Phuket property investment, especially condominiums, has taken off over the past few years. Tourist arrivals hit record highs in 2016 and 2017, driving up hotel occupancy rates dramatically. Research by the Thai Hotel Association (THA) found that island-wide occupancy rose to 75% in 2017, up nearly 12% from 2016. THA also noted Phuket led Thailand’s hotel industry performance last year. Certainly, Phuket condotel investments have benefited from the tourism boom as property buyers remain keen to put funds into condo projects, the simplest property market play on travel trends. But is investing in Phuket condos really worthwhile? Here’s a closer look at the pros, cons, and potential returns.
Condotel Concept and Benefits
A condotel, short for condominium hotel, combines features of a condominium and hotel. Units are sold to individual buyers but managed by a hotel company. This benefits investors who don’t have to handle marketing and management of the properties. It also allows hotel brands to attach their trusted names without acquiring land and constructing buildings themselves. Developers can leverage reputable brands too. It’s a win-win model that explains the popularity of condotel investments.
Advantages of Phuket Condotel Investment
Key advantages of buying Phuket condos include easier property management, income pooling, and brand reputation. Rather than managing listings on Airbnb or dealing with local agents, investors can leave operations to experienced hotel teams. Most projects distribute rental income on a pooled basis, so owners gain revenue even for vacant nights. Big hotel names also provide quality assurance, conducting strict property inspections.
Disadvantages of Investing in Phuket Condotels
The biggest downside to Phuket condotel investments is the limited personal usage rights. While most projects allow owners 13-14 nights of free annual stays, availability is restricted during peak periods. It’s critical to understand the terms and conditions before buying to avoid confusion. Also note the current operating hotel may not continue managing the property long-term. Management contracts typically run 5-20 years with no guarantee of renewal. Remember you are investing in the developer, not the hotel brand.
Rental Income and Returns from Phuket Condotels
The major selling point for Phuket condotel investments lies in the potential returns. Some projects advertise yields up to 10%, with even higher rents if tourism keeps expanding. Most Phuket condos likely generate average annual yields between 5-8% in the first few operating years. While disadvantages exist, sizable rental income and gains make Phuket condotels worthy for many investors.
In summary, Phuket offers a popular real estate investment option through condominium hotels. Buyers can gain hassle-free property management, pooled rental revenue, and trusted brands. Downsides include limited personal usage rights and no long-term assurance from hotel partners. With strong tourism fueling occupancies, condotels represent a solid path to rental income and capital gains over time.