Kasemkij Group, a leading serviced apartment and hotel owner, projects tougher competition for the top-end of the sector in Chon Buri's Si Racha district at the end of next year due to rising supply and shrinking demand.
Demand began to slacken early this year, reflected in the drop in corporate bookings at four of Kasemkij's properties in Si Racha -- Cape Racha Sriracha, Kantary Bay Hotel and Serviced Apartments Sriracha, Kameo House Hotel and Serviced Apartments Sriracha, and Karavel House, said corporate director Wiwat Tangjitkobbon.
The average occupancy rate is expected to be around 85% this year, down 5% from 2015 and 10% from 2014.
New supply will make the situation worse. Around 2,700 rooms at four- and five-star serviced apartments will enter the Si Racha market, bringing the total to 6,700 rooms by the end of 2017.
"Since early this year, many serviced apartments have cut their room rates by 20-30% to attract more customers, so the rents in Si Racha are fluctuating," Mr Wiwat said.
He said a heavy price war would soon ensue because the owners of the new supply need to fill their rooms to survive, while demand was falling because companies in nearby industrial estates had cut their budgets.
They include Pinthong Industrial Estate, Sahapat Industrial Estate, Laem Chabang Industrial Estate, Amata Nakorn Industrial Estate, Hemaraj Eastern Seaboard and Siam Eastern Industry Park.
They house many international companies and a number of car-assembly plants and auto parts production facilities. Given the tepid economy and shrinking auto demand after the end of the government's first-time car buyer scheme, these companies are reducing new investment and cutting costs.
Kasemkij, the biggest serviced apartment operator in Si Racha, is preparing to deal with the tougher competition. The group has earmarked 50 million baht to renovate its four properties with a total 700 rooms in Si Racha. The renovation will be completed by the end of this year.
Mr Wiwat said the group will maintain its current rents for the four serviced apartments until 2017. Rates start from 35,000 baht per month.
The renovation is expected to retain its Japanese customers, who account for 85% of the total.
"We don't want to play with the price. We offer free internet and laundry service and maintain our quality service standards, which is our strong point," Mr Wiwat said.
However, it is ready to offer a special rate for big groups of customers.
Although Kasemkij is facing hard times in Si Racha, its expansion plan in other potential areas will continue, such as Kantary Hills, Chiang Mai. It has set a budget of 150 million baht to add 64 rooms, bringing its total hotel rooms in Chiang Mai to 283.
In addition, two properties will be opened by November -- Kameo Hotel, Amata Nakorn, Bangpakong in Chonburi, and Kantary Hotel Korat in Nakhon Ratchasima.