"To date no existing serviced apartments have obtained actual hotel licenses as our research revealed the process is still ongoing and may take time," the survey by property consultancy Knight Frank said.

The law came into force in May last year, and will affect those serviced apartment projects that focus mainly on short-stay clients.

Knight Frank surveyed 81 serviced apartments projects with a total of 10,564 units in Bangkok's inner city, which encompasses the central business dis-

trict (CBD), lower Sukhumvit, Rama III, Phaya Thai-Petchburi, Rama IX and Ratchadaphisek areas.

It also estimated that about 4,000 four-star and five-star hotel rooms will be added to the market during the next two years, which will impact the short-stay business for serviced apartments, especially in the Grade A segment.

The supply of serviced apartments in inner Bangkok rose more than 300 per cent in one decade, from less than 3,000 units in 1995 to more than 10,000 by the end of last year. The Sukhumvit area, which is popular with foreign business travellers, has the highest number: 37 serviced projects with 5,052 units in total. This is followed by the CBD, which has a total of 3,328 units in 29 projects.

"We believe that the serviced apartments in Bangkok market, whilst still strong, will experience heightened competition in the medium term due to changing market dynamics," Knight Frank said. "In our view, Grade A and 'branded' operators with attributes such as great location, excellent facilities, good marketing and management and a quick reaction to rapidly changing market conditions will continue to thrive whilst the rest of the field will encounter increased competition."

For the period 2006 to 2010, an estimated 2,243 units from 14 projects will be added to the serviced apartment market. The new developments include the 78-unit Fraser Sathorn, the 250-unit Riverside Garden at Charoenkrung Road, the 150-unit Siam Paragon at Rama I Road and Chamchuree Square (formerly CU Hi-tech) on Rama IV Road with about 120 units.

By the end of this year, there will be 11,343 serviced apartment units in inner Bangkok, Knight Frank said.

The average occupancy rate in Bangkok dropped slightly last year from 2004, but still recorded a fairly high 82 per cent, it said. Rental rates for Grade A and Grade B serviced apartments rose 13 and 1 per cent year on year respectively.

In the Sukhumvit area, rental rates for Grade A serviced apartments rose an average 8 per cent, from Bt966 per square metre to Bt1,039 per square metre, the consultancy said.

"The increase was due to strong demand from foreigners  and newer and better serviced apartment projects offering more services and facilities," it said.