A number of hoteliers in Phuket are selling off their properties to profit from land prices that have soared 400% in just over a decade, driven by the rapid growth in residential property.
Suksit Suvunditkul, chief executive of Deevana Group, a Phuket-based hotel group, said the price of land on Patong beach had increased to 100 million baht per rai, up from 20 million baht per rai in 2004. Due to the price surge, he said it was not surprising that a number of hotels have been sold over the past few years.
"Tourism and the hotel business in Phuket has been going well, but many hoteliers want to cash in because they think it's a good time to do so. Some owners want to retire or their children don't want to run their hotels," he said.
Mr Suksit said many foreign developers also wanted to shift their investments to new tourism destinations in the region such as Vietnam, prompting them to sell their properties in Phuket.
The situation provides a good opportunity for potential investors who are looking to buy hotels from these foreign developers for renovation.
Deevana Group expressed its preference for taking over old hotels, noting it had spent 240 million baht to buy the 14-year-old Emerald Garden Resort in Krabi two years ago.
The hotel is currently under renovation, with the company setting aside a budget of 210 million baht to upgrade the mid-tier hotel into a boutique one.
The first phase with 33 rooms will be finished in October this year, and another 66 rooms will open in the first quarter of 2017.
The expansion of Phuket airport, which is scheduled to be finished this year, is projected to benefit tourism on the island. The airport's capacity will increase from 6.5 million passengers to 12.5 million per year.
The airport also expects to welcome 18 million passengers per year in the future, which will push hotel demand to outpace supply.
Mike Batchelor, managing director for investment sales (Asia) at JLL Hotels & Hospitality Group, said even though land prices in Thailand are on the rise, average land cost when developing a hotel was 5.81 million baht per room last year, lower than in Singapore, Hong Kong and Australia.
The relatively cheaper land means Thailand is still tempting for foreign investors. This is helped by the positive trend of the hotel business, which enables top-performing hotels to generate more income and increase their future value, Mr Batchelor added.
JLL said that last year, the total value of hotel trading worldwide reached 2.97 trillion baht or US$85 billion, with an estimated 210 billion or $6 billion in Asia. In Thailand it was estimated at 10 billion baht, down from 14 billion in 2014.
The group expects hotel trading to reach 15-20 billion baht in Thailand this year, as a number of big deals being negotiated are scheduled to be concluded by year-end.