The Path To Embracing Long-Term Development For Hospitality And Real Estate

WeHub Vietnam and Savills Hotels hosted another successful Meet The Experts event in Hanoi on 10 November 2022. The event is the largest hospitality and real estate conference in Vietnam and hosted over 20 local and international speakers who held lively discussions with developers, hotel owners and senior industry professionals. Experts discussed how to “Embrace Long-Term Development” within the industry, and “make the best out” of the current market and solutions for sustainable growth for hospitality and real estate. 

Hospitality in Vietnam is recovering. In the first ten months of the year, domestic tourism rebounded well with 91.8 million domestic arrivals, exceeding the 85 million arrivals in 2019. However, the return of international guests was underwhelming with only 2.3 million arrivals in 10M/2022, equal to only 16% of the performance in 10M/2019. This was mainly due to the considerable drop of some key markets like Chinese and Russian guests. South Korea has become the largest source of international arrivals in 2022 with 620,000 arrivals or 26% of international arrivals. There have been strong upticks in Indian arrivals with 82,000 arrivals, representing an average monthly growth rate of 51%.

Mr Mauro Gasparotti, Director of Savills Hotels Asia Pacific and host of the Meet The Experts conference, shared, “The hospitality industry in Vietnam is going through a transition. We will witness short-term difficulties, especially in the second home segment but this will give the market a great opportunity to briefly pause on the strong growth and focus on structural improvements that will benefit the long-term.  The recovery for coastal resorts has been slower than anticipated because of the limp international demand. The overall occupancy is still below 2019 level by 40%. The destination with larger drop in performances was Nha Trang – Cam Ranh, and followed by Da Nang. However, several luxury and boutique resorts have performed well, which shows that high-quality management and products pay off, especially in moments of market weakness. Several hotels in HCMC and Hanoi have also made a positive recovery with encouraging results from business travellers, long-term guests, and MICE groups.” 

At the gathering, senior representatives from BIM Group, Booking.com, The Ascott Limited, Fusion Hotel Group, Archipelago, VinHMS and Cityland Education Vietnam discussed what hospitality could look like in 2023 and the potential challenges for near-term growth. 

Mr Mauro added, “Besides the slow recovery of international demand, the large pipeline of projects that are under construction are a threat because they will add additional pressure on rates and occupancies. In the next three years, we expect 47,000 hotel and condotel keys to enter, however, the current credit room control might mean some of these projects will be delayed.”

2022 Meet The Experts Conference in Ha Noi

At the conference, speakers from QUO Global, TUI BLUE Hotels & Resorts, Pico Play, and WT Partnership discussed various emerging business models, including theme parks and all-inclusive resorts, and looked at the power of branding and how construction costs are changing.

Industry experts and senior professionals from Savills Hanoi, Capella Hotel Group, Hilton Worldwide, Baker McKenzie, Ziva Asia, Dusit International, and EuroStyle explored branded residences and their appeal. 

Mr Matthew Powell, Director, Savills Hanoi commented “Branded residences, as a property sector, has proved to be incredibly resilient in the face of global uncertainty and change. The sector has not only survived the disturbance but continues to thrive. Over the past 10 years, the sector has grown by over 150%, and the pipeline of future branded residences remains strong, with future projects set to double current supply offerings by the end of the forecast period.”

“Emerging markets are set to benefit with brands looking to expand their respective global footprint to new markets seeing high levels of economic growth and wealth generation. Key locations for brands can be found in emerging cities and resort locations, particularly in Asia, South America, and the Middle East, where new high-net-worth buyers are looking for primary residences and second homes within branded schemes. Vietnam market for branded residences is continuing to expand, especially Vietnam urban and resort market with a very strong potential. There is live interest for brands to enter into new market and looking for new locations to grow their portfolios. Same for developers who are also looking to develop in this sector. Younger customer base, affluent, globally-mobile individuals will continue to drive demand for branded residences,” he further shared.

The conference also stressed the associated risks of poorly planned projects. The failure to hand over projects on time or with the expected financial commitments has impacted the appetite for the second home market. 

Nearly 75% of operating condotel and branded residence projects fulfilled their guaranteed returns. Amid diminishing demand from key source markets and increasing supply, existing projects with impractical financial commitments are struggling. 

Mr Mauro added, “Condotel products started to boom in 2016. Buyers were optimistic about the exponential tourism growth and these products presented potential capital gains and revenue streams. However, the Covid knock means projects are now grovelling to deliver the expected returns. Smaller projects are proving to be more profitable with better capital gains.” 

“Condotels are still good products that can deliver good returns. However, buyers should be fully aware of both rewards and risks as hospitality is notoriously more volatile than other asset classes. Poor planning and poor execution could create complications because the project will not be able to compete with other projects once put into operation. Profitability is jeopardised when hotel facilities are not properly planned or the product is incorrectly positioned, or if the developer does not prioritise future management. This often happens for large scale projects which requires a large volume of visitors to be able to perform” he continued.

The pandemic and market downturn mean industry stakeholders have had time to reflect on what has been done right and what could be improved for enduring and sustainable growth. With the potential the market holds, it is time to act on ensuring products are suited to the future.  

WeHub Vietnam and Savills Hotels would like to thank our event partners, VinHMS and VIETCERAMICS, and all our guests and speakers. We look forward to the 2023 Meet The Experts event, where industry professionals can stay connected and gain insights from senior industry professionals.