December 19, 2023

Why Southeast Asia is The Top Destination for Property and Short-Term Rental Investors in 2024

Picture this: A sun-kissed morning in Bali, the aroma of freshly brewed local coffee wafting through the air, and a view of the tranquil ocean from your balcony. It's no longer just a traveller's dream, but a lifestyle choice for many, as Southeast Asia (SEA) becomes a hotspot for remote workers and short-term rentals.

SEA countries such as Indonesia, Thailand, Vietnam, Malaysia, the Philippines and Singapore have been included in this year's Rise 30 Economies by 500 Global Rise report. Compared to developed markets, these economies are growing faster, the population is younger, more social and connected, and underpenetrated in sectors such as e-commerce and fintech, according to the Rise report.

As someone with a deep passion for hospitality and technology who has witnessed this transformation in Southeast Asia (SEA) first-hand, I'm excited to share insights into this vibrant region that is attracting more and more investors and short-term rental owners from around the world.

Let's dive into what makes SEA the market of choice for years to come.

The Surging Growth of Vacation Rentals in Southeast Asia: Statistics paint a clear picture: the growth rate of vacation rentals in Southeast Asia (SEA) is outpacing other continents by a staggering three times. According to a report by Statista, this surge underscores not just a trend but a significant shift in the global vacation rental landscape.

The driving forces? A combination of affordability, tropical allure and serene beaches make the SEA, with Thailand leading the way, one of the top destinations for relocators and digital nomads, as highlighted by Immigrant Invest and Flatio's Digital Nomad Report 2023.

The Property Investment Landscape: I recently spoke to a property investor who shared his excitement about the market in Thailand and Bali. The property markets there and in similar locations are not just growing, they are booming. Following this active construction phase, the number of holiday homes and rentals is also increasing, signalling a great opportunity for savvy investors.

However, this growth isn't without its challenges. Local markets in these regions are still adapting to the needs and expectations of international clients, creating a gap to be filled by services. This situation calls for effective intermediaries who can understand and efficiently connect local businesses with the global community of travellers and nomads, raising living standards to meet expectations.

How is this market fundamentally different from Arab and European countries?

Compared to Middle Eastern and European markets, Southeast Asia presents a unique set of challenges and opportunities. The language barrier is significantly higher in SEA, creating communication challenges.

The region was one of the hardest hit by COVID-19, but its recovery has been remarkable this year, demonstrating its resilience and potential for rapid growth. At 12% in SEA and 4% in Europe, the average revenue per short-term rental is significantly higher in SEA than in Europe.

A significant proportion of the SEA population is employed in tourism-related sectors, demonstrating the importance of this industry to local economies. In particular, countries such as Thailand, Indonesia, the Philippines, Vietnam and Malaysia rely heavily on tourism as a key economic driver.

Evgenii Takhtai, Managing partner XAAN Thailand

"Looking at the prospects and opportunities now open to investors in Thailand, it becomes clear that the key to success lies in innovation and technology. These enable cost optimization and the provision of high-quality services to both guests and property management companies.
Investments in property for short-term and monthly rentals promise high returns due to the growing demand and market potential. Importantly, this integration of guests, property management companies, and service providers fosters an environment where convenience, service quality, and competitiveness are paramount. In this environment, every participant reaps maximum benefits: guests have access to a wide range of services, management companies get efficient tools for operation and service, and investors gain confidence in the profitability of their investments.
Therefore, looking towards 2024, the short-term rental property market represents a promising area for investors who are committed to innovation and quality service. Considering current trends and growth potential, this market promises to be one of the most dynamic and profitable segments in the real estate sector."

Trends Reshaping the SEA Short-Term Rental Market: The short-term rental (STR) market in Southeast Asia (SEA) is witnessing several fascinating trends that are shaping its growth and development:

  1. The emergence of iconic real estate projects: The STR market in SEA is entering a more mature phase with the planning of iconic real estate projects. These developments are similar to the likes of Marina Bay Sands in Singapore and Burj Khalifa in Dubai. Investing in these properties is an opportunity to be part of what could be the next 'future legend' in the property world.
  2. Shift from villas to apartments: There's a noticeable trend towards increasing the proportion of apartments over villas in the STR market. This shift reflects changing consumer preferences, possibly driven by factors such as affordability, convenience and a desire for more urban experiences.
  3. Digitalisation and market transparency challenges: Despite growth, the SEA STR market still struggles with a lack of digitalisation. This results in a grey, opaque market with limited payment options, widespread fraud, and a disconnect from the local service market. These challenges present significant opportunities for digital transformation and market standardisation.
  4. Major technology investments: The region has attracted the attention of global tech giants, with significant investments from companies such as Tesla, Google and Microsoft. This influx of technology investment indicates a growing recognition of SEA's potential as a tech-forward market, and could lead to significant improvements in the STR ecosystem.
  5. Untapped and protected territories: SEA offers a unique juxtaposition of vast undeveloped territories and areas with limited development due to UNESCO protected status. This creates a diverse range of investment opportunities, from pristine natural retreats to culturally rich, protected locations.
  6. Inflow of IT professionals and innovative services: With an increasing number of IT specialists moving to the region, SEA is becoming a testing ground for new service solutions such as advanced delivery apps, modern taxi services and other digital conveniences. This influx is likely to enhance the appeal and functionality of the region's STRs, making them more attractive to tech-savvy travellers.

How Does XAAN Plan to Strengthen This Market? To strengthen the holiday home market in Southeast Asia, XAAN's strategy focuses on digital integration and improving service quality:

Service Suppliers: We're moving services that have traditionally been offline in the region, such as tours and bike rentals, to a digital platform. This will standardise these offerings, increase visibility and promote healthy competition.

Holiday Homes: Our aim is to create a comprehensive service marketplace for holiday homes to compete with hotels in terms of guest experience. This platform will not only facilitate property listings, but also integrate additional services from trusted providers, such as local experiences and car rentals, to create a more holistic experience for travellers.

Enhanced payment systems: By introducing an online payment system and integrating different payment infrastructures, we're making financial transactions between holiday homes, service providers and international guests easier, more convenient and safer.

Community Building: A key part of our strategy is to build a community of quality managers and service providers. This network will encourage the sharing of best practice and experience, raising the overall standard of service in the short-term rental market.

The vacation rental market in Southeast Asia is on the edge of a transformative era. With its rapid growth, unique challenges and thriving opportunities, SEA presents a landscape ready for investment and innovation. For those looking to enter this exciting market, now is the time.