A new dawn for Vietnam’s luxury hoteliers

Vietnam’s hospitality boom

Vietnam is rising in popularity as a tourist destination in Southeast Asia. In 2017, the number of international guests visiting the country reached over 13 million. For the first four months of 2018, more than 5.5 million international guests visited Vietnam, an increase of 29.5% over the same period last year. As interest continues to mount, so too do opportunities for investors catering to the hospitality industry.

During the fourth quarter of 2017, occupancy rates of hotels in Ho Chi Minh City saw the highest figures in the past five years, at 76%. Luxury 4 and 5 star hotels were highest at 80%. The room rate of 5-star hotels was also reported to rise 3% per the quarter and 17% per year, making an increase in turnover of 12% per quarter and 24% over the year.

Thanks to strong development in tourism infrastructure and improvements in accommodation throughout the country, Vietnam now offers an excellent selection of hotels, luxury resorts and beach side villas to suit visitors’ travel budgets and preferences.

All-inclusive resorts and cruisers in Vietnam offer a comfortable and convenient way to discover the country through the large selection of activities they offer, with the advantage of being able to return to your chosen resort to relax with dinner already catered for. Most hotels and resorts offer a range of tempting traditional Vietnamese delicacies as well as international cuisine, and provide a good range of services and facilities.

“Since Vietnam opened its doors for tourism, its selection of boutique hotels and ultraluxe resorts has been growing quickly. From south (Ho Chi Minh City) to north (Hanoi), the buzz about the place is palpable, and the country now deserves a place on any traveller’s bucket list,” says Pham Ha, CEO of Luxury Travel.

Condotels surge in Vietnam

The first quarter of 2018 saw impressive growth in condotels in such central cities as Nha Trang and Danang while investments in luxury leisure stays have increased rapidly in such tourism hubs as Phan Thiet, Halong and Phu Quoc.

“Condotels are currently a popular topic in Vietnam and several developers have adopted this model as a method of refinancing. We forecast that 18,000 condotel units will be added to the market in the next two years in key tourism destinations, accounting for 60% of the total new supply,” said Mauro Gasparotti, director at Savills Hotels Asia-Pacific.

Savills anticipate that by 2020, 32% of the market supply will be condotels. In Vietnam, these properties are mostly characterised by large room sizes and are positioned to compete with 4-5 star hotels.

Most condotel projects are planned with large scale-up to 1,000 units-and tend to provide spacious rooms. While this product could benefit the growing demand for accommodation, it could also lead to strong competition as properties are positioned in similar segments. The condotel model is too often not clearly understood, which can sometimes lead to poorly conceptualised plans, causing difficulties in operations and therefore lowering trust in the sector.

This presents a challenge but also an opportunity for developers or investors who can integrate or innovate new development concepts to serve the demand of future guest categories, following global megatrends in hospitality.   

The need for greater diversity in hospitality

The Vietnam hospitality market has grown significantly both in demand and supply and a good number of new brands have emerged in the last five years.

One significant case is BRG Group, one of the biggest leading diversified multi-sector groups in Vietnam. BRG and Hilton Worldwide outlined details of their partnership, which includes two trading hotels in Hanoi, Hilton Hanoi Opera and Hilton Garden Inn Hanoi, plus the recently announced dual brand project to develop Hilton Hanoi Westlake and DoubleTree by Hilton Hanoi Westlake. Hilton has also announced management agreements for Hilton Haiphong, which is under construction, and the DoubleTree by Hilton Doson.

Furthermore, the group also cooperated with Hilton to develop two other projects in Ho Chi Minh City and Vung Tau, increasing its total number of hotels in Vietnam to 12 at the end of 2017.

“Travel and tourism is a significant component of BRG Group’s business model and we are excited about its prospects in Vietnam. With two million people already directly employed and a further two million jobs supported by the sector, it is a major contributor to our society,” said Madame Nguyen Thi Nga, chairwoman of BRG Group.

“By strengthening ties with iconic international brands such as Hilton, attracting further inward investment and international visitors, the industry will continue to flourish,” she stressed.

Over the years, such local major groups as Vingroup, Sungroup, FLC, Muong Thanh and Empire have continuously increased their investment in building and setting up new luxury hotels and resorts in tourism hot spots throughout the country that contribute significantly to changing the faces of these destinations and their people. In the near future, it anticipates that there will be more transaction activity as a larger number of good quality products come into operation.

However, according to tourism experts, the Vietnamese hospitality market has mostly consisted of traditional accommodation and the demand for different types of offerings has increased. There is currently a lack of products diversification and developers tend to replicate what already exists, instead of making an effort to embrace new concepts.

“Vietnam has enormous potential to develop more sophisticated hospitality projects, following current global megatrends. Technology will completely transform the way we travel. With the arrival of big data, artificial intelligence, automated systems, and building sensors, developers need to start giving these elements serious consideration during the planning stage of their next projects. The design, human resources, and functions of the hotels will completely change in the coming years,” analysed Mauro.

In addition, taking into consideration all demographic shifts, such as ageing populations or the rise of the Asian middle class, the opportunities are numerous. Wellness resorts, spa destination resorts, senior living communities, poshtels, and co-working hubs, design and art boutique resorts, high-tech hotels, and select services hotels are examples of products not yet present in the local market but enjoying strongly growing global demand and targeting new guest categories.