Let's Get Real

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No matter its the rainy season here in Phuket, Thailand, its still sunny days for the real estate sector. The last two months saw billions of baht flow into the market with hotel acquisitions and major property developments taking shape! So what gives?

Realty bites. And it seems to be biting hard on the heels of investors, who are busy making hay while the sun shines all over idyllic Phuket island, arguably Thailand's most visited tourist destination. It is no secret that investments continue to pour in and property developments persistently find buyers month after month regardless of rising costs and the global economic outlook in the near term.

Local news items venture the same paradox and all concur that Phuket must be doing something right. So why is the realty scenario in Phuket so resilient despite the times and indeed, moving forward. Billions changed hands the last quarter! The Phuket Area Revenue Office (PARO) reports close to 30% increase in taxes collected compared to the same half-year period last year.

The recent 3.6 billion baht (about US$1 billion) purchase of Crowne Plaza Hotel at Karon Beach by the Dubai-based hotel group Kingdom Hotel Investments, chaired by the Saudi billionaire Prince Alwaleed bin Talal, spurred ripples of confidence in an otherwise lack-lustre economy. Before that, Karon Phuket Hotel, a joint venture 50% owned by Central Hotels and Resorts Plc, had purchased the 316-room Phuket Islandia Hotel in Karon Beach for 1.05 billion baht.

On 19 May 2006, the Bangkok Post in an article by Boonsong Kositchotethana, captioned "Spanish win fiercely contested global bid" reported, "a European joint venture led by two Spanish business groups has acquired Phuket's first five-star hotel, Le Royal Meridien Phuket Yacht Club, for around 1.3 billion baht. Through Puravarna Holdings Plc, its Hong Kong-incorporated holding arm, the consortium bought the prime property on Nai Harn Beach from the US investment bank Lehman Brothers in a fiercely contested international bid", going on to say that "the new owner will continue to run the Le Meridien banner until the marketing contract expires at the end of 2007, when the property will be rebranded as The Royal Puravarna Yacht Club."

The article added that Puravarna aims to invest another 200-250 million baht to appeal to an even more upmarket clientele raising the average annual room rate by 30% to about $350 per night. Puravarna Holdings' chief executive, Steven Granville, was quoted saying "we will make it more than five-star in terms of luxury".

From ripples to waves, the fact that the purchase was a "fiercely contested international bid" to begin with can only augur well for an industry some feel has yet to climax. This awareness has already fuelled development of better infrastructure and instigated hitherto lukewarm plans to build state-funded mega-projects. Already a renown sports destination hosting the Asian X-Games, F1 PowerBoat Racing, the Laguna Phuket Triathlon, King's Cup Regatta and International Golf Competitions, Phuket has since taken another bold step. Topping this month's agenda was the official submission of a 6-million-baht feasibility study of Governor Udomsak Uswarangkura's idea to build a world-class sports complex (reportedly costing 5.02 billion baht) in Tah Chat Chai at Mai Khao, north-west of the island - a step closer to realising Phuket's dream of hosting more internationally acclaimed sporting events. In many ways, Phuket is coming of age, fuelling positive notions of where it's headed and eagerly proving the pundits right at every turn.

This current wave of hyperactivity did not go unnoticed. Under the patronage of HH Sheikh Mohammad bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, Arabian Travel Market (ATM), the region's premier travel and tourism exhibition, announced on Tuesday, 16 May 2006, that the Thai resort island of Phuket had been honoured with the inaugural New Frontiers Award 2006. The award was presented during the annual ATM exhibitor's party at the Grand Hyatt Dubai for Phuket's outstanding resilience and positive contribution to tourism development in the face of the overwhelming devastation caused by the Tsunami.

Phuket's not only back from the brink in terms of economic recovery, but it certainly looks like its on track to revisit and surpass past glories if investor confidence is any indicator. Nothing seems to be bucking the trend just yet, and as it appears, not while the sun still shines over this idyllic island paradise.

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Greenacres Consultancy