Homestays boom in Vietnam, but investors struggle

By Hung Le   December 4, 2018 | 03:36 pm GMT+7
Homestays boom in Vietnam, but investors struggle
Unstable demand and high sunk costs are the main obstacles for homestay hosts. Photo by VnExpress
Increasing demand to escape from cities has seen homestays mushroom in outskirts areas, but there’s no easy money to be made. 

Unstable demand and high capital investment costs are the main obstacles for homestay hosts, industry insiders say.

Seeing the potential of this business model, an entrepreneur named Trinh rented out in HCMC’s coastal district of Can Gio, a house with a garden near the forest for VND8.5 million ($364.05) a month to run it as a homestay.

The homestay is targeted at young people, she said, adding that rent for the whole house would amount to VND5-7 million ($214.14 - $299.80) per day.

"I run the business myself and only hire janitors, so the costs are not so high. However, the risk of rooms not selling in the rainy season is very high, so I have to find a way to make up for it as much as possible during the dry season,"  Trinh told the Saigon Times. 

In addition, Trinh also faces the risk of her landlord cancelling the tenancy at any time.

The unstable number of guests is also a worry for Hung, a bungalow owner in Ho Chi Minh City.

The rent for the bungalow is relatively high, at VND1.2-1.6 million ($51.39 - $68.52) per day, but the income is not stable. The bungalow is rented by both foreign and domestic guests, peaking around the beginning of the year and summer. 

"For the first nine months of the year, I take in about VND200 million ($8,564) a month in revenue. However, from September, the number of bookings decrease significantly to only a few foreign tourists, so revenue drops to VND30 million ($1,284) when staff wages are VND20 million ($856) a monthly," the Saigon Times quoted Hung as saying.

"The cost of running the homestay business is quite high. On average, I believe it will take at least 5-6 years to break even."

According to real estate experts, homestay businesses may profit in the short-run, but may lose in the long run as this model mainly caters to adventure tourists, whose tastes are always changing. 

In addition, homestays in Vietnam have attracted small and young investors, who still lack experience, making it more difficult to succeed.

According to market research firm AirDNA, the number of Hanoi homestays reached more than 8,100 last year. In the first half of this year, the number had grown to 11,200.

In Ho Chi Minh City, there were only 6,200 homestay residences in 2016. By 2017, this figure had soared to more than 15,000 and in 2018, it was already over 20,000.

As of August this year Hanoi and HCMC had 21,994 properties on Airbnb. The average rental is around $36 per room per night in Hanoi and $44 in HCMC.

Statistics from Luxstay, a homestay booking platform, shows that the number of residences under this model has been growing quite impressively. One representative said that every month, there are several thousand applications to join the system. After screening, Luxstay adds about 300 to 500 qualified rooms per month.

Vietnam welcomed 14.1 million international tourists from January to November, up 21.3 percent year-on-year, according to the General Statistics Office.

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