Untapped Potential in Phan Thiet

Phan Thiet Hospitality market

Although hospitality projects entered Phan Thiet in the late 1990s, development now lags behind other coastal destinations popular with international tourists, such as Khanh Hoa and Da Nang. Between 2015 and 2020, only five new projects with limited supply entered. Data from Savills Hotels shows that as of March 2021, there were 5,800 rooms in the midscale segment and above. Proportionally, this is only about 20% of Khanh Hoa’s supply and 30% of Da Nang’s.

Between 2014 to 2019, the CAGR of accommodated arrivals reached 13.7%. Although arrivals increased, the length of stay decreased. In 2014, domestic visitors spent 1.7 days, but this dropped to 1.6 days in 2019. International visitors dropped from 3.3 days in 2014 to 3.1 days in 2019.

Mr. Mauro Gasparotti – Director of Savills Hotels APAC, commented: “Phan Thiet has always been a fantastic destination for beach getaways from HCMC and other nearby provinces. It was one of the first high-quality beachfront resort locations, developed at a time when Da Nang, Khanh Hoa and Phu Quoc offered a limited number of beachfront resorts.”

However, Phan Thiet continues to be a “sleeping beauty”. Supply is limited and most of the existing resorts are small and owner-operated. This is a stark contrast to other beachfront destinations, where oversupply and overdevelopment are some of the fundamental issues facing the industry.

Domestic demand drives the market. Domestic guests accounted for 90% of the overnight visitors before the pandemic. Despite this, Phan Thiet’s 3 million overnight visitors in 2020 outranked Khanh Hoa with 1.3 million and Da Nang with 2.7 million.

2020 was a challenging year for all hospitality markets, and Phan Thiet was no exception. Resorts struggled and occupancies fell from about 67% in 2019 to approximately 30% in 2020.

Commenting on Phan Thiet’s potential, Mr Louis Walters, Managing Director of Sailing Club Leisure Group, shared: ““Clients from HCMC supported resorts in Phan Thiet and Mui Ne during Covid as they offered convenient and safe weekend getaways. The destination has always been popular with international tourists.[KJ@SV1]  However, the area lacks diverse activities and cultural experiences. Experiences need to be the same, if not better, and more accessible. Encouragingly, infrastructure is improving with projects like the HCMC - Phan Thiet Expressway and the upcoming airport. This will drive local and international demand.”

Renowned hotel operators such as Absolute Hotel Services, Accor, Azerai, Centara Hotels & Resorts, Minor Hotels, Radisson Hotel Group, and Wyndham Hotels & Resorts plan to enter the Phan Thiet market. They have signed management agreements and have properties under construction. The presence of branded properties will increase appeal, and the high-quality products will make the destination more visible to foreign tourists.

By 2023, four projects are expected to open. Two are integrated resorts, with diverse accommodation and entertainment options. With the anticipated CAGR of 33.8% from 2020 to 2023, the future supply will increase by 8,000 keys.

Source: Savills Hotels APAC

Improvements to Boost Tourism

Mr Henry Gray, Executive Director of Azula International PTE Ltd – Azerai,  commented: “Guests usually only stay in Phan Thiet for one or two nights or over long weekends. Although there are many projects under development, they follow the same master plan. This means there is little variation and almost no apparent attempt to integrate into the area. Projects that do not consider local infrastructure, attractions and culture may become white elephants. The area’s tourism infrastructure needs further development. There is a need for more independent restaurants, bars, retail spaces, activities, and services to improve tourism.”

He continued: “Public facilities, including hospitals, transport systems and policing, also need to compliment the needs of a tourism destination. For example, the opportunity to develop an environmentally friendly recycling facility could well be a public-private partnership.”

The Phan Thiet market has seen positive real estate investment thanks to improving infrastructure. The highway to HCMC motivates second home demand, which has seen all pipelines coupled with residential components.

Mr Mauro added: “To develop tourism businesses, local authorities must encourage capital flows from enterprises and individual investors. The destination is increasingly offering more entertainment choices, such as a premium golf course and leisure and sports activities. This will eventually encourage longer stays. However, sustainability should be a key focus. Developers and local authorities must work closely with business consultants, qualified designers, and advisors to create products that enhance long-term value and sustainability. As the middle class grows and the population ages, getaway destinations close to megacities like HCMC are expected to be in high demand, becoming a necessity to the wellbeing of citizens.

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