How will Improved International Tourism support Hotels in Ha Noi?

Tourism in Viet Nam

According to General Statistics Office (GSO), in 2022, there were 101.3 million domestic tourists and 3.7 million tourists, increasing by 2,228%  year-on-year (YoY). International tourists accounted for 3% of the total, increasing from 0.4% in 2021 but still less than 17% in 2019. With the absence of Chinese tourists, Koreans accounted for 26% of international visitors, followed by the US with 9%. India is an emerging market with 3%. Ha Noi had 18.7 million visitors, which well exceeded the city’s target of 10 million. The 17.2 domestic visitors increased by 330% YoY, and the 1.5 million international visitors rose by 650% YoY.

Chinese travellers are expected to make a return soon and regular flights between Viet Nam and China will reopen. However, the resumption has been delayed by Chinese authorities until the end of April or May 2023. The hospitality sector is greatly anticipating the return of this key source market.

Apart from leisure travellers, demand also comes from business travellers, MICE guests, and foreign investors. Given Viet Nam’s healthy FDI inflows, demand is solid from these guests. Foreign investors tend to stay in large cities like Ha Noi and travel to neighbouring areas like Bac Ninh and Hai Phong.

According to Savills Q4/2022 market report, occupancy reached 49%, increasing by 7 ppts (quarter-on-quarter) QoQ and 22 ppts YoY. The average room rate (ARR) of VND 2.5 million increased by 15% QoQ and 41% YoY. In 2022, overall occupancy increased by 16 ppts to 39% and ARR of VND 2.2 million rose by 23%. 

Increasingly Diverse Products

In 2023, eight projects with 1,300 rooms are expected. From 2024 onward, 60 projects with approximately 10,300 rooms will launch in Ha Noi, with the participation of international operators like Four Seasons, Lotte, Dusit, Wink, Accor, The Shilla, Hyatt, Marriott and Hilton. Hilton Ha Noi Opera will temporarily close for renovation and reopen under the brand of Waldorf Astoria.

The pandemic has emphasised the importance of design, customer experience, and service quality. Customers are looking for memorable experiences, rather than huge projects. Developers must take note and should look into alternative products like wellness resorts, resorts with entertainment facilities such as beach clubs and adventure sports, poshtel (an accommodation model aimed at the young), senior living resorts, or high-quality serviced apartments.

Do Thu Hang, Senior Director of Advisory Services, Savills Ha Noi said: “Demand still trails supply in Viet Nam, particularly in coastal markets. For example, occupancy in Da Nang is still -50% less than in 2019. Given the highly competitive market, developers must use very careful planning, development, and operational strategies.”

Investors should also research the available properties on the market before they invest. Hotels and resorts have different characteristics and varied opportunities and challenges. Therefore, investors must understand the nature of the product and the long-term potential rather than just the cash flow statement.

Uyen Nguyen, Head of Consultancy, Savills Hotels APAC, said: "Investors must determine why they want to own a product. They should also partner with developers with good track records who produce high-quality products. Understanding the operator, its reputation, the leasing structure, and the amenities are also basic parts of acquiring a hospitality asset.”

Conclusion:

Savills Hotels team has a wealth of experience in hospitality real estate. The team provides a host of services, from development planning to operational reviews and disposal. Contact Mauro for more information.

Read further:

• The Path to Embracing Long-Term Development for Hospitality And Real Estate