Business
viewed as solid in the long term
Asian hotel owners, including Thais, tend to
be younger than their counterparts elsewhere, leading more young businessmen to
consider hotels as a safe long-term investment, say hotel management companies.
Moreover, hoteliers have more choices with
all the local and international chains serving the market.
Glenn De Souza, vice-president for Asia and
the Middle East at Best Western International (BWI), said young people pay more
attention to hotels and this has prompted investors, mostly the second
generation of rich families, to stay for 25-35 years.
"The investors strongly believe that
hotels are a stable long-term business," he said. "Most of them come
from other industries such as textile and electronic parts manufacturing. They
have money and want to reduce their business risk."
This is a challenge for hotel chains that
will have to present their business to young hoteliers who are new to the
field.
Moreover, the hotel business in Thailand and
Asean will see a rising number of new investors after the formation of the
Asean Economic Community (AEC) in 2015, as millionaires will be numerous.
"The bright prospects of the tourism
business in Thailand will attract more investments from overseas, particularly
from Singapore," Mr De Souza said.
Ronnachit Mahattanapreut, senior
vice-president for finance and administration at Centara Hotels & Resorts,
said the younger and older generations in the hotel business have different
objectives.
New-generation investors see hotels as a
long-term profitable business.
"Young investors make swift decisions,
travel frequently and love challenges and differences, so they have new
business initiatives," Dr Ronnachit said.
Meanwhile, hotel chains are offering a
variety of business concepts to suit young investors.
But successful older investors want to
develop hotels to demonstrate their status rather than make profits.
Paul Stevens, operations director of Accor
Thailand, said the new breed has intensified in recent years as Thais have
returned from overseas studies and work assignments to invest locally.
Many opportunities still exist in areas like
Bangkok, Pattaya and Phuket. The entry into this investment class compared with
other Asian cities represents a good value and could supply major upside in
future for both demand and land price.
The investment cycle in hotels usually runs
4-5 years from concept to opening. Those that have opened in the past 24 months
were planned and financed in the boom time of 2007-08 when hotels were
performing well.
Additional hotel rooms are being slowly
absorbed and will take time to show healthy returns. Modern investors still
look at the market with rose-colored glasses and expect a sound return on
investment. Some hotels are well located and should meet investor expectations.
Hotels are generally high-capital, long-term
investments. Investors looking at basic market fundamentals, using a realistic
cash-flow model, should choose an appropriate location and allow enough funding
for construction to succeed, Mr Stevens said.
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