Hotel market enticing more overseas investors

June 07, 2022 | 20:32
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The recovery of the Vietnamese hotel market since the pandemic was brought under control has led many foreign investors as well as international management groups to latch onto the new prospects before it is too late.

April marked the return of investment capital into the Asia-Pacific hotel market, with a total value of $12.1 billion, up 46 per cent over the same period last year. The high volume of investment transactions is demonstrating the market’s optimism about the recovery prospects of the tourism and hotel business.

Hotel market enticing more overseas investors
Hotel market enticing more overseas investors - Illustrative image (Photo: VNA)

The same month, Vietnam continuously received good news, one of the biggest being the entry of Archipelago, the largest South-east Asian private hotel management group.

With more than 20 years of experience in tourism and hospitality and operating more than 150 hotels across Southeast Asia, the Caribbean, and the Middle East, Archipelago is making a mark in the Vietnamese market with five contracts to manage room distribution channels and revenues for four mid-range hotels in Ho Chi Minh City and one hotel on Phu Quoc Island.

Explaining the reason for choosing to develop in Vietnam at this time, John Gardner, CEO of Archipelago Indochina, said that com-petition is about to heat up. “Many investors are starting to get annoyed with senior management corporations because the costs are too high while the support is not as expected,” Gardner said. “International management groups in the high-end segment are quite strict in maintaining common standards, and we are ready to negotiate with the investor to ensure the balance of interests of both parties.”

The dismal state of the tourism industry in the past two years has led to a domino effect on the hotel industry. A series of brands in the 3-star segment and below have had to say goodbye to the market, while the 4-5-star hotel chain and above also struggled for a long time because there were simply no guests. Although it is hard to predict if and when the market can reach 2019 levels, positive signals in tourism have brightened up the picture of the hotel industry in Vietnam’s biggest cities.

Hanoi in early 2022 welcomed a 5-star Capella Hanoi hotel in the central area, which features nearly 50 rooms. Some projects with international brands such as Four Seasons, Wink, Dusit, and Fairmont are still under construction and expected to be completed by the end of 2023, according to Savills Vietnam.

New projects are due to come into operation by 2023, mainly in the inner city, accounting for just over half of the total supply. By 2025, Hanoi is projected to boast about 2,400 more hotel rooms in the market. The supply of hotel rooms in Danang, meanwhile, is also forecast to increase by 7,500 rooms in 2025. In Ho Chi Minh City, the end of 2023 could see 2,500 more hotel rooms, 70 per cent of which will come from well-known brands such as Fusion, Hilton, and InterContinental.

As of February, over 60 regional and international hotel brands have a presence in Vietnam. This number is expected to continue to grow in the coming quarters as a number of brands continuously announce plans to expand and increase their presence in the market.

IHG Group, the owner of brands such as Six Senses and InterContinental, last year announced a plan to develop an additional 50 per cent of hotel and resort projects in Vietnam in the next two years. IHG currently has 13 hotels in Vietnam, with a total capacity of up to 3,700 rooms.

Marriott International also set a goal of adding nearly 9,000 rooms to its investment portfolio in Vietnam in recent times. The group is expected to launch several key brands, including Ritz-Carlton Residences, Marriott Hotels, Westin, and Courtyard by Marriott in this country alone.

Dang Phuong Hang, general director of real estate service CBRE Vietnam said, “Investment in the hotel industry in Asia-Pacific is maintaining its momentum. In Vietnam, the market is forecast to witness positive hotel investment growth thanks to the return of inter-national visitors and the long-term development potential of tourism.”

Norbert Vas-Vice president of Business Development Archipelago International

Hotel market enticing more overseas investors

We enter the Vietnamese market at this time because the country has passed two peaks of tourism development and is at the third peak. There is somewhat of a “revenge tourism” trend occurring as a way for tourists to relieve pandemic fatigue and a desire to catch up on missed-out holidays. Vietnam received an impressive number of international tourists before 2019, topping 18 million, not far behind Thailand’s 20 million. Vietnam also possesses huge potential to develop a very large domestic market, similar to Indonesia.

Indonesia has a domestic market of about 150 million tourists, and although Vietnam cannot reach that number, it will be the future of Vietnam’s tourism industry, especially when the middle class is growing rapidly and their travel needs are also increasing. Recently, Vietnamese investors have changed their minds. They focus more on the hotel business, are more selective in choosing a management unit to cooperate with, and also have higher expectations. If the investor has abundant financial potential and can build million-dollar hotels in the heart of Ho Chi Minh City, they will choose hotel management groups from the United States.

By Tra My

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