The booming tourism sectors of Phuket and Bali are both at risk of faltering unless infrastructure issues are addressed, according to the latest market report from Global Asset Solutions.
The study also illustrated the current strengths of the two destinations, which are moving away from mass-market tourism and deeper in luxury.
The study found that Phuket had enjoyed a rise in international travel, with Bali benefitting from a more buoyant domestic market. With the Chinese mass market not returning after COVID, total arrivals into the islands were yet to reach 2019 levels, but the resorts have been able to yield much better in terms of rate, and as such, operating performance is improved.
Bali has benefited from pent-up demand following the pandemic, further bolstered by the government’s Visa on Arrival programme, open to 89 countries, which has drawn more international tourists to the region.
Luxury hotels’ average daily rate reached a record high of US$607 in 2023, which was 27% higher than in 2019, with limited supply playing a role alongside the allure of the island. Supply was anticipated to increase in 2024 with nearly 1,800 rooms, but this growth was expected to slow.
In Phuket average room rates also hit a record high, of US$197 in the first half of the year. This growth was expected to continue fuelled by favourable exchange rates and Thailand’s government’s relaxing of Visa restrictions and recovering air travel. As in Bali, supply was limited.
Both Phuket and Bali had infrastructure issues. In Bali, there were significant traffic issues around the airport and pollution on the beaches. Phuket’s poor urban planning meant that the road network did not flow smoothly at peak periods and water supply to resorts over the dry season was an ongoing challenge.
The sustainability of growth in these two islands remains in question as both 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. There is a great incentive to resolve these issues and the local governments are working on solutions. If successful, both Phuket and Bali have the potential to grow into highly successful, high-quality destinations. Douglas Louden, senior asset manager, Global Asset Solutions
About Global Asset Solutions
Global Asset Solutions operates worldwide providing independent hotel asset management services. Clients include PE firms, institutional investors, sovereign funds and family offices, with over $20bn of assets managed in Europe, Asia and the Middle East. The company leans on decades of experience in the luxury sector to deliver bespoke solutions which allow investors to grow their asset value and realise the potential of their assets. www.globalassetsolutions.com
