Apartment glut possible

Colliers International Thailand expects tougher competition in the serviced apartment market and has urged owners and to redirect their marketing strategy, said managing director Patima Jeerapaet.

The company's research displays that by 2011, there will be 27 billion baht worth of investments in 38 new buildings, adding 6,580 units to total supply.

Mr. Patima said the lower cost of investment and operation had attracted many investors to serviced Thailand apartments, instead of building hotels.

Risinee Sarikaputra, Colliers' research department manager, said there currently were 10,685 units in 75 serviced apartment buildings in Bangkok with an average occupancy rate of 83.33% last year.

However, the increase in demand has lagged the increase in supply. Supply on a room-night basis increased by 167% year-on-year in 2007 as against room-night demand of only 9.3%.

The traditional main business of serviced apartments has been expatriates residing in Bangkok for a period of more than one month. However, current core demand comprises two groups _ new expat arrivals in Bangkok and short-stay tourists and business travelers.

Mr. Patima said competitive struggle has meant that many apartments had moved more to the short-stay market as many as 65% of guests in some Thailand property buildings.

He said that if the hotel market was too competitive, hotel managers would reduce prices and cause a knock-on effect on serviced apartments. Therefore, apartment operators need well-planned marketing strategies to achieve sales targets.

The breakdown of new supply shows a strong concentration in the Sukhumvit area, with 3,659 new units, or 56% of the new supply that Colliers predictions will enter the market by 2011.