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In Focus: Koh Samui

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In Focus: Koh Samui MARCH 2016 | PRICE $500 IN FOCUS: KOH SAMUI Paola Orneli Bock Vice President Setthawat Hetrakul Senior Analyst Pawinee Chaisiriroj Senior Analyst HVS.com HVS | Unit 2302 The Millennia Tower, 62 Soi Langsuan, 10330, Bangkok, Thailand Koh Samui has witnessed a complete Surat Thani Airport and the political instability in transformation, from an island traversed by jungle Bangkok, which caused some flights to be suspended. tracks in 1970s to an upscale tourism destination. FIGURE 1: PASSENGER MOVEMENTS AT USM AND URT The island’s tourism was originally characterized as 4,500 50 a ‘party’ stop on the backpacker trail. In recent 4,000 40 years, Koh Samui has rapidly developed into a 3,500 deluxe resort destination with increased air and sea 3,000 30 2,500 connections and numerous upper-tier, 20 2,000 internationally branded resorts. 1,500 10 Change % 1,000 0 500 Airport Statistics Passenger Movement (Thousands) 0 (10) 2007 2008 2009 2010 2011 2012 2013 2014 2015 Koh Samui is served by two international airports, Koh Samui International Airport Surat Thani Airport Samui International Airport (USM) and Surat Thani % Change (USM) % Change (URT) Airport (URT). Source: Department of Civil Aviation USM is owned and operated by Bangkok Airways, a Located 21 km west of the centre of Surat Thani city private airline and the main carrier flying to Koh and approximately 95 km west of Donsak Peir, Surat Samui. The development of Koh Samui’s air Thani Airport serves as a secondary gateway to Koh accessibility, and therefore its demand for the hotel Samui that has helped fuel demand to the island. The market, is directly linked to Bangkok Airways’ airport consists of one terminal serving both domestic capability and willingness to expand its fleet capacity, and international flights and a single paved runway of route network, frequency of existing routes and 3,000 meters in length. airport infrastructure. In late 2014, USM secured permission from the Department of Civil Aviation to Between 2007 and 2015, passenger movements at raise the flight movement limit from 36 to 50 flights URT have seen rapid growth, representing a per day. This move aimed at resuming growth in compound annual growth rate (CAGR) of 22.9%, from passenger numbers, after a decline in 2014. 356,053 passenger movements in 2007 to 1.86 million passenger movements in 2015. Thai Airways, Air Asia, Following an expansion in 2007, the airport today has and Nok Air operate daily flights to Surat Thani from a 2,100 meter runway, allowing it to accommodate Don Mueang International Airport and Suvarnabhumi narrow-body aircrafts and handle up to 6 million International Airport in Bangkok. There are also direct passengers per year. Bangkok Airways operates both flights from Kuala Lumpur, Wuhan and Chengdu, domestic and international routes to USM. Domestic which are operated by Air Asia, Air China and China routes include direct flights from Bangkok’s Eastern Airlines, respectively. Additionally, Air Asia Suvarnabhumi Airport, Chiang Mai, Krabi, Pattaya-U- launched an all-in-one service that includes flights Tapao and Phuket. International routes include direct from Bangkok to URT and transfer from the Airport to flights from Hong Kong, Kuala Lumpur and Singapore. Koh Samui via Donsak Pier, in order to further ease Additionally, Singapore is served by Silk Air, while access to the island. In addition to commercial services, flights to and from Kuala Lumpur and Penang are URT is an active Royal Thai Air Force base. served by Firefly. There are also charter flights during high season from Guangzhou and Kunming, operated by China Southern Airlines and Lucky Air. Seasonality USM processed 2.05 million passenger movements in With a strong dependency on leisure demand, Koh 2015, an increase of approximately 6.4% over the Samui remains a seasonal destination. The primary previous year. Between 2007 and 2015, passenger high season in Koh Samui is from December to March. movements grew at a rate of 4.9% per year. 2014 In contrast to other major beach destinations in witnessed a decline of 2.2% due to increased access to Thailand however, Samui benefits from reduced levels of rainfall in July and August, which allow it to benefit IN FOCUS: – KOH SAMUI | PAGE 2 from a secondary high season over these months, segment accounted for 15% of the total guest arrivals typical holiday time for the European markets. at accommodation establishments. FIGURE 2: KOH SAMUI SEASONALITY Hotel Supply 300 As of 2014, there were approximately 529 hotels with 225 a total of 20,519 hotel rooms in Koh Samui. The healthy performance of tourism arrivals as well as the 150 hotels’ key performance indicators are driving increases in supply. As shown in the chart below, 75 between 2009 and 2014, hotel room supply went up by approximately 5.9% per annum. Passenger Movement (Thousands) 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec According to our research, in 2015, there were 22 internationally branded hotels and resorts in Koh 2011 2012 2013 2014 2015 Samui with a total of 2,164 hotel rooms. Source: Department of Civil Aviation FIGURE 4: KOH SAMUI HOTEL SUPPLY SourceSource: Department Market of Civil Aviation 25 40 20 30 FIGURE 3: SOURCE MARKET (2014) 15 20 Thai 10 10 % Change % 15% Germany 5 0 Australia 11% Rooms Hotel (Thousands) 45% United Kingdom 0 -10 France 2009 2010 2011 2012 2013 2014 8% China 7% No. Hotel Rooms % Change Russia 5% 4% 4% Others Source: Department of Tourism Source: Department of Tourism Upscale Hotel Market The three largest international feeder markets, according to visitor arrivals at accommodation Performance establishments in 2014 were Germany, Australia and The upscale hotel market in Koh Samui performed well the United Kingdom, accounting for 11%, 8% and 7%, in terms of both occupancy and rate in 2015, resulting respectively. in an 11.6% RevPAR increase over 2014 levels, largely In recent years, the island destination has experienced driven by Average Daily Rates (ADR). an increase in visitors originating from Asia, among In 2015, ADR in the upscale hotel market saw an which China and Korea are the most notable ones. For increase of 20% over 2013, whilst occupancy grew by example, China is one of the fastest growing Asian two percentage points during the same period. feeder markets to Koh Samui. Between 2009 and 2014, Consequently, the market-wide RevPAR recorded a its tourist numbers registered a growth of 56% per 23.5% increase from 2013, which stood at annum. Additionally, the popularity of Koh Samui to approximately THB4,800 in 2015. the domestic market has also increased over this period. The domestic market has seen a growth of 32% Between 2013 and 2015, room rates grew thanks to per annum between 2009 and 2014. In 2014, this increasing international demand to the destination and a general market recovery. Occupancy remained IN FOCUS: – KOH SAMUI | PAGE 3 relatively stable, despite the political demonstrations that occurred in Bangkok in 2014. However, compared Outlook to the raise in demand, occupancy growth appears Koh Samui is benefiting from its growing status as a modest. This can be partly attributed to the increases developed destination, leading to an increasingly in supply and partly to the shortening of the average strong international demand and the ongoing length of stay of visitors to the destination. As Koh development of branded international Samui becomes more popular with regional Asian accommodation. However, it is estimated that the feeder markets, these add to total visitor arrivals, island has already exceeded its carrying capacity in without directly correlating with occupancy growth. terms of infrastructure (namely electricity and water), FIGURE 5: KOH SAMUI UPSCALE HOTELS MARKET PERFORMANCE posing a threat to the overall environment. This situation, coupled with the growth of residential 7,000 90% supply, will likely dampen growth of new hotel supply 80% 6,000 to the market. 70% 5,000 60% The bottleneck of air access to Koh Samui has 4,000 50% contributed to a paced growth in demand over the past 3,000 40% Thai Baht Thai Occupancy ten years. The restriction on the number of flights at 30% 2,000 USM kept the cost of air travel to Koh Samui at a level 20% 1,000 10% that deterred lower-end visitors. However, the 0 0% increase in flight slots to USM, coupled with flight 2013 2014 2015 expansions at URT, should ease the access to the island ADR RevPAR OCC and lower its cost. Hence, we expect demand for hotel accommodation to increase across all segments in the Source: HVS Estimates foreseeable future with the improvement of accessibility. Hotel Pipeline We also anticipate that the increase of Asian tourists to FIGURE 6: PIPELINE IN KOH SAMUI the destination should over time further reduce the overall seasonality of Koh Samui. Estimated Proposed Property Number of Rooms Area Opening Date Holiday Inn Express 200 Bophut 2017 Sofitel So 120 Choeng Mon 2017 Looking ahead, new and existing hotels will have to The Sol Beach House (Conversion) 209 Choeng Mon 2017 The Ritz-Carlton 187 Plai Laem 2017 find ways to diversify their business, as we expect COSI Hotel by Centara 153 Chaweng 2018 competition to stiffen. New opportunities, for example, Holiday Inn 150 Bophut 2018 Sala Chaweng (conversion) 78 Chaweng 2018 might arise from the Meetings, Incentives, Total 1,097 Conferences, and Exhibitions/Events (MICE) market, Source: HVS Research especially the high-end segment, given the island’s relative high cost of air lift. From our research, we The pipeline of new resorts in Koh Samui is extensive gather that within the domestic market, industries and includes both new developments as well as such as banking, insurance, automotive and conversions, i.e.
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