TO DISCUSS YOUR PROJECT OR LEARN MORE ABOUT OUR SERVICES:

  • This field is for validation purposes and should be left unchanged.

Major Pricing Imbalance Holding Up Hotel Transactions

Category: Hotels, Posted:13 Jun 2009 | 07:12 am

As hotel values across the world and the region are declining, here in Phuket there remains a major obstacle in seeing hotel transactions take place. We've seen a number of properties come into the market such as the Four Seasons site in Rawai, and a variety of smaller boutique hotels in Phuket and off the island. Recently I received a circular from property agent Colliers Thailand about an existing 52 key property in Surin for sale; and the next day an email from ERA Realty in Singapore for the Baan Yin Dee Resort in south Patong priced at US$5 million for 21 rooms.
Clearly the gap between what buyers and sellers are willing to transact remain at odds with each other, though we do see solid projects such as Laem Ka in Rawai that looks like it will be sold. For the others it's much like the Blues Brothers song about a 'wish sandwich' where you have two slices of bread and wish you had some meat.
Hotels for the most part are valued on cash flow and sold on a discounted cash flow projection; not replacement value. Barring trophy assets, there is business logic to valuation which goes by the numbers. Having been in Asia in 1997 when a flood of hotel sales was expected to mimic a giant flea market; in the end very few properties sold at the time. While there will be sales during the next few years it's not going to be at volumes or prices where expectations are to purchase at pennies to the dollar.
For new hotels or assets who are highly leveraged the reality is pricing will have to be adjusted if a transaction will take place, and certainly losses realized. As for those owners putting up hotel assets at premium prices back of a wish and a prayer, it's a bit like polishing up new cars at an automotive dealership in the US. It might look good but it's not going anywhere soon.

Other News

Read more

Phuket Lifts Travel Restrictions For Bangkok Travelers

Category: Tourism, Posted:24 Jan 2021 | 20:35 pm Good news. Phuket province has eased travel restrictions for visitors from Bangkok and Samut Prakan to the island. The move effectively removes the 14-day quarantine period. A key catalyst in the policy change has reportedly been expected high levels of travel during the Chinese New Year period next month. Travelers are still required to use […]
Read more

Go Ahead. Get Your Ya-Ya’s Out

Category: Tourism, Posted:17 Jan 2021 | 06:00 am Close your eyes. Go ahead. Remember a time when you were young. The magic as a kid, taking blankets, sheets, or even boxes and creating a fantastical tent or unique crazed getaway in the house. Letting your imagination go wild and take you on a journey to incredible places. Or pitching a tent in the […]
Read more

Is Thailand Ready For Legalized Gambling?

Category: Tourism, Posted:16 Jan 2021 | 13:38 pm Topping Thailand’s economic news are comments by the Prime Minister that he is willing to consider opening up gambling, according to the Bangkok Post. With the Thai economy struggling at funding an economic recovery process that has been under extreme duress by Covid-19, the question now will the pandemic be an accelerator of a long-lasting […]