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Rust Never Sleeps, or Does it?

Author: Bill Barnett. Category: News Column - Phuket Gazette. Posted: 9th Jun 2012

Sunday is on my mind, as short bursts of staccato motorbikes fire down the road outside. A little early morning surfing brings up a concert review in the LA Times of the Van Halen reunion concert which even brought back David Lee Roth into a revival of arena rock.

The writer's closing epitaph somehow resonates by saying "nostalgia, by definition, seldom moves a person forward, rarely satisfies in the long run..." I've recently done a series of market research projects in Pattaya.

Oooosh, there it goes, that long sequential silence that is often accompanied by strange looks, eyes turn downward and the dirty little secret is out of the box.

What is it about the very word Pattaya that causes such a catechism of shame and discomfort? Is it that the destination is still stuck in the 60s and 70s, when it started as a Vietnam R'n'R center for soldiers? Or is it that the collective mindset of the masses is still entrenched in the past.

By numbers alone, the resort destination is a shining star on Thailand's tourism scene. This year it's expected that over 8 million hotel guests will spend a night in Pattaya.

More startling is the fact that internationally operated hotels hit a 74% annual occupancy in 2011, 8% up over the broader market.

Tracing the turning point takes you back to 2008 when things got ugly. First with a slap in the face from the Global Financial Crisis (GFC), and then in the ensuing year came the start of Thailand's political woes. A kick drum thump sparked the upturn in 2010, when tourist arrivals doubled from those dog days in 2008.

What changed the destination? A number of things. Certainly the development of Central Festival's Shopping Mall which is touted as Asia's largest beach fronting retail complex. As Suvarnabhumi airport further developed traction along with the impressive roadway system to Bangkok, domestic visitors were the primary drivers of demand.

In the aftermath of the GFC there was a spike in Asia's middle class growth and that was the sweet spot. Regional tourism also rose, and Eastern Europe become Thailand's "go to market" with charters flying into nearby U-Tapao International Airport. Passenger traffic between 2010 and 2011 grew by 39% at the latter facility.

A spin off beneficiary of the tourism boom to the area was residential property, which has been a true success story over the past few years. Pattaya real estate has been traded fast and furious, and, outside of Bangkok, has the highest level of market transactions of residential property in Thailand.

While foreign dominated markets such as Phuket and Koh Samui went quiet for longer than I'd like to think, Pattaya geared up with domestic demand supplemented by overseas buyers of smallish condos in high-rise complexes.

Of course the makeover remains a work in progress these days, but looking at what is creating a new market includes the economic activity in the Eastern Seaboard. After Japan's tsunami, automobile and automotive parts manufacturing have continued to grow in scale and exports from this sector have continued to surge.

If you say to a casual observer that hotels in the market have strong corporate demand, you often get a look of disbelief, but the facts on the ground bear this out. A few key players have balanced segmentation between leisure and business guests.

Looking into the future, what bodes well for Pattaya is a strong investment pattern of international tourism attractions into the catchment area. The Cartoon Network branded theme park is coming and a number of large water parks will also be debuting soon.

While the destination's inventory of accommodation stood at 49,348 units at the close of last year, the incoming pipeline is under 5% of this number. Phuket on the other hand, which is of similar scale, is expecting a 14% rise in hotel rooms and is in greater danger of oversupply.

So there you have it - Pattaya is shifting its act and drawing from a new bag of tricks. While Neil Young said "it's better to burn out, than to face away", this destination looks to buck the trend and has taken on a whole new attitude in the current decade.

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