Holiday Rentals Now Target Hotel Customers
As we move through the current property cycle in Phuket, with a flattening of demand and continued growth in supply, there looks to be a shift in strategies being used in the property business.
The resort-grade villa and condo market, which has seen spectacular growth over the past five years, is now seeing many projects and free-standing units reach completion. When the boom began, the majority of buyers were end users. But as transactions gained momentum and capital speculation rose annually in double digits, in came the speculators and investors.
Now that we've reached 2009, initial purchasers who are looking to take their profits and bow out are finding it's not that easy to cash in. A longer – term and – dare we say it? – more fundamentally stable horizon is now the view from the island, so the question exercising the minds of these initial purchasers is how to tap into short-term yields in order to cover operating costs and reduce their investment risk. Their market is further complicated by those projects that are now either in development or at an early stage where they need to stimulate sales to keep cash flowing in the system.
Over five years the island has grown from "developing” to its first segmentation, with the arrival of a bona fide resale market. Given the increasing supply, there is now momentum in longer-term rentals, and what appears to be emerging is a holiday-rental market for all of those 'resort villas and condos. In Bali the number of units to rent reached critical mass as early as the mid 1990's, but Phuket seemed to miss out on that trend until the past couple of years.
Early projects to sell on a lifestyle and rental aspect were Amanpuri and Banyan Tree, which allowed the island to lay claim to being the birthplace of the modern tropical pool villa model. Then came Allamanda at Laguna Phuket and more recently we have seen foreign management groups like Hawaii's Outrigger Group and Moevenpiek from the Netherlands brand residences, in order to fast-track their chain expansion.
A number of property agents such as Phuket Island Property Services, Shibumi, Knight Frank and Phuket Villas and Homes are now aggressively marketing vacation rentals, mostly via the Internet. Travel wholesalers are now seeing demand for "personal non-traditional accommodation” from tourists who used to stay in hotels.
As the market becomes more mature with added competition, a situation will probably emerge that is similar to that seen a few years ago in Bangkok, where the Hotel Act had to be revised after serviced apartments began to compete head-to-head with hotels through tax and licensing loopholes. At present, however, there is no legal way many free-standing units or even estates can obtain a hotel license that could attract the same kinds of taxation hotels must pay. Perhaps the biggest factor in marketing these villa and condo units as holiday rentals is the Internet, which has leveled the playing field for small and large businesses alike. At the end of the day, consumers are winning out, because renting an entire villa or large condo unit is much cheaper than spending the same time in a hotel. And in the bigger scheme of things, the possibility of turning renters into buyers is a pot at the end of the rainbow the astute real-estate agents.
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