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Downturn puts brakes on half of Phuket developments

Downturn puts brakes on half of Phuket developments

Almost half of all new hotel developments in Phuket, Thailand, are experiencing major construction delays triggered by the global economic downturn and concerns over Thailand’s political stability, according to a new report.

However the slowdown on hotel construction sites has yet to dent the flow of new developments entering the accommodation market on the island, according to the Phuket Hotel Market Update Mid-Year Report from hospitality consulting firm C9 Hotelworks.

C9’s Managing Director Bill Barnett said despite the delays, new developments continue to enter the stream with 38 properties offering 6,231 rooms at various stages in the construction cycle.

“Non-traditional product such as hotel managed villas and condos now represent 34% of the upcoming inventory,” Mr Barnett said.

According to the research, first half trading for 2009 indicated tourist arrivals declined by 14% but a combined luxury/upscale/mid-scale occupancy rate of 60.4% produced an average room rate of $141.


The report also noted that branded hotels outperformed non-branded properties rate wise by 33.7%, although the non-brand sector outperformed the brands on occupancy by 12.4%.

“Cash flow is a key underlying consideration in this market with most hospitality assets largely carrying low debt ratios. Defying the trends are the luxury high-end tier properties which operate in a favourable supply and demand segment and budget tier hotels who have captured changing demographics, are experiencing business from price conscious travellers.”

The report concluded that Phuket’s long-term outlook remained positive with brand concentration, growing airlift and infrastructure improvements, though recovery in 2009 has effectively been written off with prospects pushed into 2010.