Investors selling Da Lat homestays at losses

Tuan Hoang, 26, left his job as a photographer in Ho Chi Minh City last year to move to the scenic mountains of Da Lat and invested VND800 million ($33,000) in renovating and renting several homes there.

Now he is trying to sell the lease on the renovated and furbished property for just VND100 million, willingly accepting a 88% loss, but finding a buyer as proved impossible so far.

"When I first started out there were a lot of customers so I expected to recoup my investment within a year. But now occupancy is below 50%, even on the weekends and I cannot bear the losses any longer," Hoang lamented.

As part of his current lease, Hoang has to pay the landlord VND30 million a month, plus his six-month deposit for a five-year contract. He has yet to receive any profit from the investment.

Similar stories are being reported all over Da Lat’s rural areas, where many people who invested in homestays and farmstays in recent years are now selling them at massive losses due to a plunge in number of tourists.

A homestay for sale in Da Lat. Photo obtained by VnExpress

Nguyet Anh, 30, is looking for a new investor to replace her in running a farmstay she and a friend invested a total of VND2.5 billion on.

She has been offering the property for VND1.6 billion in total, but only a handful of potential buyers have made inquiries, and none has decided to buy the lease of the complex, which contains farms, camping sites, and a children’s playground.

She plans to lower her asking price to VND1.3 billion in hopes of a swift exit from the once-profitable but now financial perilous – even potentially ruinous for some – business model.

Local property investor Tien estimated that around 40% of homestays around Da Lat are for sale or shutdown. In Da Lat proper, the ratio is around 20-30%.

Many operators are selling their investment at unusually low prices and some even include their equipment and household items for free.

Ta Trung Kien, CEO of property developer Wowhome, said that many such operators were new to the business when they began investing with unrealistic optimism about inevitable profits.

This led to a surge in homestay supply. Da Lat now has 2,400 accommodation facilities that provide over 31,000 rooms, up 16% and 23% respectively from 2020.

But this year has been challenging for Da Lat tourism. The number of tourists in Da Lat’s home province of Lam Dong dropped non-stop between July and October, according to local authorities.

After deadly landslides in July, tourists have become reluctant to book travels in Da Lat, said Le Thi Tham, a representative of the Vietnam Realtor Association in Lam Dong.

The cost of doing business in Da Lat can be a burden, said Kien. Rents have risen 20% from pre-pandemic levels and many landlords require a deposit of six months, making payment a challenge to investors, who barely make profits after pouring big bucks into renovating the homes.

"It would take four to five years to recoup the investment, and even that is difficult," he said.