Major investors are deploying luxury hotels to dominate Bangkok and Phuket, targeting high-spending foreign tourists and aggressively seizing newly emerging locations.

A new game is unfolding in the Thai hotel market as luxury hotels aggressively target high-spending international guests, emphasizing superior lifestyle experiences. They are strategically positioned in emerging locations across Bangkok and Phuket, forcing hotels in the same segment to engage in direct competition in niche areas. Knight Frank points out that the era of simply selling rooms is over, advising existing hotels to upgrade their assets to compete before losing customers to the new generation.

19 August 2569 – Mr. Carlos Martinez, Director of Research and Consulting, Knight Frank Thailand. A recent hotel market research report reveals that the Thai hotel market in Bangkok and Phuket is entering a new, more intense phase of competition. This is due to the gradual opening of luxury and upscale hotels, which are not only adding rooms but are also setting new standards in quality, product, service, and guest experience.

As of the end of the first half of 2569, Bangkok had a total of 105,038 hotel rooms, with luxury and upscale segments accounting for 65%. There are also approximately 17,590 rooms under development (pipeline) awaiting market entry, over 80% of which are high-end hotels. Meanwhile, Phuket had a total of 47,195 rooms, with approximately 58% being luxury and upscale. New projects between 2569 and 2571 are projected to account for as much as 89% of high-end hotels as well.

The influx of premium accommodations aligns with the Tourism Authority of Thailand's (TAT) 2569 tourism strategy, which shifts from reliance on tourist numbers to generating higher per capita revenue.

“The fact that new supply tends to be more concentrated in the high-end market doesn’t mean that the development of luxury hotels is guaranteed to be successful. What’s happening is that the standard of competition in the market is getting higher. As guests have more choices, hotels need to have a clear and compelling reason for customers to choose to stay there.” Mr. Carlos said.

Targeting prime locations in Bangkok – and expanding into Phuket.

The competitive landscape in Bangkok is becoming increasingly concentrated in specific areas, particularly along Sukhumvit Road from Thonglor and Ekkamai to Phra Khanong, as well as the Ratchathewi-Siam area. Meanwhile, new brands are beginning to establish themselves in the Sathorn and Surawong areas to expand their customer base.

In Phuket, new projects are expanding outwards from Patong to surrounding areas such as Bang Tao and Kata, as well as southern and southeastern zones like Chalong, Rawai, and Nai Harn. This has resulted in hotels in the same segment facing direct competition within each submarket.

The big challenge for established hotels: adapt and fight or give up?

The report indicates that figures from the first half of 2569 clearly show that being in the top segment doesn't always guarantee performance. In Bangkok, the average daily rate (ADR) for the upscale segment decreased by 4.4% to 4,197 baht, due to pressure from easily replaceable options and transparent pricing online.

Existing hotel owners face the major challenge of maintaining their competitiveness amidst the pressure from a new generation of hotels. The solution doesn't necessarily require rebuilding entirely, but rather refurbishment, repositioning, emphasizing food and beverage (F&B) services, wellness activities, family events, and developing branded residences in the resort market.

Even though construction costs in 2569 are projected to increase by 3–5%, potentially causing some projects to delay their opening, existing hotel owners should not view the delays as a way to alleviate pressure.

“The competition in the future won't be about who has the newest hotels, but about who can create the most differentiated value for guests. Guests are increasingly prioritizing wellness experiences and personalized services.” Mr. Carlos concluded.

Read all interesting business news here.