There seem to be three distinct stages in the development of the accommodation market in Thailand, especially for beach destinations. Phuket, Koh Samui and Hua Hin have all followed a similar evolution in their development. Below are the three stages.
1) The first visitors to a beautiful beach are invariably intrepid backpackers who are prepared to take long bus and boat journeys, hike and trek and really embrace the adventure that sometimes can be involved in getting to a destination. Backpackers will take cheap basic accommodation such as simple no bathroom bungalows or even just a hammock. Just being in a beautiful place with access to the basic necessities of food and water is enough.
As more backpackers arrive so the locals are able to offer better accommodation and perhaps a generator for electricity in the evening and cold drinks.
Businesses quickly become established and the locals start to make good money catering for the larger number of visitors to their little bit of paradise. With this improvement in income usually comes the financial incentives to improve infrastructure: better roads go in, better boat links become available, taxis appear and electricity arrives.
With these improvements come backpackers and tourists who want a bathroom, hot water and air-con. And thus mid-range accommodation options appear. At the same time travel guides start to publicize a location.
2) It is at this point that phase two starts. And that is high end tourism arriving. This is driven by the building of a '5 Star Hotel'. The hotel offers lots more amenities and facilities to a location. Not to mention more employment opportunities to the locals. Behind the hotel is investors who want a return for their money. They spend money on advertising the hotel and the location. The hotel works hard to liaise with travel agents, offering commissions and making promotional materials. This is when a location really explodes in popularity. TV and mass media exposure are sure to follow.
For a while the beautiful location is shared between the cheaper more basic operations geared towards cost conscious backpackers, the mid-range places and the high-end hotels. A bohemian vibe with better facilities. 2 dollar noodles and 100 dollar dinners. The choice is great for the visitor and allows maximum employment opportunities.
3) Stage two to stage three is a gradual progression more and more towards catering to high spending short stay tourists. Prices go up. The cheap bungalows are torn down and replaced with sealed concrete units with air-con, hot water and bathrooms.
A successful hotel in Thailand invariably creates copycat business plans. If an area can make good money for one 5 star hotel it can make good money for two 5 star hotels. This is especially true during times of economic prosperity in the developed world.
A successful hotel in Thailand invariably creates copycat business plans. If an area can make good money for one 5 star hotel it can make good money for two 5 star hotels. This is especially true during times of economic prosperity in the developed world.
At the same time a fledgling land market is normally to be found in the area. When hotels move in with tourists who spend money so the dream is created - the possibility of owning a house in paradise. As the land market becomes more established so prices start to rise. The 5 star hotels offer more and more luxury, everyone upgrades and prices rise. This creates confidence in the commercial strength of a location. With this land prices further increase.
And this is when a location really happens as a money-maker. It has everything going for it: a large turn over of high-spending tourists, a great profile as a must-visit place, and a growing reputation as a new real estate hotspot. Land prices increase year by year but are still well below the average for similar land in places like Phuket.
This is where Thong Nai Pan is at. Namely at the start of phase 3 where land prices have sharply risen and the profile of the average visitor has changed from backpacker to 2-week holiday maker or honeymooner.
In Thong Nai Pan Noi there are three 5 star hotels - Panviman, Santhiya and Ra Sa Nan Da. The latest Ra Sa Nan Da is directly on the beach with boutique villas with private plunge pools. The cheapest villa costs 22,000 Thai Baht a night ($688). That is serious money.
Now all the essentials are in place for a luxury villa rental business to flourish. Big spenders are coming to Thong Nai Pan, 5 Star Hotels are charging 5 star prices and people are starting to build their own luxury villas.
Unlike in Haad Rin and other beach resorts in Koh Phangan the tourism is not dependent on the few days surrounding the Full Moon Party. Furthermore, much of the rental accommodation in Koh Phangan is mid to low range in quality and geared towards a long-term rental market. The returns on such a business are small but steady.
Whereas in Thong Nai Pan people want luxury and are willing to pay for it. Amongst those higher-end tourists visiting Thong Nai Pan will be a growing proportion who have already been before. They will be looking for a bargain. Why spend nearly $700 a night for a small villa when you could rent a private villa for $300 a night? These people will be wanting more space and privacy and extra amenities such as a fully fitted kitchen. For a family this makes perfect sense, and for those with food allergies it is crucial. This is what happened in Koh Samui. First the expensive hotels, then the land market, then the villas-for-rent market. One step creates the next step.
The key to making money under this paradigm of development is to know where the market is at. Things can change quickly and the market can tip into the negative situation of supply far outweighing demand.
I believe the time is right in Thong Nai Pan for money to be made in the rental market. At the moment in Thong Nai Pan the supply of luxury villas to rent is minimal yet the demand is there. It is just a matter of correct promotion to get the message out to those who would definitely be interested. Luxury villas can offer maid service, cleaning services, car rental etc. that hotels offer, but most importantly they can offer real value for money compared to thousand-dollar-a-night places.
No where else in Koh Phangan has the same cachet as Thong Nai Pan, and nowhere else in Koh Phangan has such an active land market. Now is the time to build a villa and rent it out, or buy a villa and rent it out. By the time the next up-cycle in the world economy comes around it will be too late.
And this is when a location really happens as a money-maker. It has everything going for it: a large turn over of high-spending tourists, a great profile as a must-visit place, and a growing reputation as a new real estate hotspot. Land prices increase year by year but are still well below the average for similar land in places like Phuket.
This is where Thong Nai Pan is at. Namely at the start of phase 3 where land prices have sharply risen and the profile of the average visitor has changed from backpacker to 2-week holiday maker or honeymooner.
In Thong Nai Pan Noi there are three 5 star hotels - Panviman, Santhiya and Ra Sa Nan Da. The latest Ra Sa Nan Da is directly on the beach with boutique villas with private plunge pools. The cheapest villa costs 22,000 Thai Baht a night ($688). That is serious money.
Now all the essentials are in place for a luxury villa rental business to flourish. Big spenders are coming to Thong Nai Pan, 5 Star Hotels are charging 5 star prices and people are starting to build their own luxury villas.
Unlike in Haad Rin and other beach resorts in Koh Phangan the tourism is not dependent on the few days surrounding the Full Moon Party. Furthermore, much of the rental accommodation in Koh Phangan is mid to low range in quality and geared towards a long-term rental market. The returns on such a business are small but steady.
Whereas in Thong Nai Pan people want luxury and are willing to pay for it. Amongst those higher-end tourists visiting Thong Nai Pan will be a growing proportion who have already been before. They will be looking for a bargain. Why spend nearly $700 a night for a small villa when you could rent a private villa for $300 a night? These people will be wanting more space and privacy and extra amenities such as a fully fitted kitchen. For a family this makes perfect sense, and for those with food allergies it is crucial. This is what happened in Koh Samui. First the expensive hotels, then the land market, then the villas-for-rent market. One step creates the next step.
The key to making money under this paradigm of development is to know where the market is at. Things can change quickly and the market can tip into the negative situation of supply far outweighing demand.
I believe the time is right in Thong Nai Pan for money to be made in the rental market. At the moment in Thong Nai Pan the supply of luxury villas to rent is minimal yet the demand is there. It is just a matter of correct promotion to get the message out to those who would definitely be interested. Luxury villas can offer maid service, cleaning services, car rental etc. that hotels offer, but most importantly they can offer real value for money compared to thousand-dollar-a-night places.
No where else in Koh Phangan has the same cachet as Thong Nai Pan, and nowhere else in Koh Phangan has such an active land market. Now is the time to build a villa and rent it out, or buy a villa and rent it out. By the time the next up-cycle in the world economy comes around it will be too late.
