Positive signals from improved tourism
According to data from the General Statistics Office, in 2022, Vietnam recorded a total of 101.3 million tourist arrivals, including 3.7 million international arrivals, up 2,228% year-on-year. International arrivals mainly accounted for 3% of Vietnam's tourist arrivals, up from 0.4% in 2021 but still below the 17% level before the pandemic in 2019. South Korean visitors accounted for 26% of international arrivals, followed by the US with 9%. India is an emerging market with 3% of international arrivals. Hanoi had 18.7 million arrivals, far exceeding the city's target of 10 million. Domestic arrivals to Hanoi reached 17.2 million, up 330% year-on-year, and international arrivals reached 1.5 million, up 650% year-on-year.
Hotels in Hanoi are receiving special attention from tenants.
The market is also expecting the return of Chinese tourists through the resumption of regular flights between Vietnam and China. The resumption of flights is currently being postponed by airlines until late April or May 2023 pending further decisions from China on allowing tourists to Vietnam. The hotel industry is expected to benefit from the return of tourists from this key market.
In addition to tourists, the hotel industry also recorded great demand from business travelers or foreign investors. By 2023, the Vietnamese market has gradually become more stable after the pandemic, entering a period of economic growth and attracting many investment activities, including FDI. Foreign investors tend to stay in big cities like Hanoi and then gradually move to neighboring areas like Bac Ninh and Hai Phong.
According to records, hotels in Hanoi from 3 stars and above have had a clear improvement in occupancy. During this period, hotel occupancy reached 49%, up 7 percentage points quarter-on-quarter and 22 percentage points year-on-year. For the 5-star hotel segment alone, occupancy reached 60%. Room rates during the period also averaged VND2.5 million, up 15% quarter-on-quarter and 41% year-on-year. For the whole year of 2022, occupancy increased by 16% to 39% and the average room rate reached VND2.2 million, up 23% year-on-year.
Hotel supply increases and becomes more diverse
In 2023, eight new hotel projects with a scale of 1,300 rooms are expected to be launched, and from 2024 onwards, 60 new projects with approximately 10,300 rooms will be launched in the Hanoi market with international operators including Four Seasons, Lotte, Dusit, Wink, Accor, The Shilla, Hyatt, Marriot and Hilton. The 5-star Hilton Hanoi Opera will also temporarily close for renovation and relaunch under the Waldorf Astoria brand.
After the pandemic, investors began to focus more on design, customer experience and service quality instead of simply focusing on project scale development as before. This is considered a positive sign because the Vietnamese market needs more diverse products such as true wellness resort models, resorts with entertainment facilities such as beach clubs, adventure sports activities, poshtel models (accommodation models targeting young guests), resort accommodation for retirees (senior living), co-living models, quality serviced apartments.
From the investor perspective, Ms. Do Thu Hang, Senior Director of Research & Consulting, Savills Hanoi, said: “Investors will proactively prepare to welcome the increased number of visitors during the peak tourist season, gradually launching more accommodation options. However, the tourism demand of domestic and foreign visitors is still not enough to increase the capacity to 100% at hotels at the moment. The coastal markets of Da Nang have only reached about 50% of the capacity level of 2019. Therefore, developing a reasonable operating strategy to gradually increase capacity and build and renovate projects in stages is one of the typical tactics that investors should apply to effectively take advantage of this opportunity.”
According to Ms. Hang, to keep up with the trend, one of the things the market needs at the present time is to perfect the legal framework. Clarifying and strictly complying with investment regulations will be the driving force for investors to strengthen their confidence in the market. At the same time, investors need to proactively prepare contingency solutions to quickly resolve legal procedural problems, avoiding being passive, causing investors to lose confidence. This will be the key to bringing investors closer to projects and promoting the growth of the hotel segment in the future.
From the investor’s perspective, there are currently many resort real estate options with diverse products; however, each type of resort real estate will have its own characteristics. Investors need to better understand the nature of the products to assess the value of the project as well as the potential benefits they can achieve when making an investment decision, not simply based on the illustrations in the sales documents.
Ms. Uyen Nguyen, Head of Consulting, Savills Hotels Asia - Pacific analyzed: “Investors need to determine the purpose of owning the product, a real estate product for personal accommodation, resort, or investment product line, exploiting cash flow. Next, learn about the development unit. If the investor is a unit capable of providing quality products, has a record of effective management and operation capacity and has a history of fulfilling commitments to buyers, the project will easily receive the attention of the market”.
“In addition, investors need to pay attention to the project’s business operation capacity because this is a factor that affects future income and the profitability of the investment. Buyers need to know the operating unit, the project’s brand, the leasing cooperation structure, and the utilities provided. These are all basic factors that need to be researched before deciding to invest in the project,” Ms. Uyen commented.
In short, project implementation capacity, management efficiency when put into operation, and the ability to meet the needs of purchasing for use or purchasing for the main purpose of investment are factors that investors need to pay attention to.
Nhan Ha Phan
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