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Phuket resorts are suffering from illegal apartments and condos

Illegal Phuket Resorts Face Crackdown as Scofflaw List is Delivered to Authorities

Monday, December 28, 2015
PHUKET: A long list of illegally operating ''resorts'' on Phuket will be presented to authorities this afternoon as legally-registered hotels call for severe action to be taken.

Outlaw apartments and guesthouses are undercutting the accommodation market on Phuket and reducing the value of legitimate businesses that pay tax, says the Thai Hotels Association.

''Bookings for the high season are running about the same as last year but prices are down betwen 15 percent and 20 percent,'' said Kritsada Tansakul, southern president of the THA.

''We believe it's time for serious action to be taken against these illegal operators.''

The increasing number of online booking agencies has led to condos becoming serious competition for legitimate five-star, four-star and three-star operations.

''Phuket has about 90,000 rooms available, including all kinds of accommodation,'' Khun Kritsada said. ''Next year another 4000 rooms will be added, leading to an oversupply.''

About 70 percent are illegal, he said.

Brands that obeyed the law were suffering so it was time for local authorities to insist that the scofflaw proprietors followed the rules, he said.

Khun Kritsada will present the list to authorities at Phuket Provincial Hall this afternoon and he expects an official investigation to begin almost immediately.

From Christmas to January 10, Phuket was at 80 percent occupancy, he said. That would drop towards the end of January but return to 80 percent in February.

The Russian and European markets were strong at this time of the year but the numbers of Chinese were dipping, he said.

''This is because there are no slots available at Phuket International Airport for additional charter flights,'' he said. ''With just one runway, the numbers of flights that can use the airport had a limit and at this time of the year, the established European operators use the allocated slots in the schedule.''

A recent promotion from the Tourism Autority of Thailand claimed that visitor arrivals to Phuket totalled 11,958,603 (Thai 3,499,187; foreigners 8,459,416) in 2014, generating an estimated 259.290 billion baht in tourism income.

However, as the official figure from Airports of Thailand totalled 11.3 million arrivals AND departures for Phuket in 2014, someone at TAT clearly needs to check their arithmetic.

Phuket International Airport is expected to deliver about 12.6 million arrivals AND departures in 2015.

Investment banks and condo developers tend to use inflated figures in promoting units to buyers on Phuket. Removing the illegal ''resorts'' from the equation would affect investment returns for some.

Apartment and condo blocks are obliged to offer bookings on a monthly basis and become illegal ''resorts'' when they offer nightly rates.

Comments

Comments have been disabled for this article.

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Just a few days back BP reported Phuket having a 90% hotel occupancy rate as of now.

Now THA says it's 80%.

If they are going to make up the numbers, could they not at least all agree on the percentage they'll claim the occupancy is at ?

Posted by Herbert on December 28, 2015 12:14

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There is a great need for family accommodation with more than just a box with a bed in it, but with kitchen and space. Condos are filling that vacuum, and by the way, why are villas not mentioned ? With ever astounding amounts of inbound tourists, we can classify them as overhelmingly Chinese (group tours stay in hotels) and not so well off Russians as a result of their ruble devaluation. The traditional Western markets have largely disappeared because the latter two dominate, and their countrymen make sure they can only spend all their money with their own tour operators, their own buses, restaurants, speedboats, latex, etc. for a reality check, walk down from Starbucks in Kata/Karon, its deserted. Almost everything there is for rent or sale, that is the result of the marketing strategy focusing on numbers, not quality. Quality guests do not want to hear shouting, yelling at 5am when the tourgroups are summoned to breakfast, and the guide knocks on every door, regardless of whether or not they are their guests, and oftn use portable tannoys,

Posted by Roger on December 28, 2015 15:06

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'Outlaw' apartments, condo's, Villas, and private houses own by thai are not the most important problem.
The main problem is the over supply, 90,000 rooms! And next year another 4000 to add?
Who is allowing this continues room building? When does this unlimited room building stop? That is the problem.

Now during X'Mas- New Year time the occupancy seems to be ok, although different sources came up with different occupancy figures. ( that is why I don't believe them)
But anyway, mid January we may expect high season to be over, and 45,000 rooms ( = 4,000 new rooms) are empty for the rest of the year.

That will push room prices down.
Demand and supply are out of balance. A child can see that.

Posted by Kurt on December 28, 2015 16:40

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FYI... I have been working for chained hotels for the last 14 years... I am actually suffering the consequences of this. But hotels are sluggish and resistant to change. The condo issue is not a a problem of the demand and supply. Is an issue of the distribution which you clearly addressed with the online agents. Online agents are savage with distribution and pricing, while hoteliers are giving out invaluable comp perks and waiting for things to get better, instead of really researching and investing on their online strategy. Get with the times and stop crying, if they spent half the time doing proper market research or travelling to other destinations, or getting a new website other than just complaining and taking legal action we know who the winner would be. Many of these guests don;t care much about service in fact they are disappointed by the low quality service standards from these hotels even if it is cheap. So they are better off in an apartment frying their own eggs. Just keep walking.

Posted by gone with the wind on December 28, 2015 17:12

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And which commission/department is checking or apartments/condo's are rented out on monthly basis and not on illegal nightly rates?
Where will they start as they have no clue where all these apts, condo's, villa's, houses are?
Many renters pay overseas prior Phuket arrival.

Posted by Kurt on December 28, 2015 17:17

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"However, as the official figure from Airports of Thailand totalled 11.3 million arrivals AND departures for Phuket in 2014, someone at TAT clearly needs to check their arithmetic" - "Quality guests do not want to hear shouting, yelling at 5am when the tourgroups are summoned to breakfast, and the guide knocks on every door, regardless of whether or not they are their guests, and oftn use portable tannoys"" - now I am back living in a developed country when I mention to people over Christmas lunch I lived in Australia and Thailand they only talk about Australia. Thailand has a terrible reputation no one wants to be associated with it from people I know who are sophisticated and wealthy, o one of my friends daughters yesterday did mention Thailand for it's ping pong shows.....what a thing for a country to be known for. Thailand the pink pong hub (I don't think she meant the table tennis game)

Posted by Hiho on December 28, 2015 18:46

Editor Comment:

It really is sad that Thailand still tolerates freak shows that demean all women. The people who run them shame Thailand. All talk of the greatness of Thai culture is pointless as long as these shows are allowed to continue.

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As Kurt commented, the main problem is oversupply of hotel rooms.

At my location near to Phuket Airport, there were only 4 hotels listed on the travel websites when I built my first hotel by the airport.

Now, according to booking.com, there are no less than 78 hotels, guesthouses, resorts and condo rooms listed in the Airport/Nai Yang locality.

The vast majority of these properties have low occupancy rates throughout the year, and reduce their room rates to an all-time low, as they try to fill their rooms with any paying guests.

That might be good for guests seeking a cheap deal, but it absolutely is not good for the 'quality' properties which provide good service, clean rooms and care for their guests.

By the way, a 'quality' property IMHO is anything from a 1-star to a 5-star hotel, but it is one which provides a high standard of service.

The tourism authorities should require all hotels to employ staff that are fluent in English as a very minimum, (extra languages such as Chinese are preferred).

They should also require all Thai hoteliers to study (and pass!) a course in learning about foreign cultures.

Remember - the hotel guest is ALWAYS right, (even if he is wrong).

Posted by Simon Luttrell on December 28, 2015 20:29

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@Simon if the room rates are so low why stay it seems there are more hotels going up all the time. Myanmar I heard the rates are high, very high.

Posted by Time to move on on December 28, 2015 22:20

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Is this part of the problem with the restrictions of what foreigners can work at, there are too many dive shops, restaurants, bars, hotels.....these are all allowed foreign jobs. It is laughable...imagine in London, New York, or Tokyo etc if foreigners were only allowed to do a few jobs.

Posted by Foreginer restrictions on December 29, 2015 00:20

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Kurt,
That would be the con-department.

Posted by MoW on December 29, 2015 00:57

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TOP 10 List of PhuketWan moments:

Well, had to find a spot to put my TOP 10 List, so then I highjack this thread.

As PhuketWan is closing down, my favorite Asia News Spot will vanish and from 01.01.2016 will be too old news to visit. Therefore as a maybe too long goodbye and big big thank you, I want to share my personal TOP 10 PhuketWan reading moments.

10. Slow lorries. Gone. Good.

9. The parking at Patong beach. I remember at least three occasions, where change was (not) coming. Still Tuktuk area, but not a problem any more, who wants to visit that beach anyway.

8. Katabeach Bum. Still chilling to think about the guy commenting here, while his girlfriend decomposing in a bin at his garage.

7. The extradition of this marine killer. Quite remarkable stories were told.

6. The helmet mother, who helped bring helmets (or plastic bowls) to every motorbike (at least from 9am to 5pm).

5. The life and work of "accidents happen" Marine official. That sums it up.

4. The revelation that 17 authorities ask for tea money.

3. The greatest sylvester rave party ever worldwide, who turned out to be little sh*t.

2. The (then) little Thai-Dutch boy who was serial kidnapped by his mother, then the new wife of his father. Here I would love to hear, how this story went on, if he could connect to both worlds and become a proud Dutch-Thai mix, with deep and healthy roots in both countries and families, as I wished him to get.

1. The Rohingya saga including the trial of the century, but as a no brainer a little anti-climax and the chewing gum (never?) ending, so

I decide to put forth a very personal 11th TOP:

0. A story only told in the comment section, the story of my friends son, who at the age of 20 died on the roads of northern Thailand while driving his rented motorbike holidaying the last 7 days before coming home after a happy one year work and travel.
Who bleed to death because the rescue took much too long for him and his adversary biker at the most scenic road in Chiang Mai hinterland. One of the thousands easy to prevent deaths on Thailands roads. A needless loss still felt very deep.

But as my last comment, I would like to put some positive input, some recommendation for Thai traffic police and organized first responders to become educated and equipped in first aid like a modern soldier is:
For example, today's US army soldiers carry an Improved Field Aid Kit that contains elastic emergency trauma bandages (a replacement for the old-fashioned pressure bandages), tourniquets, hemostatic combat gauze (gauze treated with a clotting agent such as QuickClot to stop bleeding) and an airway tube. These modern, not too expensive (at least for the clever Thai replica medicine industry) trauma medical kits would have saved countless traffic victims, like my friend's son.

Of course only one in a lot of steps to get Thailand off the bottom of the street kill charts of the earth. But one done quite cheap and easily as it would first only concern a coherent police force and first responders with an easy to use trauma kit.

Thank you Phuketwan. Farewell. :)

Posted by Lena on December 29, 2015 01:02

Editor Comment:

A good idea, Lena. Let's hope the concept of properly equipped first responders is pursued. Thanks for your thoughts.

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In Kata you can get a nice room for 2 people
for 300 Bath whit Aircon, How is this possible ?

Posted by Bjorn Ronningen on December 29, 2015 07:07

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[quote]
@Simon if the room rates are so low why stay it seems there are more hotels going up all the time. Myanmar I heard the rates are high, very high.
[/quote]

I've been travelling and working in Myanmar for many years, (when not building hotels in Phuket, I work as a school Principal/teacher in Yangon).

Unfortunately, although it looks like a 'hot' destination in the future, the land ownership/lease laws for foreigners in Myanmar are still ... let's say... rather fluid! At my age, I can't afford to lose my investment if I build a hotel/resort in Myanmar.

Bu coming back to the situation in Phuket, I ran some stats about my room rates for 3 out of 4 of the small hotels that I built/own near to the airport.

Year on year, the average room rate in any month of the year has reduced by about 20%. A hotel room that sold last year for 1,500 baht per night now sells for 1,200 baht, despite year on year improvements/upgrades in the hotel facilities.

IMHO, there are a multitude of reasons for this situation is:

- The oversupply of hotel rooms
- Failure by the relevant authorities to implement a required standard of service, (knowledge of English, foreign cultures etc)
- A paradigm shift in the demographics of foreign tourists over the past few years, from free-spending, 'Western' tourists, to money-pinching Asian/Chinese/zero-baht tourists
- Failure of the relevant authorities to crack down on the scams that we all know and hate.
- General downturn in the world economy, rouble crash etc
- An incompetent Thai government/leader (scrub that comment Alan if it is too 'honest')

Although my little hotels are usually fully-booked every night of the year, the reduction in average room rates means that my profit margin is falling. On a personal level, I can only counter this by building more cheap guest rooms for the hoards of Asian tourists.

The future is definitely not rosy for the hotel industry in Phuket.

Posted by Simon Luttrell on December 29, 2015 08:31

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Good reporting ..right to the last drop..
Best wishes to you going forward.

Posted by farang888 on December 29, 2015 18:46

Editor Comment:

Thanks, farang888.

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Can't say I agree with everything you say but I am going to miss this site good luck!

Posted by Mike on December 29, 2015 21:18

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I am wondering what Khun Kritsada expects of the authorities at Phuket Provincial Hall, after presenting a list of illegal accomodations ( 70% of the total numbers?)
That 70% illegal didn't fall out of the sky, is not suddenly from yesterday.

Wonder which Phuket Government body has been sitting on it's hands many years.

To clear that 70% illegal, closing or making it legal is impossible.

A number of them will get a warning, 2 or 3 times, than we are 3 years further.
Most of that 70% just not bother, they pay a bit mediation money and will be left alone.
Don't forget, they have to feed their families.

On Phuket, once something is wrong, but already existing/established for many years, it is very hard to correct it.
To many different departments involved, with all their own interest.

Posted by Kurt on December 29, 2015 23:14

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I was looking at buying a condo in Patong, Would this property be part of the crackdown, due to individuals renting out their own condo's? Will this not surely impact the pricing of these types of condos if there will be a restriction on renting for 30 days or less?

Posted by Vegas on December 30, 2015 03:40

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The claimed 70% illegal represents the majority of family owned guesthouses and small enterprises. I do not see the Administration cracking down on these people. These are the people of Phuket, making a living from the resource the place attracts, ie tourists. Albeit increasingly low spending ones.

Aside, whose fault is it that the bulk of the arrivals are low spending Chinese and Russians? First world travelers have moved on as Phuket's offerings have changed. As a beach destination where you may or may not be arrested for bringing your bed to the beach on a given day, depending on the current experiment, is this appealing? No. And being told certain parts of the beach are off limits to sit on (by jetski operators) ..... people don't feel inclined to come back for more of that. So the bottom of the barrel has been reached, the Sino-Russo influx, hooray!!

Posted by Geoff on January 2, 2016 13:23

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Reduced hotel prices? Is that not good news for tourists? Who in their right mind wants to go to a place where the prices for the hotels are inflated? You must join the loan shark business, built at reduced costs and with incentives, then turn around and rent out at a very lucrative margin. Complaining later when small competitors start to emerge.

Posted by Richard on January 3, 2016 12:31

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Start with air b&b and you clean up a lot of illegals

Posted by Eric on January 6, 2016 17:13


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