Koh Samui Hotel Deals and How Big is Your House?

Tourism is down and hotels are cutting their rates both in Koh Samui and Bangkok. However, you will notice that this is done in a subtle way by offering limited promotions rather than a general reduced rack rate. Hotel room rates are very customer and travel agent sensitive and whilst modest increases year on year are accepted by clientele, major changes need to be on the back of a renovation or some other good reason to justify them. Therefore to increase the value of your hotel it can take a few years to achieve a higher Average Daily Rate and hoteliers do not want to take a step back by dropping the rack rate. Hence, limited period promotions. Despite the numerous promotions around the “big boys” obviously see a future in Koh Samui as Park Hyatt and Conrad are still building and Banyan Tree have quietly made good progress with their development to the north of Lamai which is due to open later this year. Bhundhari Spa Resort and Villas has just opened with 124 more rooms and villas and of course has an “Opening Promotion”. Sala Samui in Cheongmon have a “Sala Fly Free” promotion where complimentary one-way flights are on offer for up to two guests wishing to experience both SALA Phuket and SALA Samui. Nevertheless, reports in The Nation and Samui Express – copied later in this Newsletter – indicate that many hotel owners are finding it difficult to continue in the present market and are trying to sell. Whilst there is undoubtedly some truth in the article it is another example of “parachute journalism” where a reporter takes a snapshot of a situation following a brief visit and produces an article which seems to suggest that the properties being offered have come to the market as a consequence of the current recession. The reality is that every one of the hotels mentioned (in Koh Samui) has been offered on the market for at least the last three years and mostly at prices that were unrealistic then, never mind today.

Usually the owner is well aware that the price being asked is unrealistic but takes the view that somewhere there is someone who may pay it and at that price he will sell, but if it does not sell – so what! And sometimes they are right which makes valuing hotels here so difficult. In one case a beach front hotel was on the market for Baht 50 million. It was available for months, if not years. It eventually sold. Minor renovation – mainly just a paint job – was carried out and the property was put back on the market at Baht 110 million and sold within six months. No logic to this at all. Baht 50 million was good value. Baht 110 million was way over the top. There is another prevalent view that as time has passed, the value must have gone up. In one case a hotel had been offered at Baht 150 million and remained unsold for at least three years – it needed extensive renovation and was not ideally located. Late last year the owner put the price up to Baht 210 million because “it must be worth more now!” In this case it remains unsold and is likely to remain so for the foreseeable future – unless of course “someone from somewhere” comes along and proves me wrong!

How big is your house? Well it can vary depending on who measured it and by which criteria. The RICS produce a Code of Measuring Practice the purpose of which is to achieve consistency between valuers for the purpose of accurate comparison and definition. The Code runs to 42 pages and includes definitions of Gross External Area, Gross Internal Area, Net Internal Area and has a specific section relating to Net Sales Area. Most areas I see published on web sites are poorly defined and if I have the opportunity to check them on site, they are often misleading and often simply wrong by whatever definition used. The Code is extensively used in the UK and it is clear from experience that few people on the real estate industry here in Thailand use it or are aware of it – but then why should they be! There are currently about 60 fully qualified Chartered Surveyors practicing in Thailand and what is encouraging is the large number of young Thai people in the real estate industry who are applying for membership. Hopefully as more qualify and enter the profession, standards and consistency will improve, and even if the Thai valuers produce their own version of the Code for Thailand, then consistency will be achieved for the benefit of everyone. In the meantime, I will continue to abide by the RICS Code of Measuring Practice.

And property prices continue to fall! If you check our web site and look at the Hot Press Offers you will see a great number of properties with prices that have been reduced from between 15% and 50% with an average reduction of 34%. These reductions are now beginning to produce sales and, although still not many, there are a few more buyers around than there were a few weeks ago.

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Travel to Koh Samui or not? Are you a Savvy Traveller?

“We advise against all but essential travel to Bangkok. British nationals should also review travel plans to other parts of Thailand. British nationals already in Bangkok and other cities affected by the violence are advised to stay indoors and to monitor the media and this travel advice.”

So stated the first paragraph of the Foreign Office warning to travellers during April. The whole text can be seen here.
Having lived, worked and travelled in and out of the Gulf during the first Gulf War and having been here during the Military Coup three years ago, I have seen these warnings on numerous occasions. Quite rightly I suppose governments need to make such statements because there are many people who are not seasoned travellers, who are not street wise and need to have their hands held every time they step outside their own front door. Modern news broadcasting is so extensive, immediate and even pervasive, that anyone with a reasonable amount of intelligence should be able to make a reasoned judgement on whether or not to travel to a certain place. Obviously over the Easter/Songkran weekend, Bangkok and Pattaya were probably not the best places to be, which was a shame as whether you enjoy Songkran or not, it is usually a time for fun and frivolity. With Songkran coming immediately after a weekend, it became of course a very long weekend with Songkran lasting until Wednesday. So now you have five days when people are not expected to turn up for work and the ability to amass a large number of people for a demonstration was that much easier. So was it a good idea to plan the ASEAN summit at this time? It would appear not with the inevitable consequences. As I write this in the immediate aftermath the police water cannon seem to have been replaced by the plastic water guns which have become more traditional during this period and most people have reverted to more peaceful means of enjoying themselves and the crowds are dispersing leaving the political consequences to be decided.

Here in Samui Songkran passed off as usual, a little quieter than in previous years and, as opposed to other parts of Thailand, is over in one day. Apart from Bangkok and briefly in Pattaya, I was not aware of any reports of disturbances elsewhere in Thailand, and even in Bangkok the problems seemed confined to specific areas, which obviously as a foreigner it would be wise to stay away from. The airport was not affected this time although I suppose that would be the main concern of travellers as the ability to travel and the possibility of not being able to travel was uppermost in peoples mind rather than getting caught up in the demonstrations. Certainly most people I know who are regular visitors to Thailand take these events in their stride, but for people planning their annual vacation to Thailand for the first time perhaps, these confrontations will inevitably make them have second thoughts and seek more stable destinations. The consequences for the tourism industry are severe. Job losses in the hospitality sector have been estimated at 275,000 this year based on a predicted 35% fall in tourist arrivals. Hotel occupancy is down. Room rates are being cut drastically and there are some very good deals being offered across the board.

So for the faint hearted, the Foreign Office advice may be one to pay heed to, but for the more savvy traveller the present situation has created opportunities to explore Thailand far more economically than before. Bangkok does not even have to be on the agenda. Koh Samui is accessible internationally from Singapore, Kuala Lumpur and Hong Kong as are other regional airports. For the more adventurous who wish to avoid air travel there is the Eastern & Oriental Express from Singapore through Kuala Lumpur, Penang, Kanchanaburi for the River Kwai and on to Bangkok where you can connect to Chiang Mai or Vientiane.

And property prices are still falling! If you check our web site and look at the Hot Press Offers you will see a great number of properties with prices that have been reduced from between 15% and 50% with an average reduction of 34%. These reductions are now beginning to produce sales and, although still not many, there are a few more buyers around than there were a few weeks ago.

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Koh Samui, Songkran, Marina and Sports Stadium

The world economic situation continues to have its affect on real estate globally and unsurprisingly also here in Koh Samui. We continue to see price reductions of 25-30% many of which are due to the fall in the value of Sterling and owners can afford to reduce the Baht price correspondingly and still receive the same mount in Pounds they would have done a year ago. Nevertheless there are some owners who are prepared to go even further and have reduced their asking prices by up to 50% as you will see if you look at our Hot Press Offers here. Having said that the market is not totally dead as we have seen a couple of sales in the last month so there are buyers out there looking to take advantage of falling prices.

Songkran starts on 13^th April so keep those plastic bags handy if you are going out to keep your phone, wallet etc. dry. Samui has a pretty good tradition of keeping it to three days at most. In some parts of Thailand it lasts for seven days! The main day will be Monday 13^th April although anyone venturing out on the Sunday afternoon or evening may get the odd splash and it tends to fizzle out by midday on the Tuesday. The Government was considering banning the sale of alcohol during the Songkran Festival but common sense prevailed. The existing ban on alcohol sales before 11am and between 2pm and 5pm and after midnight is illogical enough in terms of restricting sales. The concentration over Songkran will be enforcement of the drink driving law so beware – there are likely to be more traffic checks wherever you are in Thailand.

I have reported in previous Newsletters on plans for a Marina adjacent to Big Buddha and BBC Café. The soil surveys have commenced and it is expected that the Marine Department will approve the Initial Environmental Examination Report for the Samui Marina by mid to end of March. The next stage is provincial committee approval. For more information on progress and pictures check this web site http://www.bigbuddhamarina.com/index.html courtesy of Mark at BBC Café.

This has nothing to do with Samui but is interesting and worth passing on. We are all aware of the regular nonsense Health and Safety Executive directives that appear in the Press from time to time. Well the UK H&SE have now decided enough is enough and created their own web site to address the many issues of which they are accused. It makes interesting reading and you can see it here. http://www.hse.gov.uk/myth/ .

It would appear that Koh Samui is to get a new Sports Stadium according to the following announcement – “ Welcome to the Home Page of the Samui Sports Stadium, opening soon on the island of Koh Samui, Thailand. The Samui Sports Stadium features 3 large floodlit football (Futsal) pitches and a Multi-Purpose Hard Court for Basketball, Netball, Volleyball++ , a swimming pool and BBQ Area, a children's play area, state of the art facilities and a fully licensed restaurant and bar.” More details can be found on this web page - http://www.samuisportsstadium.com/

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David Beckham nonsense on Koh Samui

Once again David Beckham’s “house on Koh Samui” has hit the headlines around the world. Reports are that he has installed a state of the art mosquito repellant/killer (depending on which report you read) and that the local Monks are up in arms about killing living creatures. One wonders why then the Monks are not protesting at Tesco, Big C etc. about the mosquito sprays, rat poison, and other insect zappers they sell and why companies such as Rentokil are not targeted! What nonsense! Then they go and publish a photograph of “his house” which actually belongs to someone else. Even Samui Express picked this up and published it and they really should have known better. I copy that article below out of interest only. Just goes to show you cannot believe everything you read in the papers.

I reported last month on problems we had with our web site being hacked which was at the best disconcerting, but we were able to resolve that issue relatively quickly. If anyone still has problems accessing our site or gets warning messages – particularly is you use the Firefox browser, please let me know. We also discovered an issue with emails in that due to the number of emails I send out, not least of which are the ones distributing this Newsletter, our out-going mail server started to reject mails as it identified them as potential spam. We changed our outgoing mail server but as a precaution I also use my gmail accounts hbonning@gmail.com and ksprop.harry@gmail.com and kosamuiproperties@gmail.com so if you receive mails from any of these accounts they are legitimate and from me.

Well there is good news and there is bad news. And they are both the same. Asking prices are coming down and quite significantly. This is due to a combination of factors, mainly of course the world wide economic situation and lack of credit. As Thailand has always been a cash purchase scenario due to the absence of finance for foreigners, and as most people are hanging on to what cash they have these days, the market has all but dried up. There are still buyers around but they are only looking at really attractive deals. Combine this with the fall in the value of the British Pound as a prime example and you can see that from Baht 64 to the pound last June to Baht 50 to the pound today, this represents a 28% increase in the cost of a property here in Sterling terms. However, on the other hand anyone selling here can reduce the price of their property by 28% in Baht and still achieve the same result in Sterling. As an example, a house for Baht 10,000,000 would have cost £156,250 in June last year but would cost £200,000 today. Equally that house could now be purchased at a Baht price of Baht 7,812,500 and still maintain the Sterling price. So the good news for buyers is that property is getting cheaper – provided you are not paying in Sterling.

We have seen a number of owners reducing their asking prices accordingly and some quite dramatically taking into account the factors mentioned above but also due to personal circumstances which are producing some very interesting possibilities. We have one large sea view property on a large site that was offered at Baht 60 million which is now available at a drastic reduction to Baht 25 million for a quick sale and another hilltop house which last month was Baht 24 million now available at Baht 13 million. These are exceptional purchases for someone with a medium to long term view.

Progress is being made on the Marina project I reported about in the November 2008 Newsletter. Towards the end of last month bore holes were drilled to investigate the ground conditions for construction.

Below I have reproduced an article I wrote last November for C-Publishing and which will appear on the March Issue of C-Holiday magazine. As at this time I do not have a direct link to the article in the magazine but the general link is http://c-publishing.com/ .

Generally everything remains pretty quiet having regard to this is still High Season. The world economy is certainly having its effect on tourism although there do seem to be a fair number of stalwarts who continue travelling but in far fewer numbers. The next surge would be expected at Easter and Song Kran, so we must keep our fingers crossed for good reports.

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Fake Bank Notes on Koh Samui

Still running a month behind on these blogs but will catch up in the next few days.

The internet is such an important tool in business these days and a company’s website is the most vital provider of information on the company’s activities and products. Our own website www.kosamuiproperties.com is a major tool in our business and is the first contact that a client usually has with us. It is therefore a potential disaster when that web site is hacked which happened to us in January. For a while anyone using the Firefox web browser received a warning message when they tried to access our site that it had experienced an “attack” and they should not proceed further. Naturally this initiated a flurry of activity on our part with correspondence with our hosting company and Google to identify the problem and eliminate it. It was identified as coming from three sites in China and following the instructions of our hosting company and IT advisors we were able to clean the site and restore its safe availability within 24 hours. We maintain up to date Virus Programs and other safety software but hackers are so ingenious these days that even that sometimes does not help. Internet security is so important these days as there are too many people out there with malicious intent that you cannot be too careful.

Last month I reported on fake thousand Baht bank notes in circulation in Thailand and this month it would seem they have arrived in Koh Samui and indeed it would appear we had one in the office as part of a rental payment. I have reproduced the flyer which helps to identify fake notes below, so please take the time to look at it and be careful when receiving cash. The local banks have states that the money drawn from and ATM will be OK but long experience of dealing with banks here suggests that even then you check what comes out of the slot.

Some good news is that following the visit to Koh Samui of the Prime Minister recently, the state of the roads on the island was discussed and a promise of funding made. We must now see if that turns into reality! See the article later in this Newsletter.

The weather since the turn of the year has been much cooler than normal, and whilst acceptable to those of us brought up in colder climates, has not been welcome by our Thai hosts. Having said that though, there was one night watching the rugby quite late when even I had to make a quick run home to get a slightly heavier shirt and change my shorts to long trousers. Not at all what we expect in Samui in January.

If you are planning a trip here in the spring, the Song Kran Festival this year runs from 13th to 15th April here in Samui although different areas of Thailand extend the dates and you can get wet for a whole week in some places. Samui is pretty sensible and two or three days is the maximum. If you have never been during Song Kran it is an interesting experience – once – although the Thais love it every year but having lived here for nearly nine years now, the novelty has worn off . Or maybe I am just getting old and curmudgeonly!

A somewhat shorter Newsletter this month as there has not been a great deal of published news to report. Generally everything has been pretty quiet having regard to this being High Season. The world economy is certainly having its effect on tourism although there do seem to be a fair number of stalwarts who continue travelling but in far fewer numbers. The Chinese New Year was reasonably busy, a bright spot in an otherwise gloomy tourist season. The next surge would be expected at Easter and Song Kran, so we must keep our fingers crossed for good reports.

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Rain, Valuation and Tourist Police in Koh Samui

Sometimes things get delayed - as is this Blog which should have gone out in December so please read it in that context!

I am not commenting on the present situation in Thailand as there is really not much more to say that cannot be read in the Newspapers and seen on the television and the situation is still fluid. It has obviously badly affected the tourist season and for those still brave enough I can see that there will be some cheap deals in the hotels over Christmas.
Well the rainy season has well and truly started and there has been plenty of rain during November. As expected all the usual places have flooded but there are some positive signs as well. Since the last major flooding here the Municipality has carried out several drainage improvement schemes and they appear to be working. It is doubtful that any drainage could have coped with the volume of water that fell on the island in such a short time but once the rain stopped many of the affected areas cleared very quickly. Emergency measures put in place on the prediction of heavy rains also worked. The flooding that normally occurs between the traffic lights at Bophut and the entrance to Fisherman’s Village has been noticeable by its absence due mainly to the huge pump in place on the corner. The road near Plai Laem Wat between the 7-11 on the Tong Sai Bay turn and Cheongmon which always floods used to take days to clear but now is gone within a few hours of the rain stopping. Bangrak as well with its new road and drainage system has coped well. There are still bad areas and the road just north of our office between the PTT station and the Laem Din turn still floods badly and takes time to dissipate as does the road through Laem Din which despite the new road and drainage there has been closed. We always expect rain at this time of the year and hopefully with it coming “on time” presages an end before the Peak Season over Christmas and the New Year.

The great issue to be faced by a valuer in these troubled economic times is justifying a valuation figure against actual sales in the market when such sales are few and far between. Only Thai qualified valuers can prepare valuation reports that can be used in the Thai Courts or by Thai banks. As a Chartered Surveyor in Thailand valuations I prepare are not acceptable to the Thai authorities. However, I can and have prepared valuations relevant to real estate here that are acceptable to the UK Courts. Justification of value in these instances is important and very relevant should there be a dispute between the parties in Court. I therefore have to be diligent in my research, logical in my reasoning and arrive at a valuation figure that is fair to both parties. I must therefore look at all the evidence available to me which includes asking prices, changes I am seeing in asking prices, land prices, building costs, etc. The Market Value of a property as defined by the International Valuation Standards Committee of the Royal Institution of Chartered Surveyors is defined as follows:
‘The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.’ How do you proceed if there are no willing buyers at the valuation date? This does not mean that the property has no value as it obviously has a value to the present owner and there would be a figure at which that person would no longer be a willing seller. So it is a bit of a conundrum. In the final analysis I have to form an opinion and make a judgement and provided the basis upon which I arrived at that judgement is clear, logical and fair I can do more.

There is an article below announcing details of the new Samui Tourist Police location between BigC and Samui Town Centre. The Tourist Police come under a great deal of criticism mainly for not being available or easily contactable when they are needed. This was certainly partly due to the main office being in Nathon with a small portacabin office behind McDonalds on the Lake Road and also because the national contact number of 1155 does not work on Samui. At a meeting a few months ago which I attended they were well aware of the complaints and were working to resolve them and hopefully this move to a new location more accessible to the majority of tourists will do that. The other point that was made at the meeting was that the Tourist Police are not just there for the tourists but are available to assist all expatriates on the island including long term residents and can act as an interface between the local police and the foreigner. Certainly the Tourist Police officers will have a better command of English although not fluent by any means. This is where the Local Civilian Volunteers come in who hail from various different countries and have a good range of languages between them. Sadly there is inevitably a section of the community who see the volunteers as “wannabe cops” strutting round in uniform. I know a number of these volunteers and this is not the case. The uniform is necessary so that they are identifiable and they do carry identification to confirm their legitimacy. If they did not you can guarantee they would be accused of being “undercover snoops” for the Police. That is not their job and they are aware of it. Some are retired residents on the island and some business people who give up a few hours a week to give something back to the island. They do not have any powers of arrest nor are they armed as some people seem to think. They are there as an interface and from what I have seen do a good job. Tourist Police Contact Number: 077 43 00 18

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Possible location of new Marina on Koh Samui

Another month has gone by and there seems no end to the political turmoil in Bangkok. Whist the demonstrations are confined to specific areas the world media gives the impression that any visit to Bangkok is fraught with danger. The reality is of course that Bangkok is no more dangerous than it ever was and by comparison with many cities around the world including Europe, a lot safer. As in any city with which you are unfamiliar it is a matter of being aware of your surroundings and using common sense. These reports are part of the reason that tourism is down although the world economic crisis has also had a big hand in this with no easy credit and people hanging on to their cash. Nevertheless for those who still wish to travel beyond there own shores, Thailand is still a very attractive destination and cheap in comparison to many tourist destinations. With hotel bookings down in most sectors there are some good deals available to those willing to look. Talking to some of the hotel managers in the five star range I have been getting a slightly confused story. One hotel is telling me that their bookings are down at the present but they are full from Christmas through to March. Another was telling me that their advance bookings for next year were so low that they have dropped the seasonal rates and now have a single mid range rate for the whole year.

There was a meeting in October at Wat Plai Laem to inform the public about possible plans for a Marina adjacent to Big Buddha. It is still in the consultative stage at the present time but the estimated cost is Baht 644.5 million. The Marina will, if approved, be accessed from the land bridge connecting the main road by BBC Café to Big Buddha. There will be a total of 111 berths of different lengths with fueling facilities. There will also be a Marina Building which will presumably have the Marine Office but other facilities are not mentioned. The meeting was quite well attended with about eighty people, mostly Plai Laem residents and four or five foreign residents. One of the local residents I spoke to at the meeting was in favour of the Marina but would prefer it on the other side of the Koh Fan peninsular – nearer his house!

Thanks to Mark at BBC for the image.

This is one of five locations considered and currently the preferred option. Other locations considered were Bophut, Koh Som, Tong Krut, and Phang Nga.

Someone had a good time eating street food on Koh Samui and you can read their full report here.
Latest news of the wires is that Samui has at last been upgraded in status from a sub district to a town municipality, not City status as many had hoped, but a positive step for Samui. City status was always a forlorn hope as Samui just did not meet all the requirements. However, with a step up the ladder so to speak, Samui reports directly to Bangkok now and not through Surat Thani. For anyone interested in how the Thai regional government evolved and where we are to day follow this link.


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