A computer-generated image of a pool villa under The Residences at Sheraton Phuket Grand Bay project being developed in Ao Por on the east coast of Phuket. (Photo supplied by CBRE)

More and more Phuket residential resort investors want income-producing homes, not just holiday homes. They want to be sure their investments can provide incomes and having a well-known hotel management company operating a property has proven to be a key factor attracting this group of purchasers.

Buyers assume that hotel operators have done their due diligence on a property and are effectively endorsing its quality. They also trust that the operators can deliver the income. They will have greater trust in the best-known local and international hotel brands.

Some developers have been offering initial guaranteed yields for the first two or three years and having a well-known hotel operator managing a property gives buyers the confidence that the income will be sustainable even after the end of the guaranteeing period.

The prevailing model is a revenue split between the owner and the operator. It is important that buyers understand how revenue is defined and what other costs and tax liabilities are so they know what the net income will be.

Historically, most resort property buyers in Phuket have been foreigners. But the introduction of more income-producing properties has been attracting more Thai investors as well.

Apex Development Plc, a Thai developer, launched The Residences at Sheraton Phuket Grand Bay in Ao Por on the east coast of Phuket in late 2017. It will have a 183-key hotel and a 103-unit condominium. Interestingly, the majority of its buyers are Thais, who have been enticed by hotel-branded residences. 

CBRE, the agent of the development, believes that in the future, there will be more hotel-branded properties in Phuket.

Prakaipeth Meechoosarn, director of Resort Property Sales, CBRE Thailand, said: "Resort property purchasers want incomes but they don't want the difficulty of having to find tenants and manage the property themselves." 

It is very important that developers plan carefully. For example, a property will need a hotel licence to offer daily rates. Obviously, not all hotel brands are equal in terms of their image and reputation.

As hotel-management companies need to protect their brands and image, they will be selective about what properties to manage and have a brand standard for the design and specifications of a property. In many cases, these increase development costs, especially as all units will have to be furnished and equipped to serve as hotel rooms.

The shift in demand from holiday homes to income-producing properties means that more developers are going to want branded residences to provide the level of confidence required by investor buyers in today's market.

Rathawat Kuvijitrsuwan is manager and Khanachai Kittisorayut is analyst at 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