Vietnam’s growing tourism industry and thriving economy have bolstered the hotel and resort market, with foreign investors from across the region showing interest in the country, making it one of the hottest markets in the Asia Pacific, according to U.S.-based real estate consultancy Jones Lang LaSalle (JLL).

Inside a hotel room at Vinpearl Luxury Landmark 81, the most luxurious five-star
hotel with the highest observation deck in Southeast Asia – Photo: Vinpearl

JLL said in its latest snapshot report for Vietnam’s hotel market that the industrial renaissance has driven corporate demand for hotels across the country.

Other factors, such as visa exemptions, the introduction of new direct air routes and improved marketing efforts, have also boosted the country’s appeal to leisure travelers.

Like much of Southeast Asia, leisure demand has been driven by mainland Chinese tourists, hitting record arrival growth last year, according to the report.

The local hotel transaction market has shown exciting signs so far this year. For example, the Grand Ho Tram Strip resort has been sold to the Warburg Pincus investment fund.

Also, Malaysia’s Berjaya Corporation has successfully divested its entire 75% stake in TPC Nghi Tam Village Limited. The village owns the Intercontinental Hotel, with a value of more than US$53.4 million held by the domestic hotel investor, Hanoi Hotel Tourism Development Co., Ltd.

Foreign and domestic investors have shown varying investment preferences, according to JLL.

While foreign investors are actively seeking investment opportunities with higher returns in Vietnam through operating hotel assets with in-place cash flow, the majority of domestic investors are interested in developing hotels and resorts from vacant land banks.

“We also witnessed domestic investors’ interest in hotel investment growing in recent years. With the country’s geographic advantages and strong economy, combined with the domestic political situation, local investors are willing to pursue high-value deals, bringing fierce competition to foreign investors,” Trang Vo, vice president of JLL Hotels and Hospitality Asia Pacific, noted.

Hospitality snapshot in HCMC

Hanoi and HCMC are expected to remain the top two cities on the radar, followed by Danang and Nha Trang, the top two coastal destinations. JLL stated that hotels in the downtown areas will bring higher and more stable cash flow than coastal resorts and hotels.

In HCMC, despite market-wide year-on-year average daily rate growth of 5.8% as of year-to-date (YTD) August 2019, the pressure from new supply reduced occupancy by 4.8 percentage points.

As of YTD September 2019, international visitor arrivals in the city grew 14.3% year-on-year, reaching 72.9% of the targeted number of visitors for 2019. International arrivals are expected to grow, following the positive results of the annual International Tourism Event organized in early September.

The city’s hotel market added 1,114 rooms to its existing stock, as of YTD September 2019, lifting the overall supply to some 20,200 rooms. In 2020, new supply is projected to slow down as the Government has tightened the approval policy for new development projects.

As of YTD August 2019, the hotel trading performance was healthy with positive growth of 5.8% for an average daily rate of US$118 and 0.7% for revenue per available room at US$81. The occupancy rate is up 4.8 percentage points, marking year-on-year growth of 68.8%.

Given the limited new hotel room supply in 2020, market-wide performance is projected to see positive growth in the short to medium term, according to JLL.