STIFF competition to fill rooms in Bangkok has resulted in the closure and sale of Swissôtel Nai Lert Park Hotel after its 36th year in business.
Listed conglomerate Bangkok Dusit Medical Services (BDMS) is set to be the new owners of the property.
“It comes as no surprise for a hotel to be sold amid fierce competition. The deal is so good. I would seal it too,” said Thai Hotels Association (THA) president Supawan Tanomkieatipume.
BDMS is purchasing the property for 10.8 billion baht (US$311 million), taking into account the previous owner’s accumulated losses exceeding 700 million baht. BDMS plans to transform the hotel into a wellness centre to compete with nearby Bumrungrad Hospital.
The deal became the talk of the town within industry circles last week when a handwritten letter by the hotel’s managing director and owner addressed to her staff was shared on social media.
The letter mentioned that Swissôtel Nai Lert Park will be closed next January and cited stiff competition as the reason for the closure and sale.
Hotels in Thailand have been facing headwinds for longer than a decade now due to political uncertainty and oversupply.
As of 2Q2016, there were about 42,000 hotel rooms in Bangkok alone and some 9,700 more will have come online by 2020, according to research by CBRE. Almost all international hotel brands have a presence in Bangkok.
Years before this sale, Swissôtel Nai Lert Park had repositioned its branding downwards by changing operators from Hilton to Swissôtel.
According to rankings by STR Chain Scales-Global, Hilton is in the luxury category while Swissôtel was slightly lower, at the upper upscale level.
“It may be big a mistake of many hotels to downgrade their hotel brand. If the downgrading is really unavoidable, you must select the top brand with an effective distribution network in your new category,” said Paisit Kaenchan, CEO and director of Grand Asset Hotels and Property.
Normally, downgrading from a luxury brand to an upper upscale brand will result in lower revenue, warns Paisit. Room rates at luxury hotels in Bangkok are around 5,000-6,000 baht per night while the rate of the next lower tier stands at about 3,000 baht, he added.
Paisit further explained that regular maintenance is crucial for hotel businesses in order to stay afloat.