Homestay owners lose customers amid COVID-19 pandemic

A view of Sapa Homestay Ta May in Sapa District in Lao Cai Province. - Photo booking.com

The three-bedroom 80-s.qm condo has been vacant for weeks due to the impact of the COVID-19 pandemic.

Occupancy rates remained at 80 per cent last month with bookings made via Airbnb or Agoda, according to Thanh. She said, however, that early this month, tourism began to slow down and was now almost “frozen”.

She has decided to shut down the business.

The landlord of the condo has agreed to reduce the monthly rent by VND2 million (US$85.5) for May, June and July, but Thanh does not think she can continue.

“The reduced rent is still too high, and you can’t have any customers for at least the next few months. I am looking to lease it for the long-term but it is not feasible, as most people are going back to their hometowns to avoid the disease, or they cannot afford it due to reduced incomes,” she said.

It’s also difficult to find tenants to take over the business as they will have to wait for several months to have customers.

According to a recent decision from the PM, Viet Nam has suspended visa issuance for foreigners entering the country for a period of 30 days as of March 18.

Cases of visa exemption or those travelling for special purposes will have to be certified as testing negative to the virus.

“Tourists have cancelled reservations because they cannot get a visa and for fear of the pandemic. Most homestay services have been shut down,” said Minh Tu, an owner of an Airbnb service in HCM City’s District 1. He said last month’s revenue dropped by 60 per cent.

The landlord of the condo which Tu had rented to run Airbnb services has temporarily reduced the rent, but he said it had been difficult to continue.

He plans to lease it for long-term visits to survive the pandemic.

Thanh and Tu are not the only ones suffering from a lack of short-term customers. The gloomy situation has forced a number of Airbnb renters to offer long-term rentals with huge discounts.

“If the pandemic is contained this quarter, the market will be back to normal in September. If it is contained in the next quarter, we will suffer a loss for the whole year,” Tu said.

In a mid-year report last year, Jones Lang LaSalle (JLL), a global real estate services firm specialising in commercial property and investment management, said by providing alternatives to tourists, new service models such as Airbnb and homestays have captured a significant percentage of market share in the hotel and accommodation industry.

However, there is an increasing level of competition in the business. In big cities, many homestay owners are competing by reducing prices due to the abundant supply, which has reduced profit margins.

If there is any fluctuation in international visitors, many businesses will immediately suffer or even have to shut down.

Homestays that own property will wait for the pandemic to end to resume business.

For those who had to rent property to run the service, they must be financially strong enough to wait for the outbreak to be over.

Otherwise, they must look for new tenants who have strong financial capacity to take over the business or shut down.

Nguyen Hanh, co-owner of a homestay in Da Lat City in Lam Dong Province, which targets the local youth segment, said she did not earn a profit last month.

She estimates she will suffer losses this month because 90 per cent of the guests have cancelled bookings. She can survive the pandemic for three more months without customers, and even plans to rent more property to open new branches as real estate owners have decreased prices.

“Anyone surviving this situation will have a great opportunity because weak rivals are leaving the game, and demand will rise again after the pandemic is contained,” she said.

Previously, on March 14, Airbnb, a US online marketplace and hospitality services brokerage that connects tourists with hosts, decided to allow guests to cancel bookings without a fee penalty.

Accordingly, reservations for Airbnb made on or before March 14, 2020, with a check-in date between March 14 and April 14 are covered by the policy and may be cancelled before check-in. Guests who cancel will receive a full refund.

The move has been strongly supported by users, but has added a burden to Airbnb businesses.

There were 40,000 active Airbnb listings in Viet Nam as of January 2019 compared to only 1,000 in 2015, according to the Homesharing Viet Nam - Insights Report released by Outbox Consulting, a tourism development consulting firm.

There has been explosive growth in major cities such as HCM City, Ha Noi and Da Nang where the number of international arrivals has surged in recent years.