A young tourist poses at Wat Arun Ratchawararam in Bangkok on August 16, 2017. (Photo by Patipat Janthong)

Thailand's hotel industry has been growing, driven by thriving travel demand worldwide but a large supply over the next few years is threatening to moderate incomes.

According to CBRE's research on the global hotel industry, hotel demand has grown throughout the US, Europe, and Asia-Pacific region since mid-2016. Despite weak slow growth in many countries, demand has remained strong and occupancy rates high.

Growth in hotel demand is largely driven by demographic changes and shifting preferences to quality experiences rather than physical goods. While the older generation tends to spend a fair proportion of their income on recreation and leisure activities, nowadays it is millennials who further spur hotel demand with their travel desire.

Modern technology and social media make it much easier for independent travellers to decide where to go, what they want to experience and where they want to stay.

The challenge for hotels is to satisfy the needs of independent travellers who will be more demanding in terms of the quality of accommodation, service and food, but will also want value for money.

Online booking platforms have kept hotel demand high as they aim to keep consumers happy by making it easy to book a room.

Booking websites such as Agoda and Booking.com, which have gained popularity in Thailand, have increased the transparency of the market place through their display of a wide range of hotels that come with customer reviews.

TripAdvisor has become increasingly popular in Thailand for this reason, as it provides detailed reviews about hotels.

There's no doubt that the hotel sector has faced competition with Airbnb in many countries, especially from customers that typically seek low-to-mid-end short-stay accommodation and may opt for Airbnb as an alternative.

To respond to the competition, hotels are finding more ways to expand their services. For example, Accor, a leading hotel group, has expanded its selection of luxury private rentals to attract more customers.

Hotels in Thailand have, to some extent, been protected from Airbnb competition because of the prohibition on rentals of less than one month without a hotel licence.

Bangkok hotels saw the best performance in many years in the second quarter, with a steady occupancy rate at approximately 73%, a 3.7% year-on-year increase in the average daily rate, according to the STR.

The fast growth in tourist arrivals to Thailand, at 8% year-on-year, has also kept hotel demand growing in both central Bangkok and across the country. The government wants to encourage quality rather than just quantity of tourist arrivals, moving away from especially the low-end zero-dollar tour market.

Developers are continuing to increase hotel supply. There are around 10,600 rooms under construction in central Bangkok to be completed over the next four years. The Phloenchit/Sukhumvit area continues to remain the most popular location for hotels in downtown Bangkok, followed by the Silom/Sathorn area.

Thailand's hotel sector is one of the few growing sectors and the outlook remains positive as demand continues to increase. The big question is whether owners and operators can raise rates while supply continues to grow.

Chotika Tungsirisurp is an associate director, and Aishwarya Bajaj is an analyst at CBRE Research and Consulting, CBRE Thailand. They can be reached at bangkok@cbre.co.th Facebook: CBRE.Thailand Twitter: @CBREThailand LinkedIn: CBRE Thailand and website: www.cbre.co.th