Developers return to Koh Samui

Builders to resume work on projects as government dispels uncertainty about FBA

The Koh Samui property market is poised to stage a recovery this year, following the government’s decision to relax the Foreign Business Act (FBA), says property expert Pisarn Tangkasombat.

He said demand for residential projects on Koh Samui doubled in 2006 from the year before but that most developers suspended projects after the previous government tightened the FBA and announced stricter norms on land holding and construction licences for developing residential projects.

Pisarn, also president of the Arayaburi Group, which owns five hotels and resorts on Koh Samui, said most developers – foreign investors and local developers who were partnering foreign investors – had suspended the launch of new projects and work on existing ones. This was because of uncertainty surrounding the Act, as they were not sure whether their projects would be considered illegal.

However, Pisarn said after the new government outlined a clear policy regarding the FBA, developers who had planned projects on Koh Samui would restart work soon.

Some foreign investors will now begin work on their projects in collaboration with local partners, while others have decided to sell their projects to local developers, he said.

“We believe the property market, especially the residential segment, will stage a recovery this year, as the government has announced a clear policy regarding the Foreign Business Act,” Pisarn said.

Research by CB Richard Ellis has shown that Koh Samui, Asia’s emerging “boutique” resort island, is seeing significant growth.

Last year, the island had 1.5 million visitors, up from 600,000 in 2000.

The research also indicates that the number of tourists heading to the island may rise once Thai Airways increases the number of flights on the Bangkok-Samui-Bangkok route to two a day.

The number of airport arrivals this year is expected to surpass 2 million after this.

“ The improved connectivity will be a key factor in supporting growth in the area’s property market. CB Richard Ellis expects increased demand for homes,” said CB Richard Ellis Samui manager Prakaipeth Meechoosarn.

CB Richard Ellis remains confident of the long-term prospects of the Thai resort market.

Last year, the company opened two offices – on Koh Samui and in Pattaya – as part of its plan to expand its network in Thailand. The research said land prices in Koh Samui continued to rise last year even though the number of individual transactions dropped, due mainly to the uncertainty surrounding the FBA.

Last year, the value of property transactions in Samui was estimated at an average of Bt413 million a month, down from an average of Bt450 million in 2006.

Since last December’s general election, reports of viewings and bookings have risen. The type of residential projects most popular on Koh Samui is luxury villas.

Seventy per cent of the villas are priced at below US$1 million (Bt31.65 million).

CB Richard Ellis is now witnessing more developments within a price range of $2 million to $3 million. And as the luxury- villa sector on Koh Samui grows, chances are prices may move to a level that is on a par with Phuket, at least for the top end of the market.
SOMLUCK SRIMALEE THE NATION

ERAWAN has BT9-BN Plan To double revenues

Group embarks on biggest expansion drive in 25 years

The Erawan Group last week revealed a three-year, Bt9billion development plan focused on the hotel business.

It will build 12 hotels in the country in a bid to raise revenue from Bt3.2 billion last year to Bt6 billion in 2010.

This will be Erawan’s biggest expansion since the group was established 25 years ago. It is now diversifying into hotels after running a property business for more than two decades.

The group has already spent Bt4 billion on the first phase, and the remaining Bt5 billion is set for ongoing and future projects.

The group plans to add 2,300 rooms to the existing 1,200 in four hotels: the Grand Hyatt Erawan, JW Marriott, Courtyard by Marriott and Renaissance Samui.

President and CEO Kasama Punyagupta said the group had made solid achievements since he took charge in 2006. At the time, the group decided to sell its leasehold Amarin Tower to the landowner to reduce risks and later entered the hotel sector.

Five hotels with 1,000 rooms will be built this year, the first a five-star property with 61 pool villas located on Koh Naka off Phuket. It will be managed by Six Senses Resorts and Spas.

The other four will be budget hotels located in central Pattaya and on Koh Samui, Phuket’s Patong Beach and Bangkok’s South Sathorn Road. They will be run by Accor’s Ibis Division.

Next year will see six new hotels with about 1,100 rooms. One will be the Holiday Inn Pattaya. The others will carry the Ibis brand: in the Nana area and on Charoennakorn Road in Bangkok, as well as in Chon Buri’s Sri Racha district, Krabi and Phuket.

And 2010 will usher in the final hotel in the plan: an Ibis in Hua Hin.

“We’re using our own money for all of the development,” Kasama said. “ The group has now become a hotel developer, and we’re confident we’re on the right track. We’re allowing professionals to manage all of the properties instead of doing it ourselves.”

The group projects revenue increasing from Bt3.2 billion last year to Bt4 billion this year, Bt5 billion next year and Bt6 billion in 2010.

Hotel and leisure will contribute up to 90 per cent of operating cash flow in 2010, up 30 per cent year per year. The non-hotel business will remain at 10 per cent of cash flow over the next two years.

Kasama said the group had positioned itself as one of the leading profitable companies on the stock exchange, one that offered sustainable growth for shareholders.

To strengthen its competitiveness, the group has reorganised by creating several departments, including hotel investment and hotel development. More professionals have been recruited from outside, especially from the hospitality industry, while some staff were let go.

The group has no worries over the many threats at this time. It said the US sub-prime crisis, currency fluctuations and global economic downturn were not jeopardising its expansion.

“ Thailand remains strong and good for investment,” Kasama said.

The 12 new hotels, ranging from economy to luxury, along with backing from global hotel chain operators will strengthen the group’s competitiveness with all players.

The group sees Thailand itself, particularly its culture, sites and world-renowned hospitality, as key to wooing international tourists to the Kingdom.

SUCHAT SRITAMATHE NATION

Marriott Thailand in major expansion.

Marriott International plans to open 11 hotels and serviced apartments in Bangkok, Phuket and Hua Hin between 2008 and 2010 due to the brighter outlook of the tourism industry, says Panjit Howe, the country’s director of human resources.

She said the tourism industry had been more active since the country’s political situation improved. However, competition in the hotel business on Sukhumvit Road is higher, with the entry of almost every major global brand.

‘‘Last year, all hotels in the central business district faced a drop in occupancy rates. This year they will pick up,’’ she said. The occupancy rate at the JW Marriott Hotel Bangkok declined from 81.9% to 78.5% but is expected to improve to 82.7% by the end of 2008.

In Bangkok, Marriott plans to open the luxury brand Renaissance at two locations: 333 rooms at the Ratchaprasong junction behind Maneeya Center this year and 310 rooms on Sukhumvit in 2010.

As serviced apartments have become a more popular alternative for guests, the hotel will also open three new Marriott Executive Apartments: 195 rooms on Soi Suan Plu off Sathon Road in 2008, 300 rooms on Sukhumvit 24 and 310 rooms near Benjasiri Park in 2010.

In Phuket, it will open two luxury resorts: Phuket Marriott Resort & Spa with 202 rooms this year, and Renaissance Phuket Resort & Spa with 175 rooms in 2010, with a targeted 80% occupancy rate in the first year, said Mrs Panjit.

To tap the economy segment in popular beach destinations, it plans three Courtyard hotels in Phuket: on Patong Beach with 399 rooms, Surin Beach with 256 rooms and Kamala Beach with 180 rooms and another 243-room Courtyard on Cha-am Beach within the year.

The opening rates at Courtyard in Phuket will range from 4,000 to 11,000 baht a night during the low season, 5,500 to 12,000 baht in the shoulder season (the period between the high and low seasons) and 9,500 to 19,500 baht in the high season. The average occupancy rate is targeted at 60% for the first-year operation.

‘‘Given such big expansion, we need to have around new 50 managers and 2,200 hotel staff,’’ said the humanresources director who joined the hotel 10 years ago.

‘‘It’s not only the building, the brand or the marketing plan that leads to a hotel’s success but it’s a spirit to serve which is hard to maintain,’’ said Mrs Panjit, adding that the hotel group’s staff turnover rate was 20% compared to the market’s average of 25%.

Marriott also has a time-sharing business under Marriott Vacation Club International, with at least 250 rooms at the JW Marriott Phuket Resort & Spa. The Phuket Marriott at Kamala Beach and Renaissance Phuket will join this vacation ownership property business in 2008 and 2010, respectively.

Since starting in 2001, it now has a total of 6,000 members and more than half of them are Thais. Membership fees start at US$12,000 or 360,000 baht for eight years. Each member can spend seven nights a year at any of 52 destinations under the chain worldwide.
KANANA KATHARANGSIPORN