Local firms in M&A upswing

The list is growing of Vietnamese buyers taking over hotel and resort chains at popular destinations, Photo: Le Toan

When it comes to mergers and acquisitions (M&As) between ­Vietnamese companies and ­world-renowned hotel operators, the home side tends to be the seller. The ­upscale hotel segment in the country is dominated by hotel chains from Hong Kong, Singapore, Malaysia, South Korea or Japan, eager to ­expand their Vietnamese business by scooping up properties from ­domestic companies. For now, at least two-thirds of the 35 five-star hotels in Hanoi and Ho Chi Minh City are run by international brands.

However, in recent months, the market has been witnessing a ­reversal of the trend. Earlier this month, Hanoi Tourism Development JSC, rumoured to be a member of Vietnam’s BRG Group, bought 75 per cent of TPC Nghi Tam Village from Malaysia’s Berjaya Group. Nghi Tam Village runs the five-star Intercontinental Hanoi Westlake hotel, located near the city’s popular tourist attractions. It is estimated that Hanoi Tourism Development paid $46.9 million in the transaction. Seller ­Berjaya, previously in the headlines over delayed plans in Vietnam, also sold off its financial centre and university township projects in Ho Chi Minh City to domestic investors.

A representative from Hanoi Tourism Development said that the company chose to take over ­Intercontinental Hanoi Westlake ­because hotels are a low-risk ­business with low depreciation rates of assets. “We can also create a steady cash flow thanks to business activities,” said the representative.

Other hotel and resort chains have also been taken over by ­Vietnamese buyers, including Thien Minh Group and Victoria Hotel & Resorts, or Bong Sen Corporation and Daewoo Hanoi Hotel. Hilton Hanoi, another five-star hotel, is also under the ­management of BRG Group.

When asked by VIR about the rising power of Vietnamese buyers in the hotel segment, Nguyen Cong Ai, partner at KPMG Vietnam, said, “Domestic investors have shown their financial capacity and long-term vision via recent M&As. The buyers have both an understanding of international markets and in-depth experience of Vietnam’s culture and consumers.”

M&A opportunities are set to ­become even more plentiful for ­domestic investors, who are eyeing upscale hotels in Hanoi and Ho Chi Minh City, according to Savills Vietnam. Both cities are ­rising as the region’s top destinations for business and leisure travellers, with double-digit growth every year. Five-star hotels are investor favourites thanks to their promise of a stable cash flow and lower risks than other property segments.

The bulk of earnings at five-star hotels in Vietnam come from ­business travellers, who have a ­sizeable budget for accommodation and related services.

Businesspeople may also frequently visit Vietnam’s two largest cities for work, making them repeated patrons of these ­hotels. Investors are further interested in M&As because empty land plots in central locations are few and far between, prompting hoteliers to buy existing projects instead.

Le Duy Binh, managing director at consulting firm Economica Vietnam, welcomed the emerging trend. “Vietnam should have its own deep-pocketed investors that can compete against overseas buyers. Fair and transparent competition between Vietnamese and other investors is always good for the market,” said Binh.

Economist Ngo Tri Long suggested that patriotism is also a factor, especially crucial as Vietnam becomes host of more international events thanks to good publicity from hosting the recent summit between the US and the Democratic People’s Republic of Korea, and APEC 2017.

­“Vietnamese hotel chains will support important events like these, not just for ­business, but also for their patriotic spirit,” said Long.