Exhausted finances put hotels on sale

After a brief recovery before the latest COVID-19 outbreak in Danang, the tourism and hotel industry has faced yet another grim time. (photo: danangfantasticity.com)

Nguyen Trung Khanh, general director of the Vietnam National Administration of Tourism, said that during the peak period of domestic tourism in July and August, the number of cancelled tours went up to 95-100 per cent. Thus, revenues in many tourist centres have dropped sharply, by up to 59 per cent. The situation has forced tourism businesses into new challenges, especially in the context of a sharp decline in international visitors to Vietnam in the past eight months.

According to the General Statistics Office, international visitors to Vietnam in August reached 16,300 arrivals, an increase of 16.9 per cent compared to July. However, for the eight months of this year, the number of tourists coming to Vietnam only reached nearly 3.8 million arrivals, 66.6 per cent lower than the same period last year. Tourism revenue in the eight months also fell sharply by 54 per cent over the same period in 2019.

With fewer tourists, most hotels can either close to save costs or reduce room rates to attract new guests. On agoda.com, a series of 3- to 5-star hotels in the heart of Hanoi and Ho Chi Minh City are offering enticing discounts of 60-80 per cent. The rates for a double room at the 4-star Silk Path Hotel and the 5-star Hanoi Daewoo Hotel were reduced by 83 per cent to about VND1.3 million ($57) per night.

In Ho Chi Minh City, the 6-star Reverie Saigon is also offering a strong room-rate reduction to attract customers. The price for a double room is only VND5.5 million ($240) per night, 52 per cent lower compared to the normal price. However, this policy may not be an effective solution to help hotels offset their revenue losses. Many small- and medium-sized hotel owners were unable to cope with such policies as they lasted too long, ultimately leading to many being forced to sell.

In Ho Chi Minh City, a series of 2-3 star hotels in districts 1, 5, and Tan Binh are being offered for sale, starting at several tens of billions of VND. A 3-star hotel with 10 floors and more than 30 rooms in District 1 was also offered for sale for VND190 billion ($8.1 million) as the owner could no longer afford to pay the loan.

In Hanoi, many hotels are temporarily closed, waiting to be liquidated or converted to other models due to business losses, including 4-5 star hotels. According to an owner of a 2-star hotel on Hanoi’s Ma May Street, many places were forced to shrink their scale of operation. “Many hotels had to be transferred or liquidated. The current prices depend on the location, facilities, negotiation, and are generally rather low. However, the number of people asking to buy can be counted on a few fingers,” said the hotel owner.

Ha Huong, owner of a 3-star hotel on Ngoc Khanh street, said that in the first three months of the year, COVID-19 had blown away VND10 billion ($431,000) of ground rent, staff costs, and utilities. During the next outbreak, he was forced to transfer the hotel to someone else.

Nguyen Thanh, a real estate broker from Danang, said bank debt is the biggest reason why many hoteliers had to sell their properties.

“Most hotel investors have to borrow from banks. The pandemic has caused them severe financial crises which forced them to sell off their hotel. They cannot wait for the disease to stabilise and customers coming back,” said Thanh.