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Discounting costs Phuket hotels 300 million dollars

The Phuket Hotel Market Update summarized that 2.9 million tourist arrivals visited Phuket in 2009 with a island-wide average occupancy of 64 per cent. Average rates and revenue per occupied room slumped by 20 per cent and 22 per cent versus 2008. Despite tourism arrivals rebounding to 2007 levels, profits at Phuket’s hotels have been hit by island-wide discounting as almost all hoteliers scramble to induce demand and meet consumer pressure for lower rates.

Daniel Lorenzzo

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Phuket top tourist destination

Despite tourism arrivals rebounding to 2007 levels, profits at Phuket’s hotels have been hit by island-wide discounting as almost all hoteliers scramble to induce demand and meet consumer pressure for lower rates.

The Phuket Hotel Market Update summarized that 2.9 million tourist arrivals visited Phuket in 2009 with a island-wide average occupancy of 64 per cent. Average rates and revenue per occupied room slumped by 20 per cent and 22 per cent versus 2008.

Investment has also been hit with the suspension of significant projects due to economic and political concerns, shrinking 19 per cent of the new hotel supply. The pipeline now has 31 properties set to open over the next three years, representing 4,600 rooms and equates to a 12 per cent rise over the existing market.

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Thailand: Discounting costs Phuket hotel industry US$300 million.

Thailand Property Outlook

Although the Thai real estate industry has continued growing significantly since 2008, we have not seen a real estate bubble environment manifesting. The industry seems to have learned its lessons during the 1997 financial crisis and has successfully implemented the following safeguards: The banking industry has become much more cautious providing project financing and mortgage loans.
Thailand is member of the ASEAN (Association of Southeast Asian Nations) trade bloc and has free trade agreements with India and China, two fast-developing economic powerhouses. Consequently, many multinational companies are using the country as a regional base for its operations or a place to station employees who travel around Asia. Foreign investment in Thailand is constantly expanding, supporting the strong economic growth of the country.

Many Real estate developers in Thailand have developed and implemented market research technologies and monitor the market closely.

The 2008 Thai real estate market is fairly robust. However, any thorough analysis requires detailed supply and demand studies of each specific area. A thorough analysis will indicate the market risks associated with each location. The Impact of 2008 Global Financial Crisis on Thai Real Estate is invevitable. The 2008 US global financial crisis is impacting global financial and real-sector economies devastatingly. Because Thailand is inextricably linked to the global economy, it will also inevitably experience its ill-effects

Thailand: Discounting costs Phuket hotel industry US$300 million.

Any fall in domestic savings will impact Thai Real Estate Market corporate funding and investment. Mortgage loans will be more difficult to obtain : The slowing economy will force Thailand’s banks to be more restrictive in their lending practices. Mortgage loans will be more difficult to acquire with rejection rates rising. Lower supply : Responding to slowing market conditions, developers will lower their risks by building fewer homes and reducing supply. New housing supply will also be reduced because developers will have more difficulty obtaining equity, bond and credit market financing because of the global financial crisis. Investors earn income from rentals. If the economy turns bad, rental rates and occupancy rate in Thailand may fall, forcing many investors to become sellers. When speculators and investors become sellers, extra supply is thrown into the market. Demand and supply pressure are exerting negative sentiments on the Thai real estate market in 2008-2009. However, some developers view the situation as an opportunity. Small developers will react immediately to the negative consumer sentiment by reducing new housing construction, providing larger developers an opportunity to gain market share in the Thai real estate market for 2009. Large development companies with strong reputations, strong balance sheets, and higher operational efficiencies will the first to benefit once the market turns around.

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