The serviced apartment market

Apartment glut possible

Colliers International Thailand anticipates tougher competition in the serviced apartment market and has urged owners and to refocus their marketing strategy, said managing director Patima Jeerapaet.

The company’s research shows that by 2011, there will be 27 billion baht worth of investments in 38 new buildings, adding 6,580 units to total supply.

Mr Patima said the lower cost of investment and operation had attracted many investors to serviced apartments, instead of building hotels.

Risinee Sarikaputra, Colliers’ research department manager, said there currently were 10,685 units in 75 serviced apartment buildings in Bangkok with an average occupancy rate of 83.33% last year.

However, the increase in demand has lagged the increase in supply. Supply on a room-night basis increased by 167% year-on-year in 2007 as against roomnight demand of only 9.3%.

The traditional main business of serviced apartments has been expatriates residing in Bangkok for a period of more than one month. However, current core demand comprises two groups — new expat arrivals in Bangkok and shortstay tourists and business travellers.

Mr Patima said competition has meant that many apartments had shifted more to the short-stay market — as many as 65% of guests in some buildings.

He said that if the hotel market was too competitive, hoteliers would cut prices and cause a knock-on effect on serviced apartments. Therefore, apartment operators need well-planned marketing strategies to achieve sales targets.

‘‘With many new hotels also opening in Bangkok over the new few years, the more successful serviced apartments are likely to be the ones focused on the core longer-stay market and offering guests staying more than one month a product that meets their requirements, rather than those engaging in a price-cutting war with hotels,’’ he added.

The breakdown of new supply shows a strong concentration in the Sukhumvit area, with 3,659 new units, or 56% of the new supply that Colliers forecasts will enter the market by 2011.

Colliers International Thailand anticipates tougher competition in the serviced apartment market and has urged owners and to refocus their marketing strategy, said managing director Patima Jeerapaet.

The company’s research shows that by 2011, there will be 27 billion baht worth of investments in 38 new buildings, adding 6,580 units to total supply.

Mr Patima said the lower cost of investment and operation had attracted many investors to serviced apartments, instead of building hotels.

Risinee Sarikaputra, Colliers’ research department manager, said there currently were 10,685 units in 75 serviced apartment buildings in Bangkok with an average occupancy rate of 83.33% last year.

However, the increase in demand has lagged the increase in supply. Supply on a room-night basis increased by 167% year-on-year in 2007 as against roomnight demand of only 9.3%.

The traditional main business of serviced apartments has been expatriates residing in Bangkok for a period of more than one month. However, current core demand comprises two groups — new expat arrivals in Bangkok and shortstay tourists and business travellers.

Mr Patima said competition has meant that many apartments had shifted more to the short-stay market — as many as 65% of guests in some buildings.

He said that if the hotel market was too competitive, hoteliers would cut prices and cause a knock-on effect on serviced apartments. Therefore, apartment operators need well-planned marketing strategies to achieve sales targets.

‘‘With many new hotels also opening in Bangkok over the new few years, the more successful serviced apartments are likely to be the ones focused on the core longer-stay market and offering guests staying more than one month a product that meets their requirements, rather than those engaging in a price-cutting war with hotels,’’ he added.

The breakdown of new supply shows a strong concentration in the Sukhumvit area, with 3,659 new units, or 56% of the new supply that Colliers forecasts will enter the market by 2011.