Colliers Reports Surge in Hotel Sale Negotiations as COVID-19 Takes Its Toll

Mr. Patrachai Taweewong, Senior Research Manager at Colliers International (Thailand) Limited, revealed the overall picture of hotel business acquisitions in the country during the COVID-19 crisis. The tourism sector has been severely impacted, leading to a decline in growth due to travel restrictions aimed at preventing the spread of the virus. Consequently, the number and value of foreign tourists in Thailand in 2020 are projected to fall short of the target of 40.8 million visitors.

As a result, hotels with insufficient financial resilience are facing losses due to decreased revenue while expenses remain high. The average occupancy rate in the first quarter of 2020 dropped to 51.50%, and as the situation worsened, the occupancy rate plummeted to 20.80% in March, with many hotels experiencing zero occupancy, forcing some to close down and others to seek joint ventures or sell their businesses.

In 2020, the rate of mergers and acquisitions saw a significant number of hotels announcing their sale. Compared to the past decade, the total transaction value was 124.53 billion baht. However, in 2017 and 2018, the transaction values exceeded 20 billion baht per year, which is considered high compared to the average over the last ten years.

The impact of COVID-19 has further increased the number of hotels for sale, particularly in tourist destinations such as Bangkok, Phuket, Samui, Pattaya, and Chiang Mai, where properties are being offered at relatively lower prices compared to the previous year.

Mr. Simon Lee, Chairman of Angel Real Estate Consultancy Co., Ltd., a marketing and sales advisory firm, stated that this is an opportune time for Angel to seek investment opportunities in the hotel sector due to low prices, which present the potential for high returns. Currently, there are 4-5 hotel owners looking to sell from various attractive locations, and negotiations are underway to decide on locations and investment formats, including price negotiations.

"There are about 4-5 hotel businesses offering shares for us to help purchase, along with future customer stay contracts. Some are even offering to sell entire hotels for us to take over. We are currently in the decision-making process regarding locations and price negotiations. This is a good time to invest in the hotel business as many are offering at interesting prices, and if we invest, there is a chance for good yields. We are waiting for the next 2-3 months, and we will decide in July, as we believe hotel sale prices will decrease further," he added.

Angel is particularly interested in joint ventures, which carry lower risks, allowing for half-and-half investments in multiple hotels. Initially, they plan to target about 4-5 hotels in central city areas such as Ratchadapisek, Sukhumvit, and along the Chao Phraya River, with medium-sized hotels of no more than 80 rooms. The joint venture model has the advantage of spreading risk and leveraging the strengths of each party involved. Hotel owners have experience in the business, while Angel has connections with tour companies in China and other countries, including Japan and Turkey, which can help attract customers.

Meanwhile, sources from Grand Asset Hotels and Property Public Company Limited indicate that the company is in negotiations with investors to sell a 98.48% stake in Royal Orchid Hotel (Thailand) Public Company Limited (ROH), which owns the Royal Orchid Sheraton Hotels and Towers, a 5-star hotel with 726 rooms situated along the Chao Phraya River.

Currently, there are three negotiation options remaining from five, including the CP Group, Mori Building from Japan, the Langham Group from Hong Kong, a Singaporean group, and another Thai investor. A conclusion is expected within the next month.

Industry sources indicate that there are currently no fewer than 20 four- and five-star hotels in Sukhumvit, Silom, Rama 3, Vibhavadi Rangsit, Lak Si, along the Chao Phraya River, and Klong Toey that have announced their businesses for sale through real estate brokers, with asking prices ranging from hundreds of millions to over 15 billion baht. However, the final deal price will depend on negotiations.

 

SOURCE : www.bangkokbiznews.com