Secrets and Insider Knowledge

In Pattaya there is some really weird stuff going on that economically  and financially does not make any sence at all. There are at least 5 different english language local newspapers plus various magazines covering this small area. And here comes the weird part: These newspapars have very few readers. Of course there will always be some readers, but not enough to justify that many newspapers. Let me explain: to be elected Mayor of Pattaya you will need less than 20.000 votes. Yes, that little. The majority of people living in Pattaya are Esaan girls that do not buy or read english newspapers or magazines. These girls work in the hotels, the bars, the massage parlours, in Big C or Tesco Lotus etc. So forget about about this large majority as potential customers. Then there are the russian tourists that account for 80 – 90% of the tourists in the low season: they may read russian newspapers but definitely not english language newspapers. Then there are the retired foreigners, they are usually 60+ years old and they like to visit their native country during the summer months. The Germans, Italians etc. do not read english newspapers.

So how come we have that many foreign newspapers in Pattaya, some of which have a staff of more than 60 people? Where is the money coming from, who is financing it all? To no surprise the real estate developers often advertise on the front page. On a typical 3 August 2012 issue I found adverts from 4 different developers on the front page, Nova Group, Tulip Group, Matrix Developments and Raimon Land. No need to say a spot on the front page is expensive. The newspapers generate income from running ads, by selling advertising space, not by selling newspapers.

It is indeed a mystery why people would waste good money and get nothing in return. Could it be as simple as, “let us follow the others, it is safer”. Meaning that one developer started the whole thing and then the others just blindly followed. Also on local TV you will find that the developers are big spenders/sponsors. Could it be friends helping friends? Some might be friends, some are friends but not all of them. I can’t figure it out – then again, it is their money and they may do with it as they please, but the lack of human logic just leaves me with a big question mark….

Advertising is of course an advantage but it must be done in the right places and the right ways so you can target the correct customers. In Pattaya the right place is alongside the motorway so you can reach the people from Bangkok coming for a visit. The 15 – 20 million people living in and around Bangkok must of course be be targeted, this is where you must put your money. Why in God’s name don’t they advertise in thai newspapers and in Bangkok? Of course I am right, what I say makes sence.

Instead the developers focus on the few thousand retired people living Pattaya who have already purchased a condominium or leased a villa. They already have a place to stay and buying an extra condo for investment or to rent out does not make much sence. They are already old and they will be dead in 20 years time, they will never be able to get their money back.

Make no mistake, the developers in Pattaya are really powerful people. It is the continuous cash flows from multi billion baht projects that make them so powerful. You will notice that the newspapers take the soft approach when dealing with the developers. No critical questions allowed, no real journalism taking place, it is more like ‘friends talking to friends’. You cannot blame the newspapers, they have no choise because there is always the threat of a collective boycott hanging like a Damocles sword over their heads – simply put the developers can put the newspapers out of business anytime they may wish. The developers are the real bosses, without their money no salary to the staff. When there are too many english language newspapers covering a very small area we end up like this, being dependent on others, being dependent on just one industry.

Another really weird thing is that we have some local radio stations that nobody have heard about. They are doing just fine because of a very good sales team.  If it is financed by running advertisements then bad radio reception or having no listeners does not matter.

An editor of a local magazine once said: we will support you if you support us – meaning we will ignore you if you don’t advertise with us. A favor for a favor, you scratch my back and I’ll scratch yours.

And another secret that you will not hear any other place than If you buy a 5 million Baht condominium you will not be able to sell it. You will not be able to sell it, you are stuck with it. Why is that? The answer is simple: there is an oversupply because they are building so many new condos and people want new condos, not second hand condos. A second hand condo has to be priced very low in order to sell. Again, this makes sence, so it ought not be a secret. Why buy a second hand car if you can get a new one for the same price? Small chicken cage units at prices less than 2 million Baht are much easier to sell. Why some people want to live in a chicken cage I do not understand.

Another weird thing: for 2 million baht you can get a small condominium. For that money you can actually become a house owner or buy a two-storey townhouse. For as little as 3 Million Baht you can get your own two-storey villa with your own private swimming pool. Yes, this is low prices but there is always somebody that gets divorced, always somebody that dies, always somebody that needs a quick sale. A quick sale means reduced prices. Foreigners are not allowed to own land in Thailand (but a Thai registered company may own the land) so it is understandable that some foreigners find it more favorable to purchase a condo instead. But why in Buddha’s name do Thai people spend 2 MB on a small condo when they could buy a whole house and land and get much more for their money?

Condominiums in Pattaya are overpriced. Let me explain: cement is cheap, it costs around 130 Baht for 20 kg. Steelbars are not that expensive. And labour is cheap in Thailand, the monthly salary is around 7000 – 8000 Baht. They do not just work 8 hours per day, they often start work at 7 in the morning and finishes 7 at night. A 12 hour work day and no overtime pay is granted. Thailand is a heaven for developers because of cheap labour and cheap cement. For unknown reasons the developers tend to spend a lot of money on advertising. A budget of 50 – 70 Million Baht per project is not unusual. Spending that much money on advertising will make the condominiums more expensive than they need to be. What is worse is that much of that money is spent locally and by doing that they miss the right target group that is the middle and upper class citizens of Bangkok.

In most part of the world a villa will cost 2 – 3 times more than a condo. In Pattaya a condominium is often more expensive than a villa with land and private space to park your car. It makes you wonder why it is like that.

I made an extension to my house, I got 30 sqm extra, 3 new walls and preparations for a second floor. That cost me 70.000 Baht and there was even some profit for the contrator. Read again: 70.000 Baht for 30 sqm. The developers will charge you 2 Million Baht for that.

A 4 Million Baht villa costs less than 2 Million Baht including land, labour and common areas. Profit for the developer: 2 MB per villa. 200 villas means a profit of minimum 400 Million Baht. Of course the developer is taking a chance as he does not know how the market is going to react to his product, he may not be able to sell enough villas to cover the cost of land and he may end up going bankrupt.

It is about being unique, being creative, being different – and having fun at the same time.

Published 29 August 2012.

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