Cambodia An Ideal Destination For Hotel Investment: Experts

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A trio of experts from the economic and real estate sectors said tourism growth and several other factors make Cambodia one of the best places to invest in a hotel in Southeast Asia now.

The FCC Angkor, a recent addition to the hospitality industry in Siem Reap, the site of the world-famous Angkor Wat and Cambodia’s leading tourist destination. FCC Angkor

Jayant Menon, lead economist at the Asian Development Bank (ADB), said Cambodia’s strong economic and tourism growth present opportunities for potential investors in the Kingdom’s hotel sector.

“With rapid economic and tourism growth, investing in hotels and the broader hospitality industry does appear to be financially attractive in Cambodia at present,” he told Khmer Times.

But while the opportunities are there, he said investors should not rush and should instead carry out due diligence.

“However, hotel development is a ‘lumpy’ investment which involves a long gestation period. It can take several years to raise one, from scratch. There can also be herd behavior, where people rush in to develop new hotels without carefully considering how many other new ones are already in train,” he pointed out.

“Therefore, while attractive at present, due diligence is required to ensure unmet demand is being tapped several years in the future when the project is likely to be completed, in the specific location being targeted,” he added.

While agreeing with Mr Menon, Anthony Galliano, CEO at Cambodian Investment Management (CIM), noted that a surge of arrivals from China has greatly affected Cambodia’s hospitality sector.

“Although tourist arrivals have increased on average 11 percent per annum in the last two years, the demographic and the category of tourists have dramatically changed, thus impacting greatly the hospitality industry which must adapt to accommodate this new stratum of international tourists,” he said.

According to him, opportunities in the hospitality sector have gravitated towards catering to Chinese tourism and an increase in the number of business travellers, mainly to Phnom Penh.

“Hopefully not only Chinese-owned businesses will capitalise on the Chinese tourism opportunity and certainly the international hotel and restaurant chains will enter to satisfy the fast-growing business traveller market,” he said.

For his part, Charles Amar, senior consultant at DFDL, said that many economic factors can explain why it is interesting to invest in the hotel sector, including the increase in the number of tourists, the launch of many new flights to Cambodia, the opportunity to diversify investments, and the fact that, at present, only a few international hotel brands are operating in the Kingdom.

Only a few international hotel brands are present in Cambodia. They include Sofitel Hotel & Resorts, Rosewood Hotels & Resorts, Park Hyatt, Raffles Hotels & Resorts, Six Senses, Hotel Emion, Ibis Hotels, Courtyard by Marriott, Alila Hotels & Resorts, Belmond, and Le Meridien.

Mr Amar added that he also saw three important changes in the Kingdom’s hotel sector that could work in favour of investors – A shift from private, small-scale hotels to international brand hotels; a shift from backpackers to higher value luxury tourism; and a shift to a digital industry.

Some other experts argue that more tourists mean greater demand for hotel rooms, which Cambodia cannot accommodate without massive investments in the hotel sector.

Despite more hotels being built in the Kingdom, the Tourism Ministry emphasised earlier that Cambodia needs 100,000 more hotel rooms in the next decade or so due to rising tourist numbers.

Cambodia’s tourism industry has experienced phenomenal growth in the last few years.

Some 3.3 million foreign tourists visited Cambodia in the first half of 2019, according to the Ministry of Commerce. Of these, nearly a third, or 1.2 million, came from China.

In 2018, Cambodia received a total of 6.2 million foreign visitors, which was 10.7 percent higher than the previous year’s figure of 5.6 million. The Tourism Ministry has set a target of 7 million tourists by 2020 and 10 million by 2025.

China remains the biggest market for Cambodia’s tourism industry. A significant number of tourists from Vietnam, Laos, Thailand, South Korea, Japan, Singapore, Malaysia, Europe, and the United States also visits Cambodia.

Development in the Kingdom’s tourism industry has largely been attributed to economic progress, more flights, and the development of new and existing tourist attractions.

This article was originally published in the Khmer Times.