Investment opportunities for hospitality real estate in Vietnam: Colliers

May 26th at 07:32
26-05-2023 07:32:09+07:00

Investment opportunities for hospitality real estate in Vietnam: Colliers

Hospitality properties have long been considered a lucrative and long-term profitable investment for real estate investors operating in Vietnam.

Pockets of opportunities for hospitality real estate are present in Vietnam though the tourism recovery in Vietnam lags behind other Asian markets, and uncertainties remain due to the economic slowdown, according to Colliers.

“Vietnam has good fundamentals for developing hospitality properties. There is the rise of the middle class, increasing accessibility to travel thanks to improved infrastructure, the country’s openness to international trade, which drives business travel, events, and conferences, etc. Investing in hospitality real estate is a smart bet,” David Jackson, CEO of Colliers (Vietnam) said.

A hospitality property project - Vega City Nha Trang in Khanh Hoa Province.

Colliers experts have said that, in 2019, occupancy rates in hospitality establishments (hotels, resorts and villas) reached 52%. On average, more than half of the rooms in each of the 30,000 accommodation establishments were filled.

Thanks to domestic travelers, this figure in 2022 improved most clearly in coastal locations, namely Ho Tram, Danang, Nha Trang and Phu Quoc. Data from Google shows search demand with the keywords Dalat, Phu Quoc, Nha Trang, Vung Tau, Phan Thiet, and Hoi An increased by 75% year on year.

Over the past 10 years, hotel supply in Vietnam has grown threefold, and roughly 100 new projects are in the pipeline for the next three years. Mid-scale and luxury room supply grew the strongest, up 6.7 times from 2009 to 2022, while villas and resort shophouses increased 20% and 34%, respectively, in 2022. The number of international hotel brands is expected to double in the next three years, from 127 in 2022 to 261 projects in 2025.

CEO of Colliers (Vietnam) David Jackson (L) and Head of Asset Services & Hospitality Advisory Morgan Ulaganathan (R)

“There is an increasing market concentration, where domestic players with the dominated ownership of hospitality property collaborate with reputable international hotel brands to standardize and raise the bar of quality for hotel services, as well as the value of hospitality properties,” David added. 

M&A and collaboration activities, though slowing down last year, are expected to be a deal-making rush in the coming quarters. With capital waiting to be deployed and current favorable valuations, foreign investment funds are playing a smart bet on expanding their market shares before hotel revenues meet their full potential with the recovery. Some typical agreements were announced by Sun Group and IHG; Accor, Ennismore, and TNR; and BRG and Hilton.

Recently, the issuance of Decree 10/2023/ND-CP on ownership certificates with a term for properties built on commercial and service land set initial conditions for the revival of the condotel, office-tel, and resort villas across Vietnam, promising growth spurt in the years to come.

Morgan Ulaganathan, Head of Asset Services & Hospitality Advisory, Colliers (Vietnam) said: “For now, smart moves should include improving EBITDA [Earnings Before Interest, Tax, Depreciation and Amortization], IRR [ Internal Rate of Return], Cap rates, etc. with minimal investment and focusing on superior marketing, revenue management, and distribution.”

He also added that the development of hospitality real estate projects should weigh in ESG to ensure Vietnam’s long-term global tourism competitiveness.

"And last but not least, targeting the right mix of domestic and international tourists is critical to optimize occupancy and room rates," Morgan underlined.

Promising prospects

A hospitality property project is under construction in the central coast province of Phu Yen. Photo: Pham Hung/ The Hanoi Times

The road to recovery for tourism across the Asia Pacific is poised to accelerate this year as most destinations, particularly China, have re-opened. Colliers Hospitality Insights of Q1/2023 also projected that 2023 would continue to witness a recovery in travel, with hotel demand across the APAC region remaining buoyant and room occupancy, average daily rate (ADR), and revenue per available room (RevPAR) indices improving.

On a national level, Vietnam has set a target to fully recover its tourism by 2025, with 18 million international tourists in a total of 134 million. By 2030, the country aims for 195 million tourists, including 35 million foreign tourists, with diversification of source markets: India, the Middle East, European countries, Australia, New Zealand, Canada, and the US.

Visa relaxations were also proposed, potentially to extend the visa exemption up to 90-day stay for e-visa and 45 days for unilateral visas, issuing visas to all countries to relax entry and stay requirements for foreigners.

There are also multiple discussions in the country to improve the quality of tourism and develop new models such as wellness tourism, eco-tourism, medical tourism, MICE, and leisure (business + leisure).

Colliers noted that Vietnam has all it needs for tourist attraction thanks to its beautiful natural landscape, cultural richness, and gastronomic delights from street food to modern Vietnamese cuisine.

“The key is quality and standardization of tourism services without losing the authenticity of Vietnam to cater to the new travel tastes of an increasingly affluent population, both domestically and internationally,” Morgan said.

Hanoi Times





RELATED STOCK CODE (1)

NEWS SAME CATEGORY

$5 billion measure not to prop up real estate market

In lieu of real estate aid, a $5 billion plan government plan seeks to develop at least one million social housing units.

Further interest rate cuts hoped to fuel money flows into real estate

The State Bank of Vietnam (SBV) is set to further reduce regulatory interest rates on May 25, the third cut in a row since mid-March, expected to give a boost to...

Prospects pick up within real estate market

Real estate liquidity is moving into a positive direction, with investors planning several new rounds of funding.

Bad debts running rampant in construction sector

Little is known about the exact amount of bad debts being incurred by construction firms, but the non-payment is eating into their bottom line day by day.

Argentina and Vietnam seek to foster social housing

Minister of Construction Nguyen Thanh Nghi and Santiago Maggiotti, Argentina's Minister of Territorial Development and Habitat, have stated their intention to...

Condotels, officetels get ownership certificates from May 20

Buyers of condotels, officetels and resort villas will have ownership certificates from May 20 under a new decree guiding the Land Law implementation.

Industrial real estate increasingly attractive to investors

A total of $8.88 billion was in registered foreign investment in Vietnam as of April 20, in which real estate ranked third with nearly $972 million. Truong An...

New belief around the corner for real estate

Real estate remains a keen channel for investors to get interested in across the country, despite the current fluctuations in the market.

Industrial real estate picture contrasting from north to south

While industrial real estate in the north is recording a strong increase in supply, rent, and occupancy rates, the south of the country is enduring reduced rental...

Hanoi steps up efforts to meet rising housing demand

During this period, Hanoi saw positive developments in its housing development plans, with nearly 50 million square meters of new residential floor space built and...

Real estate stocks

Construction stocks


MOST READ


Back To Top