Si Racha Serviced Apartment Market Update September 2016
Surging pipeline projects override supply and demand equilibrium in Japanese-‐centered market Industrial sector remains the key feeder of room nights “Si Racha emerged as an industrial town that has attracted many large-‐scale companies investing in the manufacturing sector. With this came a rapid growth of the expatriate population, which has previously pushed robust demand for short and extended stay accommodations. As a result, developers were drawn to the investment opportunities in the hospitality sector, and in turn catalyzed the expansion of midscale to upscale hotels and serviced apartments. Over the past few years, Si Racha experienced a sharp rise in accommodation supply of 46% between 2013 to 2015. Looking at the existing and pipeline projects, we see a surging market competition that looks to have a decisive impact on forward trading. A growing residential condominium supply also poses to become predatory to hotels and serviced apartments.
Trends •
•
•
Supply vs. Demand Trend Number of Units
Number of Expatriates
5,000
160,000
4,000
110,000
3,000 2,000
60,000
1,000 0
10,000 2013
2014
2015
2016F
Hotel and Serviced Apartment Units Expatriates in Si Racha Source: C9 Hotelworks Market Research
Additionally, the slowdown of foreign direct investment (FDI) in the industrial sector is forcing a drop in demand for serviced apartments as the number of expatriates is seeing a slight reversal. This phenomenon will leave the destination with no choice but to target a broader market by revisiting the geographic sources.” Bill Barnett, Managing Director, C9 Hotelworks
Forward Outlook
One-‐bedroom conFiguration accounts for nearly 70% of total units in serviced apartment inventory with high demand for single use rooms from unmarried expatriates.
• Development of a high-‐speed rail that connects Bangkok to the Eastern Seaboard is pending for environmental approval and projected to start in the next two years.
Mainstream hotels and serviced apartments in Si Racha consist of 3,503 units, which are mostly clustered on Sukhumvit, Jerm Jompon and Surasak roads.
• Addition of internationally branded and managed hotel chains in the pipeline is expected to put pressure on rates and occupancy on the market and raise the standard of product offerings.
High dependency on Japanese labor force for occupancy has caused concerns for hotels due to the continuous weakening Yen in recent years.
• Decline in foreign direct investment in Thailand last year is creating a domino effect for industrial properties in Chonburi – Si Racha.
MARKET DEMAND OVERVIEW • In 2015, Japan represented 39% of the total foreign direct investment projects in Thailand, followed by Singapore and China at 12% and 7% respectively.
Expatriate Workers by Province Number of Work Permits 250,000 200,000 150,000 100,000 50,000 0 2012 Chonburi -‐Si Racha
2013 Bangkok
2014
2015
Annual work permits issued in Chonburi –Si Racha shrank by 53% last year as a result of pullbacks in FDI
Rayong
Source: Thailand Ministry of Labor and C9 Hotelworks Market Research
Top 5 Provinces by Industrial Estate Scale Number of Establishments
Area in Sq. m.
Si Racha is the second largest industrial area, covering 21% of combined estates in Thailand, only 5% behind Rayong
100,000,000
16 14 12 10 8 6 4 2 0
80,000,000 60,000,000 40,000,000 20,000,000 0 Rayong
Chonburi -‐Si Petchaburi Prachinburi Ayutthaya Racha Industrial Coverage Area
Industrial Establishments
Source: Thailand Board of Investment (BOI) and C9 Hotelworks Market Research
Key Geographic Source Markets 4% 1% 2% 2%
4% 2% 3%
7%
5%
6% 16%
2015
2014
9%
68%
Japan
Thailand
Europe
Other SE Asia
71%
Taiwan
Source: Amata Nakorn Industrial Estate and C9 Hotelworks Market Research
2
C9 Serviced Apartment Market Update: September 2016
US/Canada
Others
Japanese expatriates remain highly inIluential in the demand market, and are expected to continue in the coming years
MARKET SUPPLY OVERVIEW • Expatriates who seek long-‐term stays are the key source of business that serviced apartments in Si Racha leverage on. Apart from the daily rates hotels normally offer, serviced apartments also offer monthly rates which are comparatively lower than the hotels’ average daily rates, allowing them to secure a strong clientele base for long stay guests.
Average Monthly Rate vs. Average Daily Rate Average monthly rate is within most companies’ accommodation allowance
Average Monthly Rate in THB
Average Daily Rate in THB
120,000
8,000
100,000
6,000
80,000 60,000
4,000
40,000
2,000
20,000 0
0 Studio/Deluxe One-‐bedroom Two-‐bedroom Three-‐bedroom Average Monthly Rate
Supply by Tier Upper-‐ Upscale 6%
Average Daily Rate
Source: C9 Hotelworks Market Research
Median Unit Size Three-‐bedroom
Midscale 31%
Two-‐bedroom One-‐bedroom
Upscale 63%
Studio/Deluxe 0
20
40
60
80
100 120 Unit Size in Sq. m.
Source: C9 Hotelworks Market Research
Source: C9 Hotelworks Market Research
Serviced Apartment & Hotel Pipeline • It is anticipated that 8 projects representing 2,239 keys will enter the accommodation supply by 2018. A number of these pipeline properties are mixed-‐use developments with hotel, residential and retail components. Project Name
Location
Keys
Opening Date
Novotel Sriracha Marina Bay
Jerm Jompon
281
Q4 2018
Atara Hotel Sriracha
Si Racha Nakhon 8
N/A
2018
Balcony Seaside Hotel and Serviced Apartments*
Sukhumvit
100
Jul-‐16
Citi Resort Sriracha
Sukhumvit
379
Sep-‐16
Nusa Sriracha Condotel
Sukhumvit
1,166
2018
Karabuning Resort and Residence*
Surasak
30
Aug-‐16
Centara Sonrisa Residence and Suites Sriracha
Thetsaban 1
150
Q4 2017
Somerset Harbourview Sriracha
Thetsaban 3
133
*Additional keys for existing serviced apartments and hotels
2018 Source: C9 Hotelworks Market Research
C9 Serviced Apartment Market Update: September 2016
3
About C9 Hotelworks C9 Hotelworks is an internationally recognized consulting Wirm with extensive experience in the Asia PaciWic region. Its core business focus includes: • • •
Hotel and Resort Development Asset Management / Ownership Representation Project Feasibility and Analysis
Key competencies include international hotel operator search, selection and contract negotiation, mixed use hotel and residential planning and operation reviews. A wide range of both institutional and private developers and a comprehensive portfolio of completed projects give C9 the skill set and background to focus on key issues, evaluate complex ones and assist clients in achieving solid results. Based in Phuket, Thailand and led by Managing Director Bill Barnett, who has 30 years of experience in Asia PaciFic, the Firm is well positioned to serve an increasing demanding marketplace.
C9 Hotelworks Company Limited 9 Lagoon Road, Cherngtalay, Thalang, Phuket, 83110, Thailand (OfFice located at the entrance of Laguna Phuket) T: +66 (0)76 271 535 F: +66 (0)76 271 536 www.c9hotelworks.com info@c9hotelworks.com