Unveiling Southeast Asia’s next resort gems

The
idyllic beaches of Southeast Asia have long been a magnet for tourists. But
with established destinations like Phuket and Bali struggling with overcrowding
and a loss of charm, the question arises: where will the next generation of
travelers go, and how should investors follow?

JLL
expects investor interest in the region’s resort destinations to grow
“exponentially” in the coming years. In the decade from 2013 to 2022, $4.6
billion in capital was invested in Southeast Asia resorts, its research shows.
More than 11% of total hotel investments at the end of 2021 were on resorts, up
from 6% in 2016. About half of that was in the Maldives, followed by Phuket,
Samui, Bali and Danang.

Fortunately,
Southeast Asia is still blessed with many undiscovered gems. The southern
islands of Cambodia, for instance, will be “a little Maldives” in years to
come, predicts Anthony Lark, executive director of HMD Asia, which is building
a 4-star hotel with 82 villas on one of the islands, Koh Russey. The company is
co-owned by architect-designer Bill Bensley and runs Shinta Mani Hotels.

And
as once-pristine beaches become urban resorts, development has shifted to areas
that can ride on the coattails of the forerunners’ infrastructure. In Bali, for
example, projects have crept up along the southwest coast from Kuta to Legian,
Seminyak, Canggu and next, it appears, Seseh, where Indonesia’s Taryan Group is
developing the first luxury resort cum residences to be managed by Minor Hotels
under brand Anantara.

“Established
destinations have a lot to offer by way of underlying infrastructure,” said
Kosin Chantikul, chief investment officer at Bangkok-based Minor International,
speaking at the recent South East Asia Hotel Investors’ Summit. “They went from
the excitement of discovering new places, to destinations with proper roads,
schools, shops, hospitals and now, branded residences. We keep looking for new
sub-markets to enter, like Seseh, which has proximity to the F&B and
nightlife of Canggu and Seminyak.”

Minor
also looks out for emerging destinations that have “a tipping point” in
infrastructure. “A few islands surrounding Phuket, for example, went from off-grid
to on-grid in accessibility and suddenly the numbers started to work,” Chantikul
said. To illustrate, a bridge connecting Koh Lanta to the Krabi mainland
shifted demand for the two main islands of Koh Lanta.

Failure
to launch

But
while Asia is blessed with many potential hotspots, it has no lack of examples
of resorts that have failed to launch as “the next big thing.” Think Lombok or
Bintan in Indonesia, Sihanoukville in Cambodia, or Phu Quoc in Vietnam.

The
issues have long been aired, among them a lack of master planning or the will
to implement one; lack of government funding to establish proper
infrastructure; too-much-too-soon development that destroys environments and
communities; and a focus on mass tourism.

These countries are bound to follow the passport obtainment rate of at least 80% in the EU and the U.K. So, there’s at least a billion Chinese, and another billion Indians, waiting to get a passport. That’s a really scary number.

Kosin Chantikul

“Where
it often goes wrong is too much focused on numbers than quality of tourists who
stay longer as well because that puts less pressure on the infrastructure,”
observes Andrew Dixon, founder of two private islands, Nikoi and Cempedak,
located off the east coast of Bintan.

Chantikul
added that it’s “scary” for resort destinations in Southeast Asia if there’s no
proper control while the region is poised to see millions more tourists in
future. China and India each has 1.4 billion tourists but only 13% of Chinese
and less than 8% of Indians have passports. “These countries are bound to
follow the passport obtainment rate of at least 80% in the EU and the U.K. So,
there’s at least a billion Chinese, and another billion Indians, waiting to get
a passport. That’s a really scary number,” he said.

Still,
Chantikul won’t underestimate destinations that have not lifted off. “I won’t
undermine places like Phu Quoc for now. If a country has picked a certain
market as a national champion to support, it will be putting in infrastructure,
PR money and events around it. It may not [lift off] in three to five years but
has a greater chance to succeed over decades.”

Lombok,
on the other hand, has never been known to be a national champion since Bali
next door is already generating a lot of tax revenue. “So, Lombok is a little
harder,” he said. “The government has to put money behind it. I haven’t seen
enough for Lombok.”

Who
needs just the beach

But
one piece of good news for Southeast Asian resorts is that as travelers seek to
soak in more than just the sun, investors and developers are driven to create
experiential products that can help emerging destinations succeed, or help
revive the tried and tested ones.

An
example is the Andaz Pattaya Jomtien Beach, built by Thailand’s Seafresh Industry.
Just one year old, the luxury, ultra-green hotel has raised the rate bar in
Pattaya/Jomtien.

New
concepts such as all-inclusive resorts are also being introduced to Southeast
Asia. Asset World Corp is developing one in Jomtien, which will mark the entry
of Paradisus, Melia Hotels luxury all-inclusive brand, into Asia, scheduled to
open in 2028. Accor is introducing two Rixos hotels Vietnam in Nha Trang and
Phan Thiet.

Minor’s
Chantikul believes all-inclusive will be the highest growing tourism segment in
the next decade.

“Compounded
average growth rate for all-inclusive is projected at 17% every year for the
next 10 years. That far exceeds the high single digits of urban or traditional
resorts,” he said. “The model lends itself well to new destinations, the reason
being it needs to be designed from scratch and have scale. It also must be low
cost in real estate and construction costs, and in operating costs.”

Club
Med, the dominant all-inclusive player with 16 resorts in Asia, saw business volume
in the region surpassing pre-pandemic level last year by 6%. Sebastien Favre, vice
president Development & Construction Southeast Asia and Pacific, attributed
it to strong domestic travel in Japan and Malaysia, and 44% hike over 2019 in
its mountain business due to the opening the Club Med Kiroro Peak in Hokkaido,
Japan, in December 2022.

Favre welcomes the
increasing number of hotel brands voicing ambition in the all-inclusive space
in Asia. “It will create a louder voice and presence for the segment,” he said.