Investors rush to pour money into hotels

The increasing number of travelers and government policies to boost tourism development have prompted investors to build hotels.

investors rush to pour money into hotels hinh 0
“On Phu Quoc Island, hotels are seen everywhere. And in Cam Ranh and Da Nang, new hotels are being built. Investors are rushing to pour money into hotels,” said Binh, (his name has been changed) one of the best known hoteliers in Vietnam.

Binh spent tens of years on managing one of the first international hotels in HCMC and is now an advisor to a large real estate firm in Vietnam. 

“There is a ‘hotel rush’ in tourism cities. Those who have idle capital think of building hotels. The reports which say the number of travelers has increased steadily by 20-30 percent have spurred interest among investors,” he explained.
The 2016 Vietnam tourism annual report showed that Vietnam had 21,000 accommodation establishments by the end of last year, an increase of 10.5 percent over the year before. 

Meanwhile, the number of hotel rooms had increased to 420,000, or 50,000 rooms higher than 2015, including 91,250 3-5 star rooms. 

The presence of giant real estate firms such as Sun Group, Vingroup, FLC and Muong Thanh have changed the face of Phu Quoc, Da Nang and Khanh Hoa.

Three years ago, there were no 5-star hotels on Phu Quoc. But analysts estimate that there will be 8,000 hotel rooms by the end of the year, even higher than HCMC.

VNAT’s general director Nguyen Van Tuan said the number of 4-5 star hotels has doubled in the last six years, with the number of 5-star hotels now more than 100.

Meanwhile, some analysts have warned that the ‘hotel rush’ will lead to oversupply. They cited the 2016 Vietnam tourism annual report as showing that the average hotel room occupancy rate in 2016 was low, at 57 percent.

While the occupancy rate was 70 percent in Quang Nam and Khanh Hoa, the figure was just 35-45 percent in northern mountainous areas, not high enough to bring profit.

Nguyen Quy Phuong from VNAT said though Phu Quoc is famous, the occupancy rate is just 50 percent. 

The analysts noted that many small investors have been following others to build hotels, though they don’t have business plans. This is why many small hotels in Da Nang have had problems. Because of the oversupply, the occupancy rate in the segment is no more than 50 percent. 

In some areas, the occupancy rate is just 20-30 percent. Meanwhile, the investment rate is high: more than VND10 billion for a mini hotel covering an area of 100 square meters.

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