Youthful investors keen on hotel sector

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.

Sourced: bangkokpost