Foreign investors snapping up cheap hotels in Vietnam

In April, American hospitality giant Marriott International signed a deal to operating seven hotels and resorts of Vietnamese firm Vinpearl.

The properties include three existing hotels in the three central cities of Nha Trang, Hoi An and Da Nang, and four facilities with a total of over 1,200 rooms slated for construction completion by 2028.

In February, Singapore hotel investment platform Lodgis Hospitality Holdings joined hands with South Korea’s Hanwha Group to invest in hotel projects in several Asian countries, including Vietnam.

Lodgis Hospitality Holdings hopes to operate 10,000 rooms by 2025 as against the current 1,950 under the Maia Resort, Ixora and Hiive brands in Vietnam and Cambodia. It currently owns 11 hotels and resorts.

Morgan Ulaganathan, head of asset services & hospitality advisory at property consultancy Colliers Vietnam, said hospitality firms have made bold moves such as American investment company Bain Capital acquiring more hotels since the Covid pandemic began.

According to experts, the stronger presence of foreign firms in Vietnam’s hospitality industry comes not only from the current good prices of hotels and resorts but also the potential for tourism recovery and development in the long term.

According to property consultancy Savills Vietnam, hotels on coastal roads in Da Nang City’s Son Tra and Ngu Hanh Son districts and in the downtown area have recently been offered for sale because many owners have cash flow difficulties after more than two years of the pandemic.

Matthew Powell, director of Savills Hanoi, said most of the hotels for sale belong to individual entrepreneurs, who are the first victims of the pandemic and find it hard to compete with professional developers and operators.

But this could be an opportunity for buyers to meet the demand of tourists for higher quality, he said.

Foreign-run hotels earn higher revenues than their local rivals. A Savills report said in the second half of last year hotels managed by Pullman, Novotel and Grand Mercure had 40% higher average room rates and 8% higher occupancy rates compared to hotels managed by the owners themselves or by Vietnamese brands.

The long-term recovery and growth prospects for tourism are considered bright. Last year domestic tourist numbers exceeded pre-pandemic levels at over 101 million.

The tourism industry eyes 102 million this year along with eight million foreign arrivals.

Despite the global economic uncertainty, foreign tourists are still planning to visit Vietnam, according to Hong Kong-based travel booking platform Klook.

There were 2.7 million foreign visitors in the first quarter of this year, and Klook is seeing the number of foreign tourists, including South Koreans and Singaporeans, grow exponentially.

Nguyen Huy Hoang, Klook’s managing director for Vietnam, expected 2023 to be a boom year for international travel.

According to Colliers Vietnam, Ho Chi Minh City, along with Singapore, Bangkok and Bali, will be the markets leading Asia’s tourism recovery.

The foundation for the development of Vietnam’s resort tourism is very solid, and more business deals would be struck this year, Ulaganathan added.