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More hotels, more problems

Content image - Phnom Penh Post
Boutique hotels like this are a dime a dozen in the country, making the hotel industry ever more competitive. PHOTO SUPPLIED

More hotels, more problems

As the construction sector continues seeing a dramatic surge with investment, capping at a record $8.53 billion last year, the boom has caused ripple effects within the hospitality sector, most prominently for boutique hotels across the Kingdom.

Din Somethearith, president of the Cambodia Hotel Association (CHA) told Post Property earlier this week, “Hotel marketing plans are currently competitive, especially boutique hotels that are now facing radical challenges. There are just too many boutique hotels currently, and some of them in Phnom Penh and Siem Reap are gradually closing down.”

Despite claims that small hotels and several boutique hotels are being overshadowed by larger, more renowned hotels, Somethearith could not confirm the exact figure, only saying: “Due to a large number of enormous hotels, small ones cannot compete. It’s like we do handmade crafts while they are like factories, so in economic sector the small ones can’t beat the big guns.”

While at first glance the hotel market is seemingly dandy thanks to the increase in the number of tourists – with 5.7 million entering Cambodia last year compared to 5.4 million in 2015 – and the simultaneous increase of the number of hotels, a deeper look reveals some fractures.

As pointed out by Em Bunny, general manager of the 3-star Cardamom Hotel in Phnom Penh said: “When the elites invest in apartments or condos and they want to generate quick profits, they change the direction by renting out those projects in short or medium term at a lower price than the cost of staying at a hotel. This, in turn, affects the hospitality sector.”

“Many international brand hotels and higher-starred hotels are entering the market, such as Rosewood and Marriot,” said Bunny.

Although the clientele for international hotels greatly differs from those opting to stay in 3-star and lower-grade hotels, “existing local 4-or 5-star hotels may face challenges, consequently leading to the lowering of their prices, which will then spread the smaller hotels,” he noted.

Content image - Phnom Penh Post
Small hotels are increasingly unable to compete with bigger names. PHOTO SUPPLIED

Sok Sambath, who has invested in two boutique hotels in Phnom Penh, said the number of bookings and occupants at his hotels had fallen about 15 percent over the last four years.

“We can see that within the last few years, many boutique hotels have been popping up more than ever before,” Sambath said.

“Prior to this, there were only about up to three boutique hotels in Beoung Keng Kang, around our hotel, but now, there are around 10 boutique hotels already, and the tall buildings in this area will soon also become hotels.”

Thourn Sinan, head of Pacific Asia Travel Association Cambodia (PATA), said, “In my opinion, the challenges that small and boutique hotels face are caused mostly by investors rather than problems in the market or foreign competitors.”

According to Sinan, local investors jump headfirst into a seemingly profitable business like developing boutique hotels, but tended to do so without prior market analysis or basic know-how.

“When they start the process without any skills and they refuse to hire any experts to manage or operate their real estate business, they would have to put up a ‘rent’ or ‘sell’ sign. These challenges are self-imposed.”

A report released by the Ministry of Tourism stated that in 2015, out of the 4.8 million tourists visiting Cambodia, only 70.2 percent stayed in hotels registered under the CHA and Ministry of Commerce.

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