Thanks to the diverse culture, splendid landscape, up-and-coming cities, and lovely beaches, Vietnam becomes an attractive tourist destination in Southeast Asia. Tourism and hospitality develop parallelly, hence when tourism thrives, hospitality grows, especially accommodation. This article will provide you a brief outlook about Vietnamese high-end hotels and reasons why you should invest in hotel real estate.
Vietnam hotel industry outlook for 2020
The hotel sector has boomed for the last three years. Vietnam has been an affordable tourism destination in foreign visitors’ eyes, hence the number of travelers coming to our country reached 8.5 million in the first six months of 2019. Thanks to a large number of domestic and foreign visitors, the hotel market in Vietnam is also extending. Hotel performance is much more diversified within Vietnam from Ho Chi Minh City to Cam Ranh in the South to Da Nang and up to Hanoi in the North.
By the end of the third quarter of 2019, it is estimated that more than 442 four-star and five-star hotels were opened in Vietnam, increasing 21% annually each year since 2015 (called a compound annual growth rate - CAGR). Da Nang and Khanh Hoa - the two most favourite destinations - led the supply of upscale hotels with a growth rate of 19% in each city, followed by Ho Chi Minh City and Hanoi.
In addition, revenues for high-end hotels rise dramatically in 2019. According to the newly-released Hotel Survey 2019 by Grant Thornton, the revenue per room grew by 5.4% from 2017 to $83.4 in 2019. Kenneth Atkinson, the senior board adviser of Grant Thornton Vietnam, confirmed that the average occupancy rate at 5-star hotels remained at a high proportion of 75.6%.
The chart shows the average occupancy room rates at 4-star and 5-star hotels in Vietnam.
The revenues from luxurious hotels increase gradually year by year, which may indicate the higher number of tourists staying at high-end hotels then there is a potential for opulent accommodation.
It is predicted that the earnings from the hotel sector in 2022 can be double the revenues in 2017, to more than US 890 million.
Reasons why you should invest in the hotel sector
Impressive demand growth for hotel
Obviously, the higher number of tourists will boost the higher demand for accommodation, especially luxurious hotels and resorts.
International tourists arriving in Vietnam has accelerated considerably, reached a remarkable growth of 21% within 11 months of 2018. In addition, the growth rate of foreign visitors arrivals also increases in the decades, which is two times higher than the Asia Pacific annual growth rate.
Furthermore, outbound travelers come to Vietnam from a variety of countries. Visitors from Asia accounted for the large proportion of foreign tourists in 2019 with over 81%, of which Chinese visitors reached more than 5.2 million and Korean tourists reached more than 3.2 million. Tourists from Europe, America, Oceania, and Africa also increased by 13.4%, 10.2%, 0.4%, and 19.8%%, respectively, annually.
Vietnam is a good place for MICE and event organization
Sofitel Metropole Hanoi - a place holding Trump-Kim meeting.
Vietnam has been chosen as a host for a lot of business conferences, meetings, and summits. When important events are organized in Vietnam, it definitely motivates entrepreneurs, visitors, and delegates to come to the destination. For example, the Trump-Kim summit in Vietnam in February 2019 had positive impacts on Vietnamese tourism. At that time, five-star hotels in Hanoi run out of rooms to rent. Just a week before the summit took place, a lot of high-end hotels such as Grand Plaza, Hilton, Intercontinental, Sofitel Metropole, Sheraton, and JW Marriott announced that no more rooms were available from Feb 25 to the end of the month. In the near future, Vietnam will be the host of SEA games 31 in 2021. This event will attract many news reporters, Asian people to come here to encourage sports teams and it is forecasted that hotel owners will earn huge revenues and gain more profits.
Favourable geography and low-cost air ticket
Vietnam’s rich geographic, topographic diversity and local climate are advantages that Mother Nature endows us. Favourable climate conditions support a variety of tourism appeals. Where tourism develops, there are a lot of hotels and resorts. Popular tourism destinations in Vietnam are Da Nang, Hoi An, Nha Trang, Phu Quoc, Hanoi, Ho Chi Minh, Ha Long and so on. Coastal cities like Da Nang, Nha Trang, and Phu Quoc island impress foreign visitors with crystal-clear water, stunning beaches, beautiful landscapes, and friendly people. In these cities, a lot of luxurious hotels and resorts of prestigious brands namely Silk Path, InterCon, JW Mariott, FLC group… are built and invested to provide spaces for entertainment such as golf courses. It is predicted that real estate for hospitality at these places continues to attract many foreign investors.
Government support
The Vietnamese government has provided infrastructure improvements with new international routes to encourage tourism as well as enable Vietnam to transform from Experience Destination to Holiday Destination with repeated guests. Besides, the government also approves gambling in the casino under certain conditions. This new regulation supports hospitality growth and widens the regional competition.
Technology application boosts Vietnam hotel tourism and hospitality
The Vietnamese government plans to target USD 45 billion in tourism revenue in 2025. In order to achieve the target, technology application is one of the priorities.
Industry 4.0 with its advanced information technology has paved the way for Vietnam tourism and hospitality. Traditional tourism will transfer to smart tourism. Technology allows travelers to book flight tickets, accommodation online while searching for places to enjoy the local cuisine without depending on travel agents.
Technology application is being indeed developed but it is now available in major cities. The application in hotels in remote areas is still somehow limited, therefore the investment required to develop smart applications can be huge.
Moreover, artificial intelligence in hospitality can be a fertile ground to improve the competitiveness among luxurious hotels within Vietnam as well as in the region. The wow factor of AI application in hospitality is obvious. AI, in particular Face ID, allows visitors to check out in 3 seconds or paying supplement services quickly and high personal information security. In Vietnam, Vinpearl is the first hospitality company to apply facial recognition technology.
In addition, you can look FDI guide in Vietnam at Viettonkin's blog.
To sum up, hospitality in Vietnam has a huge potential for foreign investors. Vietnam tourism and hospitality are on the way of fast-speed development with a lot of advantageous factors regarding demand growth, endowed geographic, an ideal place for big event organization and government support. Thanks to the technological application, hospitality in Vietnam is predicted to develop further in the near future.
Viettonkin Consulting stands by your side with international know-how and local knowledge for the fast-growing companies throughout the region. If you have any questions, please feel free to contact us via email: info@viettonkin.com.vn or hotline: +84 918 866 858.
