Canadian Fund Seizes COVID Opportunity to Invest in Thai Hotels
As long as there is no sign of success in developing a vaccine or antiviral treatment to combat COVID-19, the tourism sector, particularly hotels, remains deeply submerged.
This is a critical risk that prevents closed hotels from fully recovering, as infection rates in many countries continue to flare up.
James Kaplan, CEO of Destination Capital, a subsidiary of Destination Group, a Canadian investment firm expanding its hotel, resort, restaurant, and beverage businesses in Asia under brands like Hooters, Hard Rock Cafe, and The Drunken Leprechaun, assesses the overall hotel business in Thailand. He notes that hotels without sufficient financial backing still face operational risks due to a lack of income to support liquidity, which may force them to sell their businesses. He predicts it will take about four years for Thai tourism to return to its previous state.
James also states that amidst the multifaceted risks faced by hotel operators, Destination Group, which has been operating in Thailand for over 24 years, can leverage its experience in managing hotels acquired through capital injections for liquidity, renovations, repositioning, rebranding, and hiring tourism personnel to reopen businesses. Once they achieve satisfactory profits, they can sell the properties. Currently, they manage four locations under well-known chains, including Novotel in Phuket, Hua Hin, Bangkok, and Pattaya.
In the COVID era, this presents a unique risk never seen before, prompting Destination Group to acquire hotels for management, aiming for profitability when the business rebounds, thus increasing their resale value.
“This crisis has led to millions losing their jobs, and thousands of hotel rooms have had to close during a time when there are no international customers.”
However, in the eyes of investors, he still sees the long-term potential of the Thai economy, considering Thailand a global destination with infrastructure conducive to accommodating tourists, along with hotels offering suitable amenities, which is a strong point.
“Although the Thai tourism industry is currently sluggish and will take time to recover, past crises such as the Tom Yum Kung crisis, political turmoil, the hamburger crisis, and the major floods of 2011 demonstrate that Thailand and its tourism sector have consistently bounced back, reflecting resilience against various crises.”
Given these factors, this is an opportunity to develop a business model to acquire hotels and turn them into more profitable ventures as the tourism and service industries recover. This is being facilitated through the establishment of the “Destination Capital” fund in the past 1-2 months, aimed at raising capital from investment funds and wealthy individuals interested in investing in the purchase of four-star hotels in Thailand and the Asia region, such as Indonesia and the Philippines. The goal is to acquire approximately 12-15 hotels, each valued at no more than 1.5 billion baht, with a total investment of no less than 10-15 billion baht within the next 18 months.
The first deal is expected to be signed within the next month.
“Destination Capital is looking for hotel and resort assets with around 200 rooms in four targeted tourist cities: Bangkok, Pattaya, Phuket, and Hua Hin, where many hotels still have potential for development, which could leverage the risks from the crisis to achieve higher returns in the future.”
He also mentioned that the hotel business strategy must adapt to the trends in post-COVID tourism, focusing on new travel and accommodation demands, particularly targeting the Chinese and Indian markets. Plans are underway to negotiate with well-known hotel chains from China and India to cater to the needs of Chinese and Indian tourists visiting Thailand.
“There are currently no Indian or Chinese hotel chains in Thailand, which could provide comfort and assurance to certain tourist groups who prefer to stay at hotels of their own national brands while in Thailand.”
