Nha Trang faces hotel battle as supply exceeds demand
Nha Trang faces hotel battle as supply exceeds demand
Nha Trang city, one of Vietnam’s leading tourist destinations, will continue to see harsh competition in the hospitality sector due to an over-supply of hotels.
Nha Trang had around 5,000 rooms as of December last year, but supply suddenly skyrocketed with the recent opening of several large hotels. The coastal city earlier this year became host to Vietnam’s biggest hotel, the Best Western Premier-Havana Nha Trang with 1,260 rooms. Later in June, the Muong Thanh Nha Trang opened, adding 255 rooms to an increasingly competitive market.
The city’s hotel supply continues unabated, with more properties to open in the next few months, including the InterContinental Nha Trang, which has been re-branded from Crowne Plaza, featuring 277 rooms.
Two other large properties are also under construction, the Muong Thanh Que Huong with 500 rooms and the Star City Condotel Nha Trang with 217 rooms.
The sudden flood of hotel rooms will stiffen competition among hoteliers in the city and industry players are warning that if demand does not keep rising, the oversupply of rooms will result in decreased occupancy and room rates.
Mauro Gasparotti, executive director of Alternaty real estate consulting company, said the main problem facing hoteliers in Nha Trang was fierce competition on price and lack of international flights.
“If there’s no increase in demand, the occupancy rate will be the first affected and it will worsen in the upscale segment, where the majority of the new inventory is expected,” said Gasparotti.
“If the hotel owners, in order to strengthen occupancy, start to offer promotions or opt for selling large amounts of rooms to foreign travel agents, then overall rates will decline,” he added.
A Best Western Premier-Havana source, who wished to remain anonymous, told VIR that the hotel was having a significant effect on other hotels due to its creative architecture, including a pedestrian subway connecting the hotel to the beach.
The source also said the hotel was offering competitive prices, at VND2.5-4 million, lower than in other five-star hotels in the city.
The source added that Nha Trang’s tourism infrastructure was already showing signs of being oversubscribed with the supply of hotel rooms outstripping the predicted seasonal demand With many more projects set for completion, competition will be more fierce.
The number and diversity of rooms in Nha Trang has increased dramatically since the Novotel opened in the fourth quarter of 2008. They were followed by with the arrival of the Sheraton’s 284 rooms in 2010’s fourth quarter with, Michelia and Vinpearl Luxury in 2011.
The pace of increasing supply is set to continue with several large scale properties due to open in the near future.
Late last year, the local authorities granted more investment certificates for large scale hotel projects in the city. The 50-floor Tropicana Nha Trang Complex and the 35-floor Grand Hotel & Residence Nha Trang will both eventually be located on Tran Phu street.
However, some investors have decided to divest from Nha Trang’s hotel market.
In April, VinaLand, an investment fund managed by VinaCapital decided to divest its 66.7 per cent stake in the Sheraton Nha Trang Hotel for $42 million with the purchaser assuming the majority of the existing bank debt of approximately $38 million
VinaLand claimed that since the opening of the hotel in 2010, growth in the overall tourism industry in Nha Trang has been adversely impacted by limited flight capacity servicing the region and an increase in the supply of hotels.
vir
