End of a hospitality era in Bangkok
Plans to raze and rebuild the historic Dusit Thani hotel points to changing times in Thailand's booming tourism industry
The Dusit Thani Hotel, with its unique triangular structure topped by a golden spire, towered over Bangkok at 100 meters when it was first opened for business in 1970, becoming an immediate landmark for the capital.
Now it is almost a midget among Bangkok’s proliferating skyscrapers. Under competitive pressure from luxury upstarts, the Dusit Thani will close its doors to guests and prepare for demolition in April next year.
“Believe me, it was the most difficult decision I ever made,” said Chanin Donavanik, chairman of Dusit International’s executive committee.
Chanin, 61, the son of the hotel group’s founder Chanut Piyaoui, 96, literally grew up at the Dusit Thani. “When my mother started building it I was walking around the construction site with her,” he said. “It’s been my life, that’s why the decision was tough but if I want to make sure the Dusit Thani brand is still competitive. I have no choice.”
Chanin could have opted for refurbishing the 50 year-old building (construction started in 1967), as the Mandarin Oriental of Hong Kong did. But he decided that a complete reconstruction was necessary, along with a major redevelopment of the prime property on which it sits in the heart of Bangkok’s business district just across from Lumpini Park.
When the Dusit Thani reopens its doors to the public after a three-four year construction period, it will be similar but different. Firstly, it will be taller but with fewer rooms – about 300 compared with the current 510. The rooms will be bigger and with higher ceilings, in keeping with today’s standard for five-star luxury establishments.
But the building will attempt to keep the unique ‘Thainess’ of the old Dusit Thani, including its rooftop spire – modeled after the Temple of Dawn, another Bangkok icon – and a 50-year-old banyan tree planted in the old Dusit Thani’s interior garden by his mother.
Other vestiges of the old Dusit will be retained, including its 588 staff. Employees will be reassigned to other Dusit establishments during the rebuilding. “After we reopen our wish is to have everyone come back and take a photo in front of the new hotel together,” said Suphajee Suthumpun, chief executive officer of Dusit International.
“So it’s not like we are going away for good,” she said.
Besides a complete reconstruction of the hotel, the Dusit Group has also joined hands with Central Pattana PCL (CPN), one of Thailand’s leading retail operators, to transform the current hotel property into a mixed-use complex with a department store, office building and residential condominium.
The investment will be carried out by a joint venture set up between the two companies, with Dusit holding 60% and Central Pattana 40%.
The trigger point for the decision to totally revamp the iconic property, which is strategically situated at a junction of Bangkok’s two main mass transit systems – the overhead Skytrain and underground subway – was the pending expiration of the lease.
The current Dusit Thani sits on an 18 rai (2.9 hectares) plot of land owned by the Crown Property Bureau – the juristic institution that acts as the investment arm of the Thai monarchy headed by King Vajiralongkorn Bodindradeyavarangkun.
The Crown Property Bureau is one of the largest land holders in Thailand, owning an estimated 41,000 rai (6,560 hectares) nationwide with 8,300 rai (1,328 hectares) in Bangkok alone, according the biography of the former king – King Bhumibol Adulyadej – A Life’s Work.
The Bureau has an estimated 17,000 rental contracts in the capital, covering a wide variety of tenants ranging from shophouses to government offices to well-known hotel groups such as the Dusit Thani.
After numerous lease extensions for the hotel since 1967, the latest contract was due for renewal with the Crown Property Bureau in March 2018, with a first right to extend the lease for another 15 years.
Instead, the Dusit Group and their Central Pattana partner asked for a much longer lease, in negotiations that began early last year, to justify a massive investment in the proposed fixed-use complex on the same site but including some adjacent properties that would increase the total size to 24 rai (3.84 ha.)
“In a nutshell, they liked our project so they decided to give us the right to develop for seven years, starting from July 2017, and the right to lease for another 60 years, so we don’t have to negotiate anything for the next 67 years,” Suphajee said.
To clinch the deal, the Dusit/Central Pattana joint venture paid 20% of the lease in July. The land value was estimated by a third party evaluator to “assure transparency.”
The Dusit Thani Hotel accounts for an estimated 17% of the group’s revenues, or close to 1 billion baht per year, so the hospitality conglomerate will need to expand its other activities over the next three-four years to maintain profits. Dusit Thani PCL was listed on the Stock Exchange of Thailand in 1975, but its shares are not actively traded.
The group has become an international hospitality company over the past two decades, with four distinctive hotel brands – Dusit Thani Hotels, Dusit Princess, Dusit Devarana and dusitD2 hotels – and management contracts worldwide. It currently owns 10 properties and has management contracts with another 19 under Dusit brands.
“Right now we have already signed on 62 more properties that we are going to manage for others,” Suphajee said. “So in the next three-five years we can easily triple in size.”
The hospitality group also hopes to franchise out some of its better-known restaurants, such as the Benjarong, and to earn revenues from pre-sales of its condominium. But the mixed-use project is at the core of its future plans for the group.
“This is the project that will put Dusit back as the flagship for the Thai hospitality business as we had been in the past,” Suphajee said.
For many, though, the demise of the Dusit Thani will be the end of an era. The hotel has not only been a draw for international tourists, but also at the heart of Bangkok’s social life, serving as the venue for more than 20,000 marriages and innumerable conferences over the decades.
“It’s a shame,” Simon Landy, Executive Chairman of Colliers International/Thailand, said of the pending demolition. “I think everyone thinks it’s a shame, but it’s hard to see what other option Chanin had,” said the long-time property consultant and Bangkok resident.
“I love old hotels myself,” Chanin said. “If the Dusit Thani was an old hotel in Paris, London or Munich, where there are not a lot of new competitors coming up, where the market is strong and the room rates are good and people don’t mind to get a small room at a high price, I think my decision would have been different,” he said. “But in Bangkok, where every year you have ten new hotels, it’s not easy.”