Over a decade of transformation in condotel industry

When we started FSDN and ALCDN, we aimed to create a new investment opportunity that combined the benefits of property ownership with the allure of resort living. Little did we know, we were setting the stage for a significant shift in the real estate landscape of Vietnam.

Marco van Aggele, founder, Levitate International and Fusion Resorts

The success of FSDN, with its 128 units, and ALCDN, with 203 units, demonstrated the viability of the condotel model. The projects were initially sold primarily as investment opportunities, attracting investors with promises of lucrative returns. The first few years indeed proved beneficial for early investors, driving a surge in similar developments across the country.

However, the influx of large-scale projects quickly saturated the market, challenging the sustainability of returns that early adopters enjoyed. The Vietnamese government’s liberal approach in issuing licences for new condotel projects led to an oversupply in the market.

Unlike the boutique-sized FSDN and ALCDN, many new developments were significantly larger, further diluting the market demand. Investors who entered the market later found it difficult to resell their units during construction or to maintain the promised annual returns due to the increased competition and market saturation.

Moreover, the rise of platforms like Airbnb added another layer of complexity. Many unit owners chose to rent out their properties independently, bypassing the rental pools managed by developers. This move put further pressure on the returns for those who remained within the official rental management systems. The fragmented approach to property rental has created discrepancies in returns and affected the overall value proposition of condotels.

As FSDN and ALCDN approach their ten-year mark, a new set of challenges and questions arises. One critical issue is the role of the original developer in the ongoing management and maintenance of these properties, especially as they age and require refurbishments and technical upgrades. The initial lease terms were designed with a focus on short-term investment returns, but the long-term sustainability and management of these properties now need reevaluation.

The industry must redefine the role of developers in the 50-year lease term of such projects. There needs to be a collaborative approach between owners and developers to ensure the properties remain attractive and functional. This could involve shared responsibilities in refurbishment and technical upgrades, supported by clear legislation to align the interests of both parties.

The issuance of land use and housing rights certificates for FSDN and ALCDN set a legal precedent for the condotel industry, and similarly, future legislation may be required to address the evolving needs of the sector. Such regulations could provide a framework for the mutual commitments between buyers and developers, ensuring long-term alignment and sustainability.

The condotel model has great potential, but it requires adaptive strategies to stay relevant in a dynamic market. The lessons learned from the initial projects should guide future developments, ensuring that both investors and developers can benefit from a balanced and sustainable approach.

As the condotel industry in Vietnam continues to evolve, the pioneering projects of FSDN and ALCDN may once again lead the way, setting new standards for collaboration, sustainability, and long-term success. The future of the industry hinges on the ability to adapt and innovate, ensuring that the interests of all stakeholders are harmonised for continued growth and prosperity.

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