Phuket has been in the limelight the past six months after the government announced a plan to elevate Thailand to an aviation hub, with Phuket the key gateway in the South.
The plan includes a new airport project in Phangnga, which is estimated to cost 80 billion baht and accommodate 20 million passengers per year, providing support to Phuket airport.
As foreign tourists and long-stay visitors continue to flock to Phuket, the carrying capacity of existing services has been tested, as airports, flights, hotel rooms and road traffic are all congested.
The business sector has raised concerns about overwhelming demand, which has triggered inflated prices for land, accommodation and domestic airfares to Phuket, while some ill-intentioned foreigners have exploited visa exemptions and illegally operate businesses.
The environmental impact is another topic of debate as the lack of proper supply management might harm natural resources on the island.
If the administration desires to elevate Phuket to the "hub of the Andaman", the private sector wants the government to draw up a master plan and development roadmap to improve the island's infrastructure, which is struggling to keep up with rapid urbanisation and growing real estate development.
GROWING COMMUNITY
Bill Barnett, managing director of C9 Hotelworks, a hospitality consultant based in Phuket, said the island is in the early stages of becoming a new business hub in the region, attributed to strong relocation demand from foreigners across the globe.
"People consider Phuket to be a safe haven," said Mr Barnett, citing the island's attractiveness amid global turbulence, such as wars and geopolitical tensions, bolstered by growing trends such as remote work and digital nomads.
He said there is strong demand from Russians, Chinese, Eastern Europeans and North Americans seeking long stays in Phuket.
Other growing segments include retirees and entrepreneurs relocating from other cities with their families, drawn by international hospitals and schools that cater to their lifestyles, said Mr Barnett.
He credited the government with successfully building an international community in Phuket, offering several policies that benefit long-stay arrivals, such as extending the length of stay for more nationalities, and promoting the Thailand Elite programme and the retirement visa scheme.
Over the next five years, about 14,000 new hotel rooms will be added in Phuket, with half included in real estate components to capture strong demand from long-stay visitors, such as branded residences, said Mr Barnett.
He said Bang Tao, a prime location, already has more than 20,000 units available.
The province recorded an influx of foreign and local investors, including large Thai developers such as Sansiri, CG Capital, Asset Wise and One Origin.
"We haven't seen this level of investment in Phuket in 20 years," said Mr Barnett.
INFLATED PRICES
The substantial foreign demand in the Phuket residential market, primarily from Russians in terms of property value, has spurred both new supply and property prices to historic levels, which market analysts predict will continue this year.
According to residential developers and property consultants, Russians were the largest foreign buyers in the luxury villa market.
In the first half of 2023, luxury villa market sales surged more than fourfold year-on-year, with Russians accounting for half.
"This high demand came with some expected hurdles," said Phattarachai Taweewong, director of the research and communications department at property consultant Colliers Thailand.
"As developers, both Thai and foreign, flock to Phuket, reasonably priced land plots have become more challenging to identify as some prices have doubled in recent years."
In locations near Laguna, situated on the west coast, the price of land within walking distance of the beach was 70 million baht per rai, while it was 20-30 million baht for plots farther away from the beach.
Meanwhile, land in prime locations such as Patong, Kamala, Kata and Karon beaches is mostly developed, teeming with hotels and condos.
The Phuket villa market did not traditionally attract wealthy Thais, who preferred Hua Hin or Khao Yai, with the primary target foreign buyers.
Since the pandemic, some wealthy Thais have purchased luxury villas in Phuket as second homes to work remotely, though the number remains limited.
Prakaipeth Meechoosarn, head of Phuket sales at property consultant CBRE Thailand, said the arrival of listed and Bangkok-based developers to the Phuket residential market has attracted Thai buyers who form their customer base.
"Thai buyers who previously purchased Phuket properties solely as investments are now seeking holiday homes they can rent out when not in use," she said. "The top three buyers remain Russians, Chinese and Europeans."
Last year, Phuket ranked as the 14th-most visited city, with 9.89 million tourist arrivals. It offers direct flights from 70 cities around the world.
The demand for resort real estate totalled more than 3,000 units in 2023, more than double the 1,500 in 2022 and 1,300 in 2019.
Prime land prices rose 100% in the last two years, while housing prices grew 150% over 15 years, averaging 10% per year.
WEAK STRUCTURE
Despite booming private development, Phuket still lacks sufficient public infrastructure, as existing services have not caught up with the island's fast growth.
"Phuket is no longer dependent on tourism, and that's probably a good thing, but we need infrastructure," Ms Prakaipeth said.
Notable transport projects have been delayed for many years, pending funding approval from the cabinet, said Mr Barnett. These include Patong Tunnel, the Heroine Monument interchange and Muang Mai interchange, which is the starting point of a new expressway.
He said locals and investors are also awaiting new airport development, as another runway is needed to absorb excess demand from Phuket airport.
The government needs to determine whether the development will be paid for by investment from Airports of Thailand or other investors, said Mr Barnett.
During the high season, the lack of public transport in the city and expensive taxis and ride-hailing services have caused trouble for commuters, as the island is marred by traffic congestion.
Other problems include a water shortage during the high season because of ageing municipal water pipes, while the transition towards sustainability via electric vehicles and solar power needs to be incentivised, he said.
The new draft of land regulations may allow building development up to a height of 45-75 metres in the red zone, up from 23m at present. Mr Barnett said this revision in certain inland areas makes sense for taller buildings, enabling major developments similar to along skytrain routes in Bangkok.
As Phuket becomes more urban, the provincial authority and central government should adopt a better zoning system for the province, applying the floor area ratio system, similar to Bangkok, he said.
This system calculates the building size in relation to road width, only allowing big structures and projects to be built along main roads, instead of haphazardly along small avenues.
Land prices have skyrocketed on the island, especially in prime areas, said Mr Barnett. For instance, the Bang Tao area recorded a 300-400% price hike over the past two years.
Given the insufficient infrastructure and limited building regulations, developers have refused to construct tall projects, deeming them infeasible, he said.
CALL FOR MASTER PLAN
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said the private sector and the public want to see concrete action plans for the short, medium and long term, as well as feedback on work progress.
Even though this vision will take time to accomplish, the chamber believes with a clear roadmap, political stability and continued policy advocacy the vision can materialise, he said.
Mr Barnett agreed Phuket requires a well-structured urban master plan, outlining all key infrastructure projects and mass transport so that tourism, new businesses and trade can prosper in the long run.
The government should consider making Phuket a special administrative zone, similar to Pattaya and Bangkok, for the sake of management and economic development continuity, he said.
Regarding public concerns over foreigners, especially the recent case of a Swiss man assaulting a local doctor at his villa on Yamu beach, Mr Barnett said the incident would not harm tourism sentiment as negative news always comes and goes, and the island has many good aspects to promote.
However, these issues require leadership and clear collaboration between responsible authorities in enforcing the law to ensure the safety of tourists, locals and operators in Phuket, he said.
FIRM COMMITMENT
A source in the aviation industry who requested anonymity said the real problem for mega-projects in Thailand is the lack of long-term commitment, as they can be easily affected if the government shifts from one political party to another.
The source said such worries are not exaggerated, citing the flagship Eastern Economic Corridor, as some investors gradually lost confidence because of delays to key infrastructure projects, particularly the high-speed rail linking three airports, which is the most important component supporting economic activities.
Before proceeding with a plan to establish an aviation hub in the South, the source said the government should guarantee any investment will be permanent, offering a clear timeline and receiving full authorisation from landowners before commencing the project.
Similar concerns plague a project to build a maintenance, repair and overhaul centre at U-tapao airport, which occupies land belonging to the Royal Thai Navy.
If state authorities or agencies must be involved, the government should ensure they collaborate with the private sector, not hamstring the process with red tape, said the source.
"Without proper infrastructure as a solid foundation, it might be difficult to attract local and foreign investment for any plan to establish an aviation hub in the region," said the source.
BEYOND PHUKET
Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce, said authorities need to expedite addressing obstacles for Phuket development, as well as other major tourist destinations, such as Chiang Mai and Khon Kaen.
One common issue is the transport system from airports to city centres. Some provinces, such as Phuket, rely on expensive taxi services, lacking a reliable mass transit system like those available at Bangkok's Suvarnabhumi and Don Mueang airports.
"The assault by a Swiss man in Phuket is unlikely to impact overall tourism, as the legal process is continuing," he said. "One response from this incident should a thorough survey of Phuket to determine if there are invasions or blockages of beaches and, if so, opening them to the public."
Provinces in other regions can help the government achieve its ambitious goal to make Thailand a hub for tourism, especially medical and wellness tourism, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries.
Chiang Mai and Chiang Rai in northern Thailand can form part of the medical and wellness hub scheme, drawing foreign visitors who want to experience local culture and seek healthcare services, said Mr Kriengkrai.
What the government lacks is a roadmap and action plans to develop it, he said.
"The government should support medical and wellness tourism in other provinces to boost the local economy," said Mr Kriengkrai. "The plan to develop this sector is making slow progress."
Mr Sanan said Phuket's robust tourism may elevate it to a medical and wellness as well as aviation hub, also channelling tourists to Ranong, Phangnga, Krabi and Trang.
The government should develop infrastructure to help create a hub, he said, with related departments and agencies working in unison on clear integrated plans.
Additional reporting by Wichit Chantanusornsiri, Lamonphet Apisitniran and Phusadee Arunmas
