attracts
honeymooners from Korea - which helps soak up supply during the low
season while Europeans usually visit during the high season. The number of
visitors from Korea grew by 26.3% in 2011 to 5,858 visitors.
The Department of Civil Aviation is considering building a new airport on a
2,000 rai plot in Don Sak, a 45-minute ferry ride to the island. Apart from the
airport, the project will feature a ferry dock as well as a hotel. This is still in
its initial planning stage with required investment of THB 7 billion.
Future supply includes Vana Belle Samui and an 89-room Movenpick Resort
& Spa Mae Nam Beach opening in 2013. Major hotel transactions in Samui
in recent years include the sales of Samui Buri Beach Resort (formerly
Mercure Samui Buri Resort) sold to a property fund and the InterContinental
Samui Baan Taling Ngam (formerly Baan Taling Ngam Resort & Spa) sold
by Jones Lang LaSalles Hotels & Hospitality Group in 2010 to a group of
private investors
Figure 9: International Visitor Arrivals to Samui
Number of Visitor (million) Annual Growth (%)
1.00 20.0%
0.90 15.0%
0.80 10.0%
0.70
5.0%
0.60
0.0%
0.50
-5.0%
0.40
-10.0%
0.30
0.20 -15.0%
0.10 -20.0%
0.00 -25.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
No. of Visitors (million) Annual Growth (%)
Source: Jones Lang LaSalle, TAT
 OnPoint Spotlight on Thailand Hotel Investment Market 7

Chiang Mai
Figure 10: Visitor Arrivals to Chiang Mai
Chiang Mai welcomed 5.6 million visitors in 2011, a 12.3% increase when
compared to 2010. Chiang Mai is primarily a domestic market, as Thais Number of Arrivals in Millions
6.0
make up 64.3% of the total visitors. Top international source markets to
Chiang Mai comprise the US, France, Japan, UK and Australia. The Middle 5.0
East showed the strongest growth in 2011 at 264.9% although it is not
part of the top ten visitor arrivals, while the top market, the US, also grew 4.0
strongly by 43.9%.
3.0
International air connections to Chiang Mai are improving with Thai AirAsia
having launched daily flights from Chiang Mai to Macau in May 2012. 2.0
Dragonair has also started a new route from Hong Kong to Chiang Mai with
1.0
four flights weekly from July to September. The new flight will further grow
demand from this emerging source market as Chiang Mai has seen the 0.0
number of visitors from Hong Kong double from 8,000 to 16,000 visitors 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
in 2011.
International Arrivals Domestic Arrivals

Currently, there are 543 hotels totaling 27,369 rooms in Chiang Mai. Most of Source: Jones Lang LaSalle, TAT
the new openings in Chiang Mai are independently owned/ owner-operated
boutique hotels. A prominent future opening in 2013 is the renowned
boutique hotel chain, the Sala. Sala lanna Chiangmai, a 16-room boutique Table 2: Top 5 Source Markets to Chiang Mai by Country
hotel, will be opened in March 2013. Hotel occupancy in Chiangmai
of Residence
increased for the first time in YTD July 2011 after a continuous drop since 2011 Growth 2010 - 2011
2008. Chiangmai market wide occupancy rate in YTD July 2011 is 33.5%.
USA 223,457 43.9%
France 150,499 49.7%
Japan 144,905 6.6%
UK 140,413 56.3%
Australia 130,492 42.0%
Source: TAT
Jones Lang LaSalles Hotels & Hospitality offices
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Thailand Haryana, India
tel +66 2 624 6400 tel +91 124 331 9600
fax +66 2 679 6519 fax +91 124 460 5001
Beijing Shanghai
11/F China World Tower 25/F Tower 2 Plaza 66
1 Jianguomenwai Avenue 1366 Nanjing Road (West)
Beijing 100004 Jing An District
China (PRC) Shanghai 200040, China (PRC)
tel +86 10 5922 1300 tel +86 21 6393 3333
fax +86 10 5922 1346 fax +86 21 6393 7890
Chengdu Singapore
30/F, Tower 1, Plaza Central 9 Raffles Place
8 Shuncheng Avenue #39-00 Republic Plaza
Chengdu 610016 Singapore 048619
Sichuan, China (PRC) tel +65 6536 0606
tel +86 28 6680 5000 fax +65 6533 2107
fax +86 28 6680 5096
Tokyo
Jakarta 4th Floor, Prudential Tower
Indonesia Stock Exchange Building 2-13-10 Nagatacho
Building Tower 2, 19th Floor Chiyoda-ku
Sudirman Central, Business District Tokyo 100-0014, Japan
Jl. Jend Sudirman Kav 52-53 tel +81 3 5501 9240
Jakarta 12190, Indonesia fax +81 3 5501 9211
tel +62 21 2922 3888
fax +62 21 515 3232

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