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While residents of Chiang Mai, Thailand
are breathing a collective sigh of relief that the Ratchaphruek
Royal Flora festival is now over, developers have keenly
noted the windfall some made from the city’s biggest
influx of tourists ever. With three million visitors in
three months it demonstrated the very real future of this
northern tourist centre, as well as the effect it’s
likely to have on the property market.
In issue 26 of Property Report Thailand,
we reported on the construction of a 22 storey Le Meridien
hotel that was changing the face of Chiang Mai’s
Night Market area. When it’s complete in 2008 this
enormous high-rise will join big names such as Shangri-La,
Mandarin Oriental, Sofitel, GHM (Chedi) and Pan Pacific,
along with the Dusit Group’s new D2 concept and
the long-established Four Seasons.
Both the Hyatt and Banyan Tree are rumoured
to also have future plans in this city, once regarded
as a quaint guesthouse venue in the north of Thailand.
Yet just three years ago only one of these existed. The
question on the minds of many in the hospitality industry
is whether this sudden flood of luxury rooms will be sustainable?
The question on the minds of realtors is: how much is
it going to inflate property values?
But these are big names with big money
and they certainly would have done their homework before
moving in. The fact that several have simultaneously gone
ahead sends out a very strong signal that Chiang Mai’s
tourism is not only set to increase but go markedly upmarket
as well. As we have seen in other tourist centres, it
tends to set off a buying and development spree in the
adjacent areas, and this has already become evident.
According to several opinion leaders
we spoke to, the single biggest catalyst has been the
announcement by the ousted Thaksin government to develop
a large convention centre as part of the deposed prime
minister’s grand tourism design for his hometown.
Although those plans may now be on hold, the current tourism
minister assured a local hotel manager recently that it
would still go ahead. But even without it, the improvements
to infrastructure and tourist profile are having an effect.
The completion of an international air terminal and the
publicity from the Flora Expo have raised the city’s
profile. The hospitality industry seems bullish, and this
has been demonstrated none more clearly than the creation
of the Dhara Dhevi in San Khampeng. This 60 rai Lanna
and Burmese-themed masterpiece under the Mandarin Oriental
banner is an extraordinary work of art featuring purpose-built
temples and palaces from long gone kingdoms. It ranks
as one of Thailand’s most ambitious hotel projects
and is aimed firmly at the super rich. Even if the city
has yet to attract that kind of tourist numbers, it’s
an excellent confidence booster for Chiang Mai as a destination,
attracting gob-smacked travel journalists and TV crews.
Another bold move is that of the uber-trendy
D2 boutique hotel in the heart of the Night Bazaar area.
Developed as a pilot project, it signals a new direction
for the Dusit Group which specifically chose Chiang Mai
as a more accurate litmus test for its funky new hotels.
It’s targeted at urban hipsters, and is a counter
move to the usual Lanna style and soft-adventure sales
pitch. The attention to stylised detail is refreshing
and it detracts from the hotel’s position among
street-side vendors and girlie bars. But the decision
to develop a renovated hotel in this bustling area was
a shrewd one considering the recent hike in property prices
since the TCC Group snapped up a clutch of properties
here. Their recent acquisitions include the Kalare Centre,
Chang Klan Plaza, Anusarn Market and Panthip Plaza, as
well as building the new Le Meridien which will occupy
one of the city’s prime corners.
Nearby is another chic new hotel, the
Chedi, and we spoke to GM Eleanor Hardy about her impressions
of Chiang Mai’s outlook. A relative newcomer to
the North, Hardy feels confident of the city’s appeal,
provided it doesn’t try to copy Phuket, and lose
its charm in the process. The Chedi itself is an interesting
property case study, for it incorporates the former British
Consulate building – a grand colonial edifice that
occupies an enviable position besides the Ping River.
Other new hotels, such as the popular Tamarind Village,
have incorporated historic or neo-Lanna buildings into
their development to retain the character of this 700-year-old
city.
But the coveted riverfront position also
proved disastrous when unprecedented floods in 2005 wrecked
the hotel’s ground floor and basement installations,
six weeks after it opened. The deluge might have had a
profound effect on property in the area but the enormous
Shangri La going up further down Chang Klan road has buoyed
confidence, and the recent opening of a Lacoste outlet
is evidence that posh retailers rate this street’s
potential. Hardy sees the floods as a freak one-off and
is confident in their future. “When the big marketing
machines of the Sofitel and Le Meridien kick in, it is
hoped all of Chiang Mai will benefit," she says.
The most famous of Chiang Mai’s
luxury hotels is undoubtedly the Four Seasons, out in
Mae Rim. Frequently mentioned as one of Asia’s best
hotels in travel magazines, the hotel was a pioneer in
the luxury concept more than 10 years earlier. It’s
set around rice terraces and offers a complete hideaway
experience that has attracted the likes of Hilary Clinton,
among others. It also offers an interesting benchmark
on what happens to property in the area. A serene lakeside
housing project was subsequently developed across the
road and trendy galleries and coffee shops gradually filled
the pretty rural road adjacent to the hotel. A little
further down, a futuristic luxury development named Baan
Azaya is marketing itself as a “unique investment
opportunity.”
Four Seasons general manager Andrew Harrison,
is cautious about the expansion. “We need the airflow,
particularly from cities in China and India,” he
says. He also shares the cynicism of many about Chiang
Mai’s ability to step up to the challenge the boom
is creating. For instance, guests staying at the Dhara
Dhevi’s US$500 a night rooms first have to be limosined
past a shambolic road construction debacle that has been
mired in incompetence and graft for the past two years.
“If Chiang Mai goes upmarket,” Harrison says,
“it cannot exist with screwed up pavements and the
Night Market the way it is now.
“We have to be careful this five
star tourism is matched by city services, otherwise we
won’t survive at this level if we don’t keep
up.”
But even if the public sector displays
a typically lackadaisical northerner’s approach,
the private sector isn’t waiting around. Sunday
Night’s walking street has breathed new life into
the property along Ratchadamoen street. The opening of
the smart new Kad Klang Wieng “cultural arcade”
is evidence of the gentrification going on in these areas.
In February last year, Property Report documented the
emergence of Nimminhemin street and since then parts of
this “avenues” suburb have become barely recognisable
with trendy new arcades and modernist coffee shop facades.
Property prices on this street have become almost unaffordable
for residential use, but it wasn’t always like this.
The Amari Rincome, Chiang Mai’s oldest surviving
luxury hotel, occupied the corner with Huay Kaew road
at a time when cow pastures comprised much of the adjacent
land. Former GM, Marc Dumar, who has witnessed 19 years
of changing Chiang Mai, was responsible for managing their
property on the adjacent soi 1 with its humble shop houses.
Today it is one of the most exclusive retail streets in
the city, thanks to the annual Nimminhemin Arts and Crafts
Festival which has turned the entire area into a home
décor Mecca.
Dumar is now overseeing the opening of
the city’s newest luxury hotel, the Sofitel. Set
to open in March, it too has a riverside location and
meets all the expectations of modern upmarket Asia travellers.
He has one major advantage too, the hotel is owned by
the progressive mayor Boonlert Buranuprakorn. There was
a previous wave of hotel development in the eighties,
he explained. Big names have come and gone but he believes
this time around the development is more genuine. “We
need more sports and cultural events to keep the momentum
going.
“The Royal Flora expo proved we
can handle three million tourists, it was mostly well
organised and it filled up the lower-end hotels, which
pushing more foreign tourists to us.” Indeed, numerous
opportunist developers completed condos in time to rent
them out for short stays during the unprecedented flood
of tourists.
And herein lies the real secret for smaller
investors and developers. A surprising fact to emerge
was the lack of luxury serviced apartments in the city.
Twin Peaks, developed by Siam Zokie and aimed at the Japanese
ex-pat crowd, is one of the few luxury modern condos in
the city. Not surprisingly it sits right beside the new
Shangri-La, and hasn’t had trouble selling despite
the ‘luxury price tags’. While many small
boutique hotels are opening up on quiet sois, more and
more visitors are coming back to Chiang Mai to spend months,
not weeks here during the winter months. One of the hotel
GMs we interviewed expressed frustration over the shortage
of high-end condos in the city, and pointed out that several
of the hotel’s guests had since returned and settled
here. If they can afford five star rooms, they’ll
certainly be looking for new, comfortable, luxury-priced
serviced apartments. We had difficulty finding suitable
suggestions other than the newly opened Frangipangi, tucked
away quietly behind the historic Wat Chiang Man. Competitively
priced compared to the hotels, yet offering a similar
level of comfort, it seemed an ideal answer for the upmarket
guests that Chiang Mai is forecasted to attract.
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