Rental villas in Phuket compete with hotels
By Jon Fernquest[Introduction|Article]
[Reading Questions|Answers]
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Thailand is a world leader in the tourism industry.
So it makes sense that new and more sophisticated products are continually being developed,
Products that differentiate Thailand from other vacation spots around the world will ensure that the country never faces a decline in visitors.
Vacation villas in resort areas such as Phuket, Phangnga, and Koh Samui have become popular with foreigners over the last few years.
They are bought both as a second vacation home and as an investment.
During the part of the year when the owners are not occupying the villa they are rented out.
Villas have more privacy than hotels and are increasingly preferred to even the most luxurious hotels.
A villa has several rooms making it cheaper for groups of people traveling together.
With private maids, cooks, and beaches villas are arguably more luxurious than most hotels.
In the future, look for this new trend in Thai tourism and real estate to spread further afield to other areas of provincial Thailand, to northern Thailand in Chiang Mai and Chiang Rai, for instance.
Reading Questions
Here are some questions to guide your reading (See answers at end):1. What sort of accomodations are competing with luxury hotels in some resort areas?
2. Which resort areas and real estate markets of Thailand are discussed in this article?
3. How profitable is the rental income from luxury villas?
4. What percentage of the year does a villa have to be rented out to cover maintenance and operating costs?
5. What do you typically get when you rent a villa out for over $1,000 a night?
6. How does the rental rate for luxury villas differ with the season of the year?
7. How much per bedroom do luxury villas work out to be?
8. How do the per bedroom rates of luxury villas compare to luxury hotels?
9. What sorts of groups traveling together might find villas a more attractive option than hotels?
10. What advantage does a villa have over hotels for a group traveling together?
11. Which is becoming more popular: villas, hotel rooms, or condominiums?
12. Where do the villa owners typically come from?
13. What percentage of villa owners typically rent out their villas?
14. What is another reason to rent out a villa besides rental income?
15. How do real estate businesses in resort areas typically grow over time?
16. How much are cheaper villas and what do you sacrifice for the lower price?
17. If you don't make money off of villa rental income, how can you make money from a villa?
Bangkok Post Article October 08, 2007
PROPERTY / RESORT OPTIONSRental villas compete with hotels
NINA SUEBSUKCHAROEN
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People don't really buy expensive villas to make money but some do rent them out to cover maintenance, says Andrew Craig, general manager of Phuket Villas & Homes, an affiliate of the successful Samui Villas & Homes, which has been operating since May of this year.
"We try to keep the house occupied at least 20% of the year and that results in some sort of return for the owner and the operating and running cost of the house are then covered."
Clearly illustrating this are the four Jivana villas on this pristine beach in Phangnga province, which is very close to Phuket Airport. Each sits on a four-rai land plot with a large beachfront and all are owned by Hong Kong families. Rental rates in the current low season for each of these six-bedroom houses - with two maids and a full-time chef - are US$1,200 a night. That works out to $200 a bedroom and is indeed something four - to five-star hotels have to reckon with. In the high season the rate climbs to $1,800 a night and during Christmas and New Year it's $3,500.
posh - fashionable and expensive
villas - a large house for holiday use
cover costs - make enough to pay costs
occupied - someone living in it
pristine - pure, unspoilt, undamaged
a beachfront - the beach in front of a beach house
have to reckon with - have to deal with something you did not expect and were not prepared for
Privacy Becoming More Attractive
"So people are starting to get groups together or if you have very large families going on holiday, or even a few couples going away together, they find this a lot more private but still with all the services you find in a fine hotel," says Mr Craig.
The villa rental market is quite new in Phuket and Phangnga though many of the new hotels that are coming up also have a villa component.
"It's quite evident that the market is really tending to go more toward the private rental situation and that is where my company comes in," says Mr Craig. "So if the guests book a villa then we provide all the service that you would find in a five-star hotel."
Owners of Rental Villas
Helping this market is the fact that few villa owners actually live in Phuket. A large majority are from Europe, Australia and the US or are expatriates living and working in other countries in Asia.
Mr Craig has found that about half of the owners of villas in Phuket and Phangnga are willing to rent out their holiday homes, compared with 80% on Samui.
"We see a lot of people just locking up for the low season and not renting out too much. However, my belief is that keeping villas running full-time and having people staying there keeps them in better condition as you are constantly maintaining them and doing preventive maintenance."
expatriates - people who live and work outside of their country
preventive maintenance - repairing and fixing to avoid even larger repair bills after it completely falls apart
Real Estate Companies in Resort Areas
Mr Craig draws on the experience of Samui Villas & Homes in building up business in Phuket and Phangnga. "Our Samui office just started out managing four homes and providing rentals and then it branched out into property sales and then construction management."
The Samui office now manages about 60 villas with a staff of 180 and Mr Craig aims for a similar number on the Andaman side in two to three years.
Aside from Jivana and other top-end property, Mr Craig has cheaper properties - some at the Laguna estate are $550 a night - but with golf course views and not sea views. "But essentially the price range is the higher you get on the hill or the closer you get to the beach the more expensive it gets."
draw on experience - use knowledge gained from past experience
building up a business - developing a small business into a large business, increase sales and market share
branch out into - enter a new area of business
Andaman - the Andaman sea around Phuket (and futher south the Andaman islands; See Wikipedia on Andaman Sea and Andaman Islands)
A Growing Market
At the moment the demand is for the high-end villas because holidaymakers find $1,200 for six bedrooms pretty cheap compared to hotels.
While rental returns on villas are not that high, capital values are going through the roof, he says. "I mean, the land has probably quadrupled in price from the time they bought it five years ago."
The condominium rental market is also growing, but Mr Craig says villas are favoured for their full services. However, some people who enjoy doing some housework and a few Jivana guests like to cook and use the kitchen and also go to the market with the maids. While last year's coup and lingering political uncertainty compounded by the planned changes to the Foreign Business Act are affecting the overall resort property market, Mr Craig pointed out that as a holiday destination the Phangnga area is getting better every year.
The brave hearts who still dare to buy expensive property are advised by Mr Craig to seek good legal advice so that they know exactly what they are getting into. "Always be aware that there is tax to pay, Thailand is not a tax haven by any stretch of the imagination."
high-end - expensive, luxury, for people with a lot of money to spend
holidaymakers - people taking a vacation, tourists, travelers, on holiday
returns - gain, profits from investment
quadrupled - increased four times, X 4
lingering - hasn't completely disappeared (happened a long time ago but hasn't disappeared yet)
compounded by - made worse by
brave hearts - brave people, courageous people
dare to - have enough courage to do a risky thing
a tax haven - a place with low or no taxes
by any stretch of the imagination - very difficult to believe
Answer Key:
1. What sort of accomodations are competing with luxury hotels in some resort areas?
Luxury villas.
2. Which resort areas and real estate markets of Thailand are discussed in this article?
a. Phuket.
b. Phangnga
c. Koh Samui
3. How profitable is the rental income from luxury villas?
Since rental income typically covers maintenance only, profits from rental income are not very great.
("People don't really buy expensive villas to make money but some do rent them out to cover maintenance")
4. What percentage of the year does a villa have to be rented out to cover maintenance and operating costs?
20% of the year.
5. What do you typically get when you rent a villa out for over $1,000 a night?
a. Four rai land plot.
b. Large beachfront.
c. Six bedrooms.
d. Two maids
e. Full-time chef.
6. How does the rental rate for luxury villas differ with the season of the year?
During the low season rentals rates are typically $1,200 a night which increases during the high season to about $1,800. On special holidays rental rates could rise to as high as $3,500.
7. How much per bedroom do luxury villas work out to be?
$200 per bedroom.
8. How do the per bedroom rates of luxury villas compare to luxury hotels?
Very competitive at $200 per bedroom.
9. What sorts of groups traveling together might find villas a more attractive option than hotels?
a. Large families on holiday.
b. Couples traveling together.
c. Large groups.
10. What advantage does a villa have over hotels for a group traveling together?
Greater privacy.
11. Which is becoming more popular: villas, hotel rooms, or condominiums?
Villas. In fact, they are becoming so popular that many hotels are adding them to their hotels. Villas are preferred to condominiums for the full services they offer.
12. Where do the villa owners typically come from?
a. Europe
b. Australia
c. The US
d. Expatriates living and working in other countries in Asia
e. Hong Kong
f. Usually not locals
13. What percentage of villa owners typically rent out their villas?
a. 50% in Phuket.
b. 80% in Koh Samui
14. What is another reason to rent out a villa besides rental income?
Having people stay in the villa typically keeps it in better condition.
15. How do real estate businesses in resort areas typically grow over time?
a. Start out with managing homes and providing rentals.
b. Then move into property sales
c. Then move into construction management.
16. How much are cheaper villas and what do you sacrifice for the lower price?
Cheaper villas are located inland from the beach, are priced at $550 per night, and only have a golf club view.
17. If you don't make money off of villa rental income, how can you make money from a villa?
Villa owners typically make money from appreciation in the value of their real estate.
("While rental returns on villas are not that high, capital values are going through the roof, he says. "I mean, the land has probably quadrupled in price from the time they bought it five years ago.")
