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Vietnam’s major cities are 'underhoteled', expert says

By Kim Anh    December 2, 2018 | 06:45 pm PT
Vietnam’s major cities are 'underhoteled', expert says
Hotel is a particularly dynamic sector in Vietnam's major cities, driven by flourishing tourism. Photo by Shutterstock/Saigoneer
The “golden age of tourism” in Vietnam presents robust hotel development opportunities in Vietnam’s biggest cities.

Troy Griffiths, deputy managing director of real estate consultant Savills, said Ho Chi Minh and Hanoi are "under-hoteled per population, per travel and per airlift capacity".

"Hotel is a particularly dynamic sector at the moment as Vietnam is experiencing a golden age of tourism, with international tourism rising 20-30 percent year-on-year and more Vietnamese travelling than any time before," Griffiths told VnExpress International.

"There’s a demand for five-star hotels which will be really a strong asset class for the future," he added.

As of November, 14.12 million foreigners visited the country, up 21.3 per cent year-on-year and exceeding last year’s 12.9 million, according to the General Statistics Office.

South Koreans dominated the surge at 46.5 percent, followed by Hong Kong (32.8 percent), Finland (29.6 percent), mainland China (26.9 percent), Taiwan (15.6 percent), and Denmark (15.4 percent).

In the same period, domestic travelers rose 20.91 percent.

"Hanoi and HCMC had been pretty quiet in the past as they went through a bit of a bad phase, when international visitors would pass and go straight to Da Nang, Phu Quoc and Nha Trang.

"Now we see they are actually coming to Hanoi and HCMC because they are both very charming cities for international tourists," Griffiths said.

"And their stay is lengthening. That means more five-star demand."

Vo Quoc Phuong Trang, head of hotel investment consultancy at real estate service firm Jones Lang LaSalle (JLL), also told VnExpress in a recent interview that Hanoi and HCMC, with their steady economic and tourism growth, would continue to draw foreign investors in the high-end hotel segment, which Trang said has low risk but offers steady revenue.

A report released in July this year by global consulting firm Grant Thornton stated that increasing numbers of well-to-do Vietnamese citizens are choosing to stay in five-star hotels and spend lavishly when they travel within the country.

Vietnamese citizens accounted for 19.2 percent of 4-star and 5-star hotels guests in 2017, according to the report. Although this is a slight decrease from last year’s figure of 20.8 percent, the number of domestic guests staying at upscale hotels had increased for three consecutive years from 2014 to 2016.

The country has seen a strong influx of international hotel brands and hotel management companies in the last few years. From 30 hotels with international brand names in 2010, the number had increased to 79 at the end of last year, according to Savills.

There has been a particularly big jump this year with recent announcements by Mandarin Oriental and Movenpick in HCMC and Best Western Premier in the central province of Quang Binh, it said.

The emergence of Vietnamese hotel operators is also a highlight in the local hospitality landscape.

"Vietnamese hotel developers are also getting mature. They are acquiring international knowledge and becoming a really strong force in their own right as we have already seen across the resort cities with Vingroup, FLC, BIM and Sun Group," Griffiths noted.

Savills' third-quarter report shows that the 5-star segment in Hanoi continued its strong performance in Q3 though the high travel season for foreign tourists lasts from the beginning of Q4 to April.

Occupancy rate of five-star hotels in the capital city was highest, at about 80 percent, followed by four-star hotels (65 percent) and three-star hotels (59 percent).

Average revenue of five-star hotels was $100/room/night, double that of four-star and three times that of three-star properties, the report said.

According to VnExpress data, ten out of 19 high-end hotels in the best locations in HCMC have foreign owners. These include Sheraton, Caravelle, InterContinental, Asiana Saigon, and Sofitel.

In Hanoi, nine of 16 high-end hotels have foreign firms as major owners such as Melia, Sheraton, Sofitel Metropole, Nikko, and Pan Pacific being the major names.

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