Phuket and Bali are the most prominent island resort destinations in Southeast Asia. They are an important bellwether to the overall market condition and sentiment in the region. This report examines their performance pre- and post-COVID and trends leading into 2025.
Our research summarises key metrics for the two islands as follows:
Phuket has more international travel into the destination, but Bali has a more bouyant domestic market. In terms of the total inventory in each destination, Bali has slightly more capacity with 59k rooms, while Phuket has approximately 45k rooms. (source Colliers and Knight Frank). With the Chinese mass market not returning after COVID, total arrivals into the islands are yet to reach 2019 levels, but the resorts have been able to yield much better in terms or rate and as such, operating performance is improved.
Looking at each destination independently, we note the following trends.
Bali
In 2023, Bali’s hotel market saw a significant resurgence. This was the first full year with minimal COVID-19 restrictions, leading to a surge in demand driven by pent-up interest from the pandemic. The government’s successful Visa on Arrival (VOA) program, open to 89 countries, was crucial in attracting tourists to the region. Domestic visitors remained the primary market, with just under 10 million visitors yearly, ranging between 700k and 950k monthly.
Before the pandemic, Australia and Mainland China were the two main source markets for luxury hotels, followed by India and Russia. Although the top source markets have remained unchanged post-pandemic, the uneven recovery across markets has led to changes in market share. Australia maintains its position as the top source market, with a larger market share of 25.1%. India has replaced China as a distant second with 8.4%, followed by China (5.3%) and Russia (4.9%).
Visitors from Australia, Korea, Singapore, and India are increasing, potentially influenced by Indonesia’s efforts to strengthen relations with these countries.
Regarding trading performance, luxury hotels’ average daily rate (ADR) reached a record high of USD 607 in 2023, which was 27% higher than in 2019. The pent-up demand and limited supply growth have allowed hotels to charge higher rates with little resistance from guests. However, year-to-date performance until June 2024 suggests that rate levels may have peaked and could either remain stable or experience moderate declines. However, this might be offset by continued occupancy growth.
The rate of hotel openings significantly decreased from 2020 to 2023, averaging around 600 keys per year, compared to the 2,600 keys annually between 2009 and 2019. The supply is anticipated to increase in 2024 with nearly 1,800 rooms, but this growth is expected to slow.
The ongoing recovery in Chinese visitation is anticipated to significantly enhance international visitation shortly, while domestic demand is expected to stay strong based on current trends.
A common thread in our discussions with Bali hoteliers was the sustainability of this growth; with infrastructure on the island struggling to cope with demand, major traffic choke points occur in and around the airport and pollution on the beaches were frequently mentioned issues which must be addressed.
The second airport for Bali is being planned. It will be located in the north of Bali, in the Kubutambahan district in Buleleng regency – approximately two hours by road from Bali’s capital city of Denpasar – and is intended to ease congestion at the existing Gusti Ngurah Rai airport and overcrowding around tourist hot spots like Kuta, Seminyak and Canggu in the south. News of the revived second airport project comes after a widely reported incident in December 2023 when traffic congestion forced travellers to abandon their cars and walk to Ngurah Rai airport. At this time, no specific target date has been set for the completion of the project.
We spoke to Asset Manager Michael Burchett (MJB Hoteliers) and the former General Manager of the Conrad Bali to get his take on the Bali market and its future prospects. “2024 has been an outstanding year and the traditional low season dip in Bali over the July to October has not really materialised. The government are making the right moves in resolving the island’s infrastructure. 2025 is looking to be very strong, and the future prospects are very positive.”
Phuket
As with Bali, Phuket’s tourism has made a strong comeback post-pandemic, With 4.3 million arrivals in the first half of 2024, almost reaching pre-pandemic levels. Foreign arrivals increased by 42%, and hotel occupancy reached 81%, surpassing pre-pandemic rates. The average room rates also hit a record high of US$197. The second half of the year is expected to continue this growth, fueled by favourable exchange rates, the Thailand government’s relaxing of Visa restrictions and recovering air travel, but rising costs may restrict new hotel development.
Recovery trends vary across different visitor segments. Foreign arrivals are now back to pre-pandemic levels, and without the impact of the mass Chinese market, room rates on the island are well. This robust resurgence underscores Phuket’s lasting allure as a top-tier resort destination in Thailand, especially for international tourists.
On the flip side, there were 1.7 million domestic arrivals, marking a modest 6% increase compared to last year but still 13% below pre-pandemic levels. The number of international flights to Phuket also saw a significant rise of 34% compared to the previous year. With airlift capacity on the rise, foreign arrivals are anticipated to continue to grow in the second half of the year.
In the early part of the year, the biggest group of international travellers were from Russia, with Chinese tourists coming in a close second. The weaker Chinese economy has meant Chinese tourists have not yet regained their top position. Many Chinese tourists are choosing to travel within their own country instead. Moreover, there has been a notable increase in tourists from India and Australia, as well as from traditional short-distance markets such as Malaysia and Singapore.
Phuket continues to attract visitors from a wide range of countries in the West and Asia. Lately, there has been a noticeable increase in visitors from Asia, which is expected to continue. Phuket’s luxury hotels are experiencing more robust trading performance growth than Bangkok, driven by record levels in ADR. This is due to the island’s status as a highly desirable global tourist destination.
Like Bali, Phuket has infrastructure issues, which need to be addressed, poor urban planning means the road network does not flow as well as it should during periods of peak demand and the airport needs further upgrading. Water supply to resorts over the dry season is an ongoing challenge. The government has resumed its feasibility study on a new airport in Phang Nga, with the objective of linking the province up with tourist hubs like Phuket and Krabi, which could ease pressure on the current airport but this is still some time away.
Phuket’s outlook for the rest of the year looks promising due to the favourable exchange rate against the US and Euro, the ongoing enhancement of the airlift, and visa-exemption measures. Like in Bangkok, upscale hotels are expected to benefit from rising tourists. The performance is anticipated to see a significant improvement in 2025 as limited new supply is expected to open, and the demand from both foreign and domestic visitors is likely to strengthen further.
Anthony Lark – former GM of Amanpuri and President of Phuket Hotel Association, remains very bullish on the Phuket Market. “ The island is benefitting from long-haul direct flights to the destination. Beyond the straight hotel-driven tourism, we are seeing growth in condominium development, international schools and hospitals, further enhancing Phuket’s attraction. There is a limited new supply of luxury hotels, but the island is developing north of the causeway to include Phang Nga and Khao Lak to become “Greater Phuket”. 2025 will be a very positive year.”
Summary
Business on both islands has rebounded and is now well up on pre-pandemic levels. With less focus on mass market tourism rates have improved on both Islands.
Phuket is experiencing a very strong 2024 and the indicators are that this will continue into 2025. Bali’s performance is also showing significant growth over 2019 levels.
The sustainability of this growth remains in question as both islands must deal with creaking infrastructure and the genuine risk of over-tourism.
The relaxation of visa controls is certainly a contributing factor to this growth and is a lesson other destinations in the region need to take heed of.
Disclaimer
The information and analysis presented in this report are gathered from various sources. No warranty or representation as to accuracy or completeness is made by Global Asset Solutions Europe SL, which shall have no obligation concerning it. All rights reserved ©2024 Global Asset Solutions.
References
Bali
www.horwathhtl.com/wp-content/uploads/sites/2/2024/03/Bali-Hotel-and-Branded-Residences_March-2024.pdfwww.colliers.com/en-id/research/colliers-quarterly-property-market-report-q1-2024-bali-hotelwww.colliers.com/en-id/research/colliers-quarterly-property-market-report-q2-2024-bali-hotelwww.hotelinvestmenttoday.com/Regions/Asia-Pacific/Emerging-trends-in-Bali-performance-developmentwww.thebalisun.com/north-bali-airport-could-be-sidelined-further-despite-presidential-election-promises
Phuket
www.c9hotelworks.com/wp-content/uploads/2024/04/2024-04-phuket-hotel-market-update.pdfwww.knightfrank.be/research/phuket-hotel-market-1h-2024-11501.aspxwww.krungsri.com/en/research/industry/industry-outlook/services/hotels/io/hotel-2024-2026www.futuresoutheastasia.com/phang-nga-airport
South Asia
Hotstats Data 1H 2024
Bali ADR $168.01 Phuket ADR $197.40 Occupancy 71.6% Occupancy 81.2% TrevPAR $177.58 TrevPAR $235.72 GOPPAR $71.71 GOPPAR $107.14
