THAILAND HOTELS Overbuilding In Economic Cycle Mismatch

Posted: 02 Feb 2010 | 6:00 am

A growing concern in Thailand is becoming evident back of the cancellation or postponement of hotel projects in the development pipeline. The timing of hotel s which can be a long term process are often out of alignment with economic and supply/demand cycles that can potentially throw the financial viability of projects into negative territory.

Bangkok has witnessed a number of these when you take a ride down Sukhumvit Road and the past reminders of the excesses of vaunted Lehman's and even Grande Assets who's towering skeletons rise above the skyline. Of more concern is the sharp rise of new hotels opened over the past 12 months and what appears to be an unabated supply line for the next 12-24 months.

Prospects to see a continued flattening of rate growth and inevitable declines in leading metric RevPAR create an industry resembling an overgrown giant trying to fit into pants two sizes too small. Viewing Phuket's pipeline the same issues are now hitting closer to home, and while the political and economic events of the past few years are somehow rationalizing investment levels in hotel grade assets, the sins of the past are going to come due very very soon.

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