Starwood expanding presence in Thailand

HOTEL owner and operator Starwood Hotels & Resorts Worldwide Inc is expanding rapidly in Thailand, despite the political uncertainties there.

Starwood — which operates the Sheraton, Westin, W and Le Meridien chain — expects to have 7,221 rooms by the end of 2012.

It now has 11 hotels with a total room inventory of 4,500 rooms. It is on course to open 13 hotels by 2012, six of which are under construction in Bangkok.

Wayne Buckingham, regional vice president of Starwood Hotels & Resort Thailand, Vietnam, Cambodia and Singapore said Starwood was prompted to expand because the Thai market recovers fast after it falls.

“Thailand is a resilient destination. It has a lot of different issues to be managed, but the business comes back very quickly after problems,” he told Business Times in an interview.

He added that the hotel business has to be looked at as a long-term business as most contracts are for 10 years with an option for another five or 10 years on top of that.

“The tourism business in Bangkok still has a lot of potential and Bangkok being a hub will always be popular,” he said.

Starwood now manages five hotels in Bangkok, and having nine different brands helps it to place a brand best for a particular location.

Buckingham was quick to point out that if it did not take on the job, someone else would. “I look at it this way. If I don’t sign a hotel, somebody else is going to sign this hotel, as there are plenty of other operators. Of course we also need to consider the best brand fit for the location.”  he said.

On the performance of its hotels in Thailand, Buckingham said that its hotels had a very positive start in 2010 but the crisis in Bangkok slowed business.

“Some hotels were trading at less than 10 per cent occupancy and some hotels had to close, particularly in the areas where the problems were. People did not come into the country at that time,” he explained.

The volcanic eruption in Iceland had compounded the situation. “Since the Red Shirt protests finished, business is starting to pick up, but it is taking time.

“What we have noticed is that outside of Bangkok, the hotels are still doing okay, but in Bangkok, hotels are not doing well,” he said.

Hotels are averaging (room rates) less than they did five years ago because of all these issues.

Buckingham reckoned that it could be sometime before it returns to the best years it had in 2005/2006. Performance in 2008 was better than in 2009.

“What we are trying to do now is to get back to the 2008 levels. With stable political situations, I would say that we could get back there in another two years from now,” he said.

In 2008, hotels in general enjoyed 75 per cent occupancy. But in 2009, they only filled 50 per cent of the room inventory. This year too, Buckingham said, hotels were likely to achieve 50 per cent average occupancy given that other hotels were opening too.

“In fact, in my whole region, the only place that won’t make budget in 2010 are the Bangkok hotels,” he said.

The ARR of Starwood hotels Thailand in 2009 was between 4,000 baht and 4,500 baht (RM417 and RM469). According to him, Bangkok will go through a situation over the next five years, where yields will be kept down because a lot of new growth is coming into the market.

He estimates that for a new hotel owner, it could take eight to 10 year for Return on Investment (ROI), from five to seven years previously.

“Two keys hubs where people will develop hotels in Thailand are Bangkok and Phuket. But even that is getting saturated. For me, I have to look at other opportunities such as in Koh Samui, Thailand.

“Most of our development in the future will be in Vietnam more so than in Thailand. Saigon (Ho Chi Minh City) is very successful, popular for business developer, rates are high and profit margins are high,” Buckingham said.

Source: http://www.btimes.com.my/Current_News/BTIMES/articles/20101115000035/Article/