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.