Holy Grail Phuket Hotels for Sale

A chill swept through me yesterday despite the 30 degree weather as I read the front page of The Nation yesterday which announced more then 100 hotels for sale and touted a hospitality industry facing catastrophic crises. Phuket was mentioned to have 28 hotels for sale, though no names were mentioned and the article contained only vague references to a property sales representative in Koh Samui.

While things are grim for tourism at the moment I found the article a bit light on facts and written in a sensational manner that will only spur a series of unfortunate news about Thailand abroad. Again negative sentiment attracts the news more then reality and shotgun blasts are becoming far more common these days then direct and pinpoint accuracy.

Not a week has passed this year when an overseas or Bangkok investor calls, emails or visits the office and asks about a cheap distressed hotel for sale they can buy. More often then not the price they have in mind is a fraction of the development or replacement cost of existing product and they seem to think the island is a virtual 7-11 of hotels deals.

Over the past 3-4 years there have been a limited amount of hotel transactions. Banner sites sold included the Crowne Plaza which is now Moevenpick in Karon, Kamala Bay Terrace, two properties in Kata and the present Courtyards in Patong, Kamala and Surin which were purchased, renovated and branded by Destination Hotels. Lehman's was a big player a few years ago, including the Novotel in Panwa.

Today as we sit there are not that many new hotels which entered the supply stream in the boom years and are not struggling under debt. The island is a strong regional player performance wise, labor costs are low and gross operating profits when rates and occupancies are high hit the 40-50% and above. Like real estate the present market does have some distress in it and a handful of hotels are indeed for sale, though they are not in danger of immanent closure nor repossession by the banks.

At the end of the day Phuket's hospitality market is strong on fundamentals but currently suffers from an omnibus approach to being lumped into the entire Thai basket of issues and problems While we welcome hotel buyers here, and certainly there will be transactions in the near future the iconic 28 seems to have been plucked from thin air.

DO YOU LIKE THIS?

Finding a journalist with real knowledge and intelligence about the hotel real estate sector is like trying to find a banker's representative in Asia with more than a passing knowledge of hospitality real estate investment, it's realtive values, or relaible and regional histories. That is clearly a distinct difference we continue to face from that found in many overseas mature markets - where hotels have longer been a source of often more sensible investment and certainly deeper and more frequent, balanced research (and where, in more transparency, hotels are often sought after by Asian based investors).
So too have we here seen further irresponsible journalism in Asia, under-managed by venal or sloppy, irresponsible publishers, create situations that frustrate sensible commercial resolution in most instances, and that would be laughed off the front pages by other journalists and commentators more reliable and informed in other parts of the world as we should more often here. Happy to see you trying with the rest of us to bring a sense of reality to the hotel real estate scene in Asia and it's reportage - I just hope those calls you've returned to such enquiries were collect and not at your own expense to add to the frustraion we all face every day in this market!
Keep the Faith!
Fly the Flag for Facts not Fiction! Kevin B Murphy

Kevin B Murphy, 26 May 2009 | 3:06 pm

Mr Barnett kindly put me on your mailing list for hotels for sale on Phuket. I have have interest!! Thank you!

Sean, 18 May 2009 | 9:35 pm

Hello Bill
I know a number of large hotels, resorts and development projects which are ''up for sale''. The problem for them is they do not want to make it public for a number of reasons. The report in The Nation is probably not far wrong, but can never be verified due to the owner’s unwillingness to go public. We are all feeling the current economic situation, and whilst I admire your optimism and understanding of the hotel sector, I cannot believe that it is immune from what is happening around the world. All of us want this island to continue to grow, but the raw facts are, tourism and investment is down and unless it picks up these headlines will continue to appear.

Bill Barnett responds:
Thanks good comments indeed. Sentiment often outpaces reality so lets hope we see the light at the end of the tunnel on this sort of stories soon.

Simon Youens, 14 May 2009 | 11:00 am

Bill, please put me on your top priority mailing list for the cheap hotel sales in Phuket, my owners will be buying today. rgds,Wolfgang

Bill Barnett responds:
Will do though its a long list and growing. The Nation article is getting huge reprints and not a day is passing without a call asking for a cheap, distressed asset in Phuket? We havent seen many of these but maybe they are laying low in rainy season.

Wolfgang.Meusburger, 14 May 2009 | 10:09 am

Correct. We have been offering The Mangosteen for sale, mainly because the market is changing. More branded hotels are now competing, so we are also looking for an alliance. We have plenty of empty land to be developed as well and no capital to do so. Interested buyers however are waiting if it gets any cheaper and we must dissapoint them. The Nation article is obviously not helpful and partly incorrect. I also doubt the sales prices stated there are right. What would a hotel owner answer if The Nation calls and asks for a price? I would probably double it! But I think everybody agrees that the market is likely to bounce back next year and than less hotels will be offered for sale.

Hajo Von Keller, 14 May 2009 | 8:15 am