Phu Quoc Island set for construction wave

The idyllic island of Phu Quoc will soon welcome a wave of major resorts

Phu Quoc currently offers international travellers warm turquoise waters, secluded sandy beaches, and lush mountainous lanscapes protected within its national park.

However, Vietnam’s government intends to turn Phu Quoc from a sleepy backwater to a major mass market destination similar to Phuket or Bali. As part of this turn towards the mass market, international travellers can now enjoy a 30 day visa-free stay in Phu Quoc following a government decision which took effect this March.

The island is still largely undeveloped, and hotel rates are largely higher than on the Vietnamese mainland. But unlike Phuket, visitors can find little to do on the island after dark and there is a lack of other hospitality focused infrastructure, which poses questions about such a rapid expansion.

Higher construction and operational costs are another concern of investors, according to a special report on Phu Quoc, which property consultant CBRE released last week.

The construction costs for a standard low-rise five-star hotel varies from $1,000-1,500 per square metre depending on the materials used, the consultants employed, and the construction and management companies contracted. The costs in Phu Quoc are 20-30 per cent higher than the mainland.

Electricity and water costs on the island are also higher. Before 2014, a typical four-star resort in Phu Quoc was allocated power at VND9,300 ($0.4) per kWh for 10 hours a day and had to use generators for the remaining 14 hours at a cost of VND12,500 per kWh ($0.6). However, since the island was connected to the national power grid, prices have fallen to VND1,509 for a kWh, a fifth of their previous cost.

Food and beverage (F&B) costs are another concern. According to the CBRE report, F&B costs for a four-star resort in Phu Quoc can account for 30-35 per cent of total revenue compared to 20-25 per cent on the mainland.

A shortage of qualified, English-speaking employees is also a big concern for the island’s hospitality industry. There has been fierce competition among high-end hotels for good employees which has pushed up labour costs on the island to a higher level than on the mainland.

Phu Quoc’s hotel market will fundamentally change when the Vinpearl Phu Quoc Resort & Spa opens at the end of 2014, with 750 rooms, a 27-hole golf course and an entertainment park.

The five-star 120-key Salinda Premium Resort & Spa is now being fitting out and will be also put into operation in 2014. Other new projects have also kicked off in recent months, including the five-star Crowne Plaza Phu Quoc Hotel, the four-star Novotel Phu Quoc Resort, and the 24-ha Sunset Sanato Premium Complex. All of these projects are located on Bai Truong Beach and are scheduled for completion in 2015-2016.