Phuket is nearly as ubiquitous within the investment property sphere as London, even if it’s for different reasons. Once the island secured its position as one of the world’s most popular vacation destinations it never really looked back, and it keeps on growing and growing.
Property Over Politics
As is being well documented, Thailand is once again embroiled in political turmoil, with Bangkok under siege since mid-January, disrupted elections and riot police reclaiming public buildings as protesters demand Prime Minister Yingluck Shinawatra resign in favour of an unelected “people’s council.” So far no governments have issued travel advisories, but most are recommending caution. “People always wonder about the risk factor in Thailand,” begins Bill Barnett, founder and managing director of hospitality consultancy C9 Hotelworks. “Name me a place in the world that isn’t without political risk today.”
Fair enough, but Scotland looking to secede from the UK and Osaka bucking for administrative status akin to Tokyo’s are vastly different concepts of political risk. “There will be glitches. We had 1997, we had 2005, 2008,” admits Barnett. “But the thing we know about Phuket is that whether it’s economic or political issues it’s always bounced back quickly. It’s Brand Thailand.”
The statistics back him up. Tourist arrivals to Thailand continue to rise and Phuket in particular is reaping the benefits of changing travel demographics. Nearly 1.6 million international passengers arrived in Phuket in the first half of 2013 in addition to 1.2 domestic arrivals, a rise 30 percent over 2012. The government is putting an emphasis on broadening infrastructure projects on the island, such as the expansion of the airport, which is continuing through 2015. Phuket sits five to six hours from half the world’s population with a burgeoning middle class of future tourists, making it a sustainable market. “Like it or not, Phuket, and Asia, are transitioning and are urban resort destinations. There’s so much mass tourism coming that we’re seeing an urban shift. That’s not necessarily a bad thing. Look at Waikiki. But certainly they’re changing,” says Barnett.
And Phuket is going mass. Five years ago, you could get to five cities in China direct from Phuket. In 2013 that number was 22. Retailing and attractions are playing a bigger role. “The emerging markets are creating more diverse segmentation. We don’t just see European snowbirds. Inter-regional tourism continues, and the low-cost carriers are expanding,” Barnett points out. New hotel properties ranging from the Hyatt to the Ramada to Novotel are all opening between now and 2016.
A Perfect Model
And that mass tourism is what makes The Pavilions Estate development so appealing to Phuket’s traditional investors. Tourism will continue to drive Phuket’s real estate market and keep the island a strong investment location. Budget hotels and upscale properties performed best between 2012 and 2013, with average occupancy rates running at nearly 80 percent. But, “There are changes in patterns. There are shorter average lengths of stay and multi-generation groups. Asians and Europeans travel differently,” notes Barnett. “Asian travellers will bring their grandmother and kids. Something like Pavilions is timely in terms of product offering. They have larger units for families travelling together and that taps into a very defined trend.”
Located alongside the existing Pavilions Phuket near Layan Beach on the west side, The Pavilions Estate (scheduled for completion in late 2014) will ultimately comprise nine three-bedroom pool villas roughly 7,000 square feet in size, thirty 900-square foot apartments plus three penthouses units at approximately 2,000 square feet. Pavilions is equipped with the usual amenities and luxuries, including access to the resort’s dining outlets and spa. There is plenty of vibrant red in Pavilions, but aside from the fiery colour, how does it separate itself from the other resort investments that dot the island — among them Laguna Shores, Baan Mai Khao and Amari Residences?
The Pavilions Resorts owner and founder Gordon Oldham chalks it up to experience, stability and a great track record of few resales by existing owners. “My hotel operates. It’s an ongoing operation. My product is better than anyone else’s. We’ve just won a best honeymoon hotel award. This is not me saying this; these are objective standards,” he states proudly. “If you want to be near some ladyboys, go to Pattaya and buy a little box. If you want a proper destination with infrastructure that has the product to show and a nine-year track record, come and see the place and kick the tires.”
Prices at The Pavilions Estate begin at US$300,000 (HK$2.3 million) for apartments and US$1.5 million (HK$11.6 million) for villas with some financing available and a fixed rental yield of 4 percent (net) if apartment owners enter the rental pool. “A good real estate investment is location, location, location,” finishes Barnett. “Pavilions is in a prime area. Buying this isn’t taking a significant development risk.”