Vietnam - Hotels upgraded to prepare for tourism market recovery

The hotel room rates and room occupancy ratio of four-star hotels witnessed significant increases in 2010 in comparison with three-star and five-star hotels, according to market survey firms. Meanwhile, a series of hotels have been upgraded in anticipation of the strong recovery of the tourism market.

Biggest changed occur with four-star hotels, why?

Unlike 2009, when the room rates at 3-5-star hotels hovered around 70-90 dollar per night due to the global economic crisis, in 2010, the hotel room rates saw considerable increases, even though they remain far below the rates in 2008 (120 dollar per night). However, the hotel room rate in 2010 was satisfactory high at 90-100 dollars per night.

Market survey firms’ reports show that the total hotel room occupancy ratio of the hotels in 2010 increased by 1.9 percent. Especially, four-star hotels witnessed an impressive growth rate of 5.3 percent.

This has been described by Than Thanh Vu, Secretary General of the Tourism Real Estate Association as an “impressive rise” of four-star hotels, because according to him, in the 3-star hotel segment, the demand is higher than the supply.

In district 1 in HCM City, in high season, three-star hotels are always fully occupied (60-70 dollars per night), while the occupancy ratio at 5-star hotels is just abut 60 percent (300 dollars per night).

Vu said that in many cases, travelers just need the rooms to stay, while they do not set high requirements on the service diversification. This shows the big opportunities for investors in the 3-star hotel segment.

However, a survey by Grant Thornton about Vietnam’s hotels showed that in 2010, while the hotel room occupancy ratios of 4-5 star hotels increased the ratio of 3-star hotels decreased by 1.6 percent.

Explaining this, Ken Atkinson, Managing Director of Grant Thornton said that there have been changes in the clients’ demand: they now tend to require higher quality services and they pay more attention to the convenience and service diversification rather than to the prices.

According to Savills Vietnam, a real estate service provider, to date, HCM City has had 10,000 hotel rooms ranked from three to five stars. Meanwhile, it is expected that 25 more 3-5 star hotel projects would join the market in 2011-2012. They would be located in districts 1, 3, 7 and Tan Binh.

In 2012 alone, 1500 hotel rooms would be put into operation, which includes 630-750 4-5 star rooms and only 170 3-star hotel rooms.

Tourism market recovers, hotels upgraded

Saigontourist has been well known as the travel firm that owns the biggest chain of 3-star hotels – Que Huong Liberty - in HCM City.

In late 2010, Saigontourist decided to upgrade three hotels of the Que Huong Liberty chain from 3 stars to 4 or 5 stars. On the place, where there were the 3-star Metropole Hotel and Comeco filling station at 148 Tran Hung Dao in district 1, Saigontourist decided to build a five star hotel Pullman Saigon Center.

Meanwhile, on the “golden land” of the 3-star hotel Que Huong 1 (165-167 Hai Ba Trung street in district 1) and the land plot of Invesco Company, the 4-star Novotel Saigon Center hotel is taking shape.

Liberty Central has been upgraded from Que Huong Liberty 6 (177-179 Le Thanh Ton in district 1). The total investment capital Saigontourist spends on the three works is 113 million dollars.

Nguyen Huu Tho, former General Director of Saigontourist said that the travel firm upgrades the hotels as a part of the plan to obtain one billion dollars in revenue by 2015.

The survey by Grant Thornton has also pointed out that 42.6 percent of the polled hotels are planning to get upgraded in the next two years.

While 3-star hotels focus on expanding the hotels, 4-star hotels would focus on developing services.

Doanh Nhan Saigon

Business & Investment Opportunities
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