Dearth of land hurts capital growth

“There are good opportunities for hotel investors given high demand and limited existing [hotels] and future supply,” said Marc Townsend, managing director of property consultant CB Richard Ellis.
“Investment opportunities include a stake acquisition in current well performing hotels or building new hotels,” he said.
Most of the five- and four-star hotels came on-line in the 1990s and there have been few room inventory over the last couple of years with the exception of Sheraton. Hotels have recorded stable high occupancy and room rates over recent years, reaching 77 per cent and $95 on average in the first 9 months of this year, according to CB Richard Ellis. VinaCapital is among the first foreign investors riding on the strong performance of the hotel sector, acquiring stakes in the Hilton and Sofitel Metropole, two prominent properties. VinaCapital managing director Kelvin Lee said the group purchased the Hilton because it was in a prime location, had good business and a recognisable brand name.
“What’s more important, Hilton will continue performing well in the future,” said Lee who led the transaction to buy the Hilton a few months ago. VinaCapital is seeking opportunities to purchase and develop more hotels in Ho Chi Minh City, Danang, Hoi An and Nha Trang. It recently acquired beachfront land in Danang to develop a golf course, hotels and villas to the tune of $100 million. Hanoi is facing a shortage of quality hotels with the increasing number of international arrivals to the country, who are requiring more rooms. Hanoi currently has 4,924 three to five-star hotel rooms, with supply expected to go up by 500 rooms next year following the opening of new facilities including the InterContinental, Dan Chu, Hoan Kiem, Dong Loi and Sofitel Metropole.
Nguyen Viet Tao, deputy general director TPC Nghi Tam Tourist Village Company, said the developers of the InterContinental had secured a loan, settled the dispute with former contractor Hyundai E & C and was speeding up construction to be able to open next September. However, Townsend said demand was high and more hotels were needed, estimating the city should build an additional 11,000 three to five-star and 20,000 one and two-star rooms by 2020.
“Current supply of hotels in Hanoi is still low compared to Bangkok where 60,000 rooms have been built,” said Townsend. Many developers are focusing on Hanoi, yet it is extremely difficult for them to acquire stakes in an existing business because of the limited number of quality hotels, or to build new hotels because of the unavailability of decent sites for four and five-star hotels. Hanoi authorities recently said they would encourage investors to build hotels but no specific preferential treatment plans have been unveiled to date. Two sites near the National Conference Centre and West West Lake projects were proposed for hotel developments. But, Townsend said most visitors preferred locations around Hoan Kiem Lake.


No. 783/October 16-22, 2006