So you want to own a hotel…

Reality shows continue to be all the rage on television these days.

By Bill Bernett

managing director of C6 Hotel

Whether you want to sing, dance, model, cook, survive, juggle penguins, apprentice, or simply be seen, the next ten minutes of fame can be yours.

Of course for many, the brief glare of the spotlight returns them promptly to the cold harsh darkness of anonymity. From hero to zero ” or even less, casting you into some sort of perpetual twilight, like a modern-day vampire who has to huddle in a corner just to survive the endless parade of days.

Enter the new age of the Asian hotel owner. Suddenly, everyone in Thailand wants to own a hotel.

We are not exactly treading new pathways here, at least for those of us who were around in the early to mid 1990s and saw an absolute explosion of hotels and resorts in every nook and cranny of Southeast Asia.

Bolstered by strong currency growth, rising stocks and equities and increasingly high levels of debt, the hospitality-asset gold rush is being joined by projects both sound and bordering on the absurd.

When asking first-time developers exactly why they chose to build a beach hotel 20 kilometres from the beach, or a city-centre business hotel in the middle of an industrial slum, the answer ” in more cases than I can recall ” is: “I owned the land already”.

An entire textbook of similarly silly answers could fill more pages then I care to think about. But in many cases, the hotels erected by these entrepreneurs of the nouveau riche are symbolic of ego rather than financial fundamentals.

1997 stepped in to call a halt to it, with its massive economic contagion. Now, some 13 years later, here we stand again, with currency, debt and a new breed of domestic-hotel investors.

In Bangkok, every soi, sub soi or soi that is barely beyond a track is filling up with hotel, after hotel, after hotel. Well-known brands are intermixed with independents and boutiques with condo hotels or serviced apartments.

On Phuket, a similar crush of midscale vanilla offerings could more appropriately be placed in an entirely new category: the “same-sames”. Forget about unique selling propositions, financial and feasibility studies, even experience in the tourism business. Nothing draws the eyes of these new owners from their heavenward search for the anticipated monsoon of endless profits.

I have a bad feeling these days, that things are going to turn ugly sooner rather than later. It’s a feeling I get no matter where I travel in Thailand, from Koh Samui or speeding along in Bangkok’s Skytrain, to Patong or up in Chiang Mai. It’s like a talkative neighbour on a long-haul flight ” there’s no getting away from it.

Thailand’s Board of Investment continues to focus foreign owners’ opportunities on new buildings, egging-on overseas investors into the trappings of an oversupplied market. A more practical scheme would be to adjust incentives towards ownership of existing properties, with a proviso that the “same-sames” be upgraded to fit a newer and better model.

New zoning and building restrictions have yet to allow for easy conversion of residential apartments or office buildings into hotels. And of course the Revenue Department has also missed its cue by failing to offer tax breaks for upgrades.

As Phuket’s room inventory continues to grow, the inevitable consequence is that it must pursue a mass-volume-based model, which any economist can tell you cannot be sustained over a long period.

Infrastructure and demand generators such as world-class tourism attractions, conference centres and leisure components have arrived in Singapore, Macau, Malaysia and now, slowly, Vietnam. Over the past few years, Thailand has been asleep at the wheel and it’s going to be hard to fill the rooms without the necessary business drivers.

1997 remains a keystone in the memory of many. But hopefully Thailand’s private sector and the government can initiate a more cohesive and logical approach to long-term sustainable growth in tourism.

As for the budding class of new hotel owners, it’s best that they start selecting a few books and learning the business, because it’s going be a long, long haul ahead.

Source: http://www.nationmultimedia.com/home/2010/11/05/business/So-you-want-to-own-a-hotel–30141536.html