Room remains for growth in luxury hotel segment

According to CBRE’s report for the Vietnamese hospitality real estate market in the second quarter of 2016, released on August 25 in Hanoi, the hotel segment continued to see growth in supply in the first half of 2016.

In Hanoi, the 4-star hotel segment recently welcomed Novotel Suites Hanoi, increasing the supply by 6.1 per cent quarter-on-quarter. In Ho Chi Minh City, Bay Hotel opened on Ngo Van Nam street in District 1.

However, the increase in supply has not come with a compromise in performance. In Hanoi, the average occupancy rate is stable at 75 per cent. It also remained strong in Ho Chi Minh City with 65 per cent as of June 2016.

According to the report, Hanoi rivalled Bangkok in topping the chart for regional occupancy rates. Both Ho Chi Minh City and Hanoi’s average daily rate (ADR) as well as revenue per available room (RevPAR), which is calculated by multiplying a hotel's ADR by its occupancy rate, fared relatively well compared to the region in 2015, higher than Bangkok, Kuala Lumpur, and Jakarta, though still lower than Singapore and Hong Kong.

Source: STR Global, CBRE Hotels

Looking forward, the Vietnamese hotel market will see the 5-star hotel and resort sector getting busy. More 5-star hotels are expected to open in Ho Chi Minh City until 2017, while Hanoi is to welcome approximately 1,000 5-star hotel rooms in Landmark 72 (expected to open at the end of 2016), Van Mieu Mercure Hotel (currently under construction), VietinBank Tower, and Hilton Hanoi Westlake in the next two years. Starwood group also plans to open six new hotels and resorts at various locations throughout Vietnam between 2016 and 2019.

In this context of increasing supply, there is still room for growth, especially in the luxury segment.

According to Robert McIntosh, executive director of CBRE Hotels Asia Pacific, recently CBRE has seen real interest in buying luxury hotels and resorts because room rates are now closer to the international level. Also, developers are coming out with new luxury hotels project proposals.

“There are a lot of good quality four to five star hotels, but there are only a handful of really good luxury hotels,” he said. “There is more room for extra hotels in the luxury segment and I think more will be built.”

Over seven million international tourist arrivals were recorded in Vietnam in 2015. The new visa exemption policy also boosted the number of international visitors, producing an increase of 13.5, 39.3, and 39 per cent year-on-year in Ho Chi Minh City, Hanoi, and Nha Trang, respectively.