Unveiling Southeast Asia’s next resort gems

SOUTHEAST ASIA - 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.

Kosin Chantikul, chief investment officer, Minor 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

Share this quote

“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.