Is the guest house sector crashing?

[thailiketoo]

Four new listings today. That is 12 Patong guesthouses listed for sale in three days on a single website:

http://www.bahtsold.com/view/19-rooms-on-new-road-patong-g0024--185595?doqs=1

http://www.bahtsold.com/view/12-rooms-plus-restaurant-on-nanai-rd-patong-g0031--185431?doqs=1

http://www.bahtsold.com/view/brand-new-phuket-hotel-with-swimming-pool-to-lease-185362?doqs=1

http://www.bahtsold.com/view/8-rooms-with-restaurant-patong-beach-g0023--185346?doqs=1

So. What percent for sale in the market at this time of year is normal?

[Bulldozer Dawn]

If you believe published occupancy rates... then up to you... I have been physically on nearly every street in Ao Nang closely looking at properties for over 3 months ... and 25% is tops for an occupancy rate except for within a few hundred meters of the beach road ... and they are building more as I have seen some boarded up and some looking abandoned...

The economic world including the Harvard Business school and the London School of economics believes the Bank of Thailand occupancy rates. http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=624&language=ENG

You know better? Aw come on. It is impossible to have an intelligent conversation unless we agree on certain conventions. If your anecdotal guess of hotel occupancy rates is to be held on the same level of credibility as the Bank of Thailand economic indicators they you will have to find someone else to talk to.

My grandfather thought the moon landing was faked.

The question is......

Is the guest house sector crashing

My suggestion would be based on an average of the hotel occupancy as full as 100%. July occupancy rate 50%. 10 to 20% of that 50 would have been sales meetings and probably not filled guest houses. So one can assume guest houses operated at about 30% occupancy during June. Or down 10% from March 2014.

http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=624&language=ENG

Is the guest house sector crashing? Depends on the break even of the individual guest house. If you own the place outright obviously no it is not crashing. The rest is determined by the fixed costs of each guesthouse. Is the fixed cost more than the income 30% occupancy would generate? If yes then that place will go broke.

Thailiketoo, although there is some bulk to your analysis there is little substance other than the chestnut that if your fixed costs are more than your revenue you will go broke. Well done on that ephiphany.

I have held a number of commercial leases in Phuket over the years and it is common place for the owner of the property to want a clause inserted in the lease that passes the tax burden on to the tenant. The rate is 12.5 percent of revenue. It is commonplace however for the Landlord to lie about returns on the property and so the tax payment is often reduced or avoided all together. That was certainly the case with one of my properties. In the last week I have seen the army doing the rounds at several guest houses and apartments in Patong. They are inspecting the owners records chasing tax evasion. 12.5 percent is a considerable margin, and in these quiet times it may well be the straw that has broken the back of the camel with regard to profitability of a leased guesthouse.

This crash will not just be limited to guesthouses. If other businesses, such as massage shops, are pursued for correct taxation on earnings by the army, it may well be the case that they too, can no longer service the onerous rents in Patong.

Edited September 11, 2014 by Bulldozer Dawn

[thailiketoo]

If you believe published occupancy rates... then up to you... I have been physically on nearly every street in Ao Nang closely looking at properties for over 3 months ... and 25% is tops for an occupancy rate except for within a few hundred meters of the beach road ... and they are building more as I have seen some boarded up and some looking abandoned...

The economic world including the Harvard Business school and the London School of economics believes the Bank of Thailand occupancy rates. http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=624&language=ENG

You know better? Aw come on. It is impossible to have an intelligent conversation unless we agree on certain conventions. If your anecdotal guess of hotel occupancy rates is to be held on the same level of credibility as the Bank of Thailand economic indicators they you will have to find someone else to talk to.

My grandfather thought the moon landing was faked.

The question is......

Is the guest house sector crashing

My suggestion would be based on an average of the hotel occupancy as full as 100%. July occupancy rate 50%. 10 to 20% of that 50 would have been sales meetings and probably not filled guest houses. So one can assume guest houses operated at about 30% occupancy during June. Or down 10% from March 2014.

http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=624&language=ENG

Is the guest house sector crashing? Depends on the break even of the individual guest house. If you own the place outright obviously no it is not crashing. The rest is determined by the fixed costs of each guesthouse. Is the fixed cost more than the income 30% occupancy would generate? If yes then that place will go broke.

Thailiketoo, although there is some bulk to your analysis there is little substance other than the chestnut that if your fixed costs are more than your revenue you will go broke. Well done on that ephiphany.

I have held a number of commercial leases in Phuket over the years and it is common place for the owner of the property to want a clause inserted in the lease that passes the tax burden on to the tenant. The rate is 12.5 percent of revenue. It is commonplace however for the Landlord to lie about returns on the property and so the tax payment is often reduced or avoided all together. That was certainly the case with one of my properties. In the last week I have seen the army doing the rounds at several guest houses and apartments in Patong. They are inspecting the owners records chasing tax evasion. 12.5 percent is a considerable margin, and in these quiet times it may well be the straw that has broken the back of the camel with regard to profitability of a leased guesthouse.

This crash will not just be limited to guesthouses. If other businesses, such as massage shops, are pursued for correct taxation on earnings by the army, it may well be the case that they too, can no longer service the onerous rents in Patong.

What crash? Your premonition of doom is not a fact and you keep presenting fiction as fact. How many guest houses in the market area (Phuket?) How many are for sale? Just the facts Jack. What crash? Just the facts; not some anecdotal report of an expat wandering around looking from the outside in and pretending to be privy to some information no one else has.

[thailiketoo]

Four new listings today. That is 12 Patong guesthouses listed for sale in three days on a single website:

http://www.bahtsold.com/view/19-rooms-on-new-road-patong-g0024--185595?doqs=1

http://www.bahtsold.com/view/12-rooms-plus-restaurant-on-nanai-rd-patong-g0031--185431?doqs=1

http://www.bahtsold.com/view/brand-new-phuket-hotel-with-swimming-pool-to-lease-185362?doqs=1

http://www.bahtsold.com/view/8-rooms-with-restaurant-patong-beach-g0023--185346?doqs=1

I'm sorry. I want to formally apologize. You wanted to spam Thai Visa with bahtsold ads and have figured out a way to do it. I actually thought the writing about a crash was the point of your post. I got conned. Normally I'm quicker to figure the real intent of a post. Good job. Sorry again, but hey look on the bright side for my argument you got to spam another 4 ads.

[rgs2001uk]

If you believe published occupancy rates... then up to you... I have been physically on nearly every street in Ao Nang closely looking at properties for over 3 months ... and 25% is tops for an occupancy rate except for within a few hundred meters of the beach road ... and they are building more as I have seen some boarded up and some looking abandoned...

The economic world including the Harvard Business school and the London School of economics believes the Bank of Thailand occupancy rates. http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=624&language=ENG

You know better? Aw come on. It is impossible to have an intelligent conversation unless we agree on certain conventions. If your anecdotal guess of hotel occupancy rates is to be held on the same level of credibility as the Bank of Thailand economic indicators they you will have to find someone else to talk to.

My grandfather thought the moon landing was faked.

The question is......

Is the guest house sector crashing

My suggestion would be based on an average of the hotel occupancy as full as 100%. July occupancy rate 50%. 10 to 20% of that 50 would have been sales meetings and probably not filled guest houses. So one can assume guest houses operated at about 30% occupancy during June. Or down 10% from March 2014.

http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=624&language=ENG

Is the guest house sector crashing? Depends on the break even of the individual guest house. If you own the place outright obviously no it is not crashing. The rest is determined by the fixed costs of each guesthouse. Is the fixed cost more than the income 30% occupancy would generate? If yes then that place will go broke.

Thailiketoo, although there is some bulk to your analysis there is little substance other than the chestnut that if your fixed costs are more than your revenue you will go broke. Well done on that ephiphany.

I have held a number of commercial leases in Phuket over the years and it is common place for the owner of the property to want a clause inserted in the lease that passes the tax burden on to the tenant. The rate is 12.5 percent of revenue. It is commonplace however for the Landlord to lie about returns on the property and so the tax payment is often reduced or avoided all together. That was certainly the case with one of my properties. In the last week I have seen the army doing the rounds at several guest houses and apartments in Patong. They are inspecting the owners records chasing tax evasion. 12.5 percent is a considerable margin, and in these quiet times it may well be the straw that has broken the back of the camel with regard to profitability of a leased guesthouse.

This crash will not just be limited to guesthouses. If other businesses, such as massage shops, are pursued for correct taxation on earnings by the army, it may well be the case that they too, can no longer service the onerous rents in Patong.

What crash? Your premonition of doom is not a fact and you keep presenting fiction as fact. How many guest houses in the market area (Phuket?) How many are for sale? Just the facts Jack. What crash? Just the facts; not some anecdotal report of an expat wandering around looking from the outside in and pretending to be privy to some information no one else has.

As one who travels extensively throughout Thailand, answer, NO, the guest house sector is not crashing.

I refer to "hong pak" as the Thais call it, if anything it is booming, along with "Homestay"

Phuket is hardly representative of Thailand or the Thai economy.

If your business is based in a farang enclave and dependant on farang customers, yes you may have a problem.

In the last 6 months I have visited, in no particular order, Petchabun, Chan, Khao Yai, Nakon Nayok etc etc.

The Thai market is alive and well.

The mrs was on the phone today and booked us up for 2 nights next week, luckily we are going mid week, on weekends, forget it, fully booked.

[Berkshire]

This crash will not just be limited to guesthouses. If other businesses, such as massage shops, are pursued for correct taxation on earnings by the army, it may well be the case that they too, can no longer service the onerous rents in Patong.

What crash? Your premonition of doom is not a fact and you keep presenting fiction as fact. How many guest houses in the market area (Phuket?) How many are for sale? Just the facts Jack. What crash? Just the facts; not some anecdotal report of an expat wandering around looking from the outside in and pretending to be privy to some information no one else has.

Don't worry, thailiketoo, this bulldozer dude has been predicting/hoping for the demise of Thailand for some time. None of his cause and effect makes any sense, but he figures that if he's going to be miserable, he wants everyone else to feel the pain as well. All imaginary, of course. The BD should change his name to Bulldozer Sunset so we can accurately refer to him as "BS."

[mrtoad]

The sky is falling. Well plenty of guesthouses in Koh Chang that are doing well. They dont just rely on Farang market

[KarenBravo]

Have been hearing the doom-and-gloom about Phuket and Patong for decades.

"If this doesn't/does happen, the tourists won't come. Ghost town blah, blah, blah.

None of it has come to pass.

Think. How many places like Phuket with airport, beaches, restaurants, shopping, sea sports, sex, scenery etc. in SE Asia?

Bali is all I can think of.

I think of Bulldozer Dawn (alias BTB) as a rather shrill version of Chicken Little and with about the same credibility.

As far as guesthouses. I think it will be harder to fill them with Westerners than before, mainly due to more and more of them appearing, but, "crashing"? No.

Edited September 12, 2014 by KarenBravo

[sunray69]

The price seems interesting in general but they don't mention the price of the rent... It is generally so high the landlord is the only winner and you are struggling for making a 25,000 THB a month... That's their problem!

[lazygourmet]

The sky is falling. Well plenty of guesthouses in Koh Chang that are doing well. They dont just rely on Farang market

Same here around south of Khao Yai. Guesthouses and bungalows for rent are catering for the domestic market. Most of them are only opening during weekends and school holidays. All of them are doing more than well with an average of one hundred fifty working days per year.

[Aussieroaming]

Yeah..time to bulldoze the lot

[Kwasaki]

The price seems interesting in general but they don't mention the price of the rent... It is generally so high the landlord is the only winner and you are struggling for making a 25,000 THB a month... That's their problem!

I'm not usually serious about things happening in Thailand but for me you hit a note guesthouses that are not owned and having to pay rent are the ones that will lose out.

[rgs2001uk]

The sky is falling. Well plenty of guesthouses in Koh Chang that are doing well. They dont just rely on Farang market

Same here around south of Khao Yai. Guesthouses and bungalows for rent are catering for the domestic market. Most of them are only opening during weekends and school holidays. All of them are doing more than well with an average of one hundred fifty working days per year.

I take it the OP has never made his way up to Nakon Nayok.

Check out the guesthouses/resorts etc beside Salika waterfalls, Gang Sam Chan is another area.

Filled to capacity on Fri/Sat/Sun night with Bkk Thais escaping Bkk for the weekend.

The beauty of them is, they dont charge rip off farang prices.

The resort I stay is fully fitted, even provides the cooking pots and charcoal for cooking.

Air con, satellite TV, fridge etc etc.Just like a regular hotel room

[JDGRUEN]

If you believe published occupancy rates... then up to you... I have been physically on nearly every street in Ao Nang closely looking at properties for over 3 months ... and 25% is tops for an occupancy rate except for within a few hundred meters of the beach road ... and they are building more as I have seen some boarded up and some looking abandoned...

The economic world including the Harvard Business school and the London School of economics believes the Bank of Thailand occupancy rates. http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=624&language=ENG

You know better? Aw come on. It is impossible to have an intelligent conversation unless we agree on certain conventions. If your anecdotal guess of hotel occupancy rates is to be held on the same level of credibility as the Bank of Thailand economic indicators they you will have to find someone else to talk to.

My grandfather thought the moon landing was faked.

The question is......

Is the guest house sector crashing

My suggestion would be based on an average of the hotel occupancy as full as 100%. July occupancy rate 50%. 10 to 20% of that 50 would have been sales meetings and probably not filled guest houses. So one can assume guest houses operated at about 30% occupancy during June. Or down 10% from March 2014.

http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=624&language=ENG

Is the guest house sector crashing? Depends on the break even of the individual guest house. If you own the place outright obviously no it is not crashing. The rest is determined by the fixed costs of each guesthouse. Is the fixed cost more than the income 30% occupancy would generate? If yes then that place will go broke.

Occupancy rates depend on HONEST reporting ... reporting low occupancy means losing face among other things... If you really believe that Thai hotels, resorts, guest houses, etc., etc., report honest figures to ANYONE - then I have ocean front property in Kansas, USA to sell you ...

I suggest that you take a personal physical inspection of such places in the closest resort town to you - as I have done ... Then come back and talk about occupancy rates. Believe your eyes and ears ... in a face to face LOOK and Talk with owners and managers ... before spouting off. Physically look into the windows - look for evidence of people - shoes at the door, cars and motorcycles in front and a dozen other things... you have no clue

Edited September 12, 2014 by JDGRUEN

[rgs2001uk]

Yeah..time to bulldoze the lot

Dont worry the General has them in his sights, if he hasnt yet made it to your area, dont fret, he will get there soon enough.

Most of these fly by night farang operators are probably trying to convert to an Ed Visa as we speak.

Check out some of the places farangs have sunk their life savings into upcountry, trying to sell for 20 million baht++, puuuleeeeze, gimme a break.

[Aussieroaming]

Yes wifey and I spent a few months in Phuket before coming back to Bangkok and they were busy knocking down the Surin Beach gear. I was a bit 50:50 about the destruction. Legal or not there were a few good spots there, some I'd been visiting for a number of years.

But I agree... If it's not legal then it shouldn't be there.

But if a building is legally there then it should be forced to comply with all safety and environmental aspects.

[A1Str8]

No.

[rgs2001uk]

Yes wifey and I spent a few months in Phuket before coming back to Bangkok and they were busy knocking down the Surin Beach gear. I was a bit 50:50 about the destruction. Legal or not there were a few good spots there, some I'd been visiting for a number of years.

But I agree... If it's not legal then it shouldn't be there.

But if a building is legally there then it should be forced to comply with all safety and environmental aspects.

There was some guy one one of the forums a few months back, he was about to sink his lifes savings into an under the table, no questions asked, no VAT, no money back, no guarantee venture.

Basically he was going to buy a spot on Hua Hin beach where his mrs could sell fantas and pineapples and deck chairs.

Unbelievable.

The Thais have told me, Operation Clearout has already started in HH.

Personally I dont care about the legallity of it or not, if the food is good we eat there, but no way would I ever consider investing in it.

Next week we are off down to Rayong, will be interested to see what has happened down there, last time we were there, a pile of bungalows had been built on the beach side of the road, as far as I know, thats totally illegal, I was under the impression the beaches belong to the crown.

[thailiketoo]

Occupancy rates depend on HONEST reporting ... reporting low occupancy means losing face among other things... If you really believe that Thai hotels, resorts, guest houses, etc., etc., report honest figures to ANYONE - then I have ocean front property in Kansas, USA to sell you ...

I suggest that you take a personal physical inspection of such places in the closest resort town to you - as I have done ... Then come back and talk about occupancy rates. Believe your eyes and ears ... in a face to face LOOK and Talk with owners and managers ... before spouting off. Physically look into the windows - look for evidence of people - shoes at the door, cars and motorcycles in front and a dozen other things... you have no clue

Perhaps you should learn how occupancy rates are figured, before you act like an expert. You might want to google: Statistical operation: Hotel Occupancy Survey

I know Thai Visa anecdotal evidence trumps them PHd's every time......

If you think modern science and statistics and financial reporting in Thailand are all faked then I nor anyone else can argue with you. It is like talking about astrophysics with a person who thinks the moon landings were faked.

Edited September 12, 2014 by thailiketoo

[Upset]

I always find it so funny whenever I see ads online selling businesses....common if a business is really profitable and making money ...who in the right mind would sell it...yeh...most of them simply say excuses like relocation or someone of sick...gimme a break. Why buy a business that is losing...simply start something new and innovative instead of buy an existing business that is rubbish.

[Munger]

Yes... guest house industry is crashing... Baht is crashing against all major currencies... Investors taking out all money, because they get so much interest everywhere else... tourist industry is crashing despite the fact that tourist industry worldwide is surging up... even the corruption industry is about to crash because of the General... taxi / beach vendor / jet ski businesses are all crashing... all despite the fact that worldwide all economies are going up and up and up...

Minor adjustments is all you see here, small Thai business operators without business plans and not a single Baht of contingency available are the ones who try to get out...

Waiting for the next "CRASH" cry on TV...

Best to remove the rose colored glasses...

The apologists will never remove them

[simon43]

On Monday I will open my 4th guesthouse/small hotel in Phuket, (6th that I've opened in Thailand).

Out of these 6 business ventures, 2 'failed'/produced little profit. Surprise, surprise that those 2 failures were in leased buildings, operating on short, 3-year leases and at the 'mercy' of the landlord who could up the rent/throw us out after 3 years. Of course, a < 3-year lease meant that the landlord didn't have to register our lease at the land office and didn't pay the required taxes for this unregistered lease.

I got wise to this insecurity, and now I only open new guesthouses that my Thai family build for me, on long-term leased land (20 years), where the monthly lease rate is stipulated for the 20-year period, the lease is properly registered at the land office and all relevant taxes paid.

Certainly in the popular tourist areas there is a glut of short-lease guesthouses, 'owned' by those who have little knowledge of the guesthouse sector, think that a Channel Manager is someone who manages cross-Channel swimmers, and doesn't recognise the value of good SEO.

But that's not unique to Thailand. There are dreamers throughout the world who will throw away their redundancy money/retirement money on ill-thought business ventures that have little chance of success, especially with the 'dreamer' at the helm....

Edited September 13, 2014 by simon43

[thairastawoman]

Sorry but no need to be a rocket scientist to understand before even opening any business that renting, especially short term is totally stupid...

I would never open any business in a building that I don't own in this insecure country.

[thaibeachlovers]

Yes wifey and I spent a few months in Phuket before coming back to Bangkok and they were busy knocking down the Surin Beach gear. I was a bit 50:50 about the destruction. Legal or not there were a few good spots there, some I'd been visiting for a number of years.

But I agree... If it's not legal then it shouldn't be there.

But if a building is legally there then it should be forced to comply with all safety and environmental aspects.

There was some guy one one of the forums a few months back, he was about to sink his lifes savings into an under the table, no questions asked, no VAT, no money back, no guarantee venture.

Basically he was going to buy a spot on Hua Hin beach where his mrs could sell fantas and pineapples and deck chairs.

Unbelievable.

The Thais have told me, Operation Clearout has already started in HH.

Personally I dont care about the legallity of it or not, if the food is good we eat there, but no way would I ever consider investing in it.

Next week we are off down to Rayong, will be interested to see what has happened down there, last time we were there, a pile of bungalows had been built on the beach side of the road, as far as I know, thats totally illegal, I was under the impression the beaches belong to the crown.

< Operation Clearout has already started in HH.>

I look forward to the army destroying the encroached below high tide beach reclamations that were built by the big condo developers. If it happens I'll go down to cheer the bulldozers on.

Edited September 13, 2014 by thaibeachlovers

[rgs2001uk]

Yes wifey and I spent a few months in Phuket before coming back to Bangkok and they were busy knocking down the Surin Beach gear. I was a bit 50:50 about the destruction. Legal or not there were a few good spots there, some I'd been visiting for a number of years.

But I agree... If it's not legal then it shouldn't be there.

But if a building is legally there then it should be forced to comply with all safety and environmental aspects.

There was some guy one one of the forums a few months back, he was about to sink his lifes savings into an under the table, no questions asked, no VAT, no money back, no guarantee venture.

Basically he was going to buy a spot on Hua Hin beach where his mrs could sell fantas and pineapples and deck chairs.

Unbelievable.

The Thais have told me, Operation Clearout has already started in HH.

Personally I dont care about the legallity of it or not, if the food is good we eat there, but no way would I ever consider investing in it.

Next week we are off down to Rayong, will be interested to see what has happened down there, last time we were there, a pile of bungalows had been built on the beach side of the road, as far as I know, thats totally illegal, I was under the impression the beaches belong to the crown.

< Operation Clearout has already started in HH.>

I look forward to the army destroying the encroached below high tide beach reclamations that were built by the big condo developers. If it happens I'll go down to cheer the bulldozers on.

Great stuff, lets make an appointment to be there at the same time, my mrs will supply a beach umbrella, I will supply the chairs and beers, maybe you or your mrs can supply the grilled chicken and sticky rice.

Look forward to it.

[Gringogazzer]

No.

Yes.

[Gringogazzer]

No.

Yes.

Errr...maybe??

[eldragon]

Guesthouse seems to be high on the list of "get rich quick" schemes here. Just like small restaurants and coffee shops, foreigners see the way locals are doing things and think they can do it better whilst making a good chunk of change. But two things many don't realize is 1) the Thais usually own the property and have lower overhead and 2) the Thais might not be making that much money (and can probably survive here with less). Reality sinks in- or doesn't- and the foreigner sells the business to the next patsy.

[bendejo]

I think a lot of us on here are pretty much removed from the experience of tourists on a few weeks holiday during high season.

People come to a strange land where they can't speak the language, maybe the only things that look familiar are soft drink bottles, and, well, everything is so different. Not many such people are going to travel half way around the world thinking "we'll just find a hotel when we get there."

Sites like tripadvisor (there's at least a dozen others like it) allow people to shop around. I would suspect that hotels and resorts are lowering their prices to fill vacancies, while the guest houses are holding fast, if not raising their prices to cover losses (if you don't understand the logic of the latter then welcome to Thailand). For those young European couples with their three kids, I would think that when shopping for accommodation they'd see the convenience of an en suite room over a possibly-occupied toilet down the hall, especially with the kids, with the price difference between them around the cost of a lunch back home.

[kokesaat]

Although I live in Thailand, hundreds of kilometers from the sea, we see the same thing in Udon.......hotels, guest houses, resorts up the wahzoo. Combine that with the google search "junta governments".......if I were young, searching for a desirable place to waste away a few weeks, I might be disinclined to do it in a country with a junta.