With just 800,000 tourist arrivals last year, Cambodia's capital remains one of Asia's smallest hotel markets. However, Andrew Langdon, executive vice president of JLL Hotels and Hospitality Group, said that as Cambodia's political situation has improved, prospects for the capital's hotel market became positive this year.
"Business demand in Phnom Penh primarily emanates from embassies, NGOs, the UN and the garment industry. Corporate demand from sectors such as telecom, banking and insurance is on the rise," he explained. "However, internationally branded supply to cater to growing hotel demand in Phnom Penh is currently limited."
According to from the professional services and investment-management firm, there are currently only three internationally branded hotels in Phnom Penh with just 745 rooms. An additional four hotel projects with 1,705 rooms are expected to enter the market by the end of 2015. Despite strong future supply in a pipeline, it is expected that demand will catch up to supply, allowing room rates to continue to rise at at a slower pace.
The Phnom Penh hotel market was hit hard by political unrests in 2013. The luxury segment recorded an increase in the average daily rate (ADR) of 16% from $114 in 2011 to $132 in 2012. However, growth slowed to 4% to $138 in 2013 as a result of political tensions.
Occupancy grew 2% to 43% in 2012 compared to the previous year, but declined to 35% in 2013.
Phnom Penh has seen continuous growth in international visitor arrivals over the past four years. It saw 800,000 international visitors during 2013, a 16.7% annual increase. The first four months of 2014 witnessed 10.9% growth in international visitation compared to same period last year.
The Cambodian government has also rolled a number of planned infrastructure improvement initiatives and active promotion of the Phnom Penh-Siem Reap tourism circuit. "All these will underpin further growth in demand for lodging in Phnom Penh over the short to medium term," Mr Langdon said.
"In addition, while the majority of the upcoming supply comprises of hotels in the upscale and luxury segments, the branded economy-to-midscale segments remaining largely untapped. This is where opportunities are open to international hotel operators," he concluded.