CBRE Hospitality Forum 2019 Highlights Of Vietnam Hospitality Real Estate Market
By the end of Q3 2019, Vietnam tourism industry has made remarkable progress compared to targets set out in “Master Plan on Vietnam Tourism Development to 2020, vision to 2030” approved in 2013. Continuing the momentum from 2018, Vietnam welcomed nearly 13 million foreign visitors in the first nine months of 2019, an increase of 10.8% y-o-y. Source markets of international arrivals having the highest y-o-y growth were Thailand (46%), Taiwan (28%) and Korea (23%). Meanwhile, although the number of Chinese tourists for 9M 2019 is still on the rise, the pace has significantly slowed down (only 4% y-o-y). Asian countries continued to dominate the volume of international arrivals to Vietnam in 9M 2019, accounting for 79% of the volume, with China and Korea alone accounting for 55%.
The improvement in infrastructure supporting the tourism industry, which has always been one of the prioritised investment areas by Vietnam, has catapulted the rise of many tourist cities in recent years. According to Airports Corporation of Vietnam (ACV), two of the country’s largest and busiest international airports, Noi Bai and Tan Son Nhat, are set to increase passenger capacity to 50 million (Noi Bai after 2030 and Tan Son Nhat after 2025). Key aviation infrastructure projects to be implemented in the coming years include: construction of new passenger terminal T3 at Tan Son Nhat International Airport, construction of passenger terminal T2 at Cat Bi Airport, Vinh Airport, Phu Bai Airport; expansion of aircraft parking spaces at high-frequency airports such as Noi Bai, Tan Son Nhat, Da Nang, Cam Ranh, Lien Khuong, Cat Bi, Vinh, Phu Bai.
By end of Q3 2019, it is estimated that there were 442 four- and five-star hotels under operation in Vietnam, providing 91,236 keys to the market. In the period of 2015-Q3 2019, the number of five-star hotel keys increased with a compound annual growth rate (CAGR) of 21% per year, while four-star hotel keys only grew at a CAGR of 9%. Da Nang and Khanh Hoa, which are famous tourist sites in Vietnam blessed with favourable weather condition and long coastline with beautiful beaches, are two areas leading the supply of upscale hotels, with approximately 14,000 keys in each city and CAGR of more than 19% in the period 2015-Q3 2019. These are followed by Ho Chi Minh City and Hanoi with 10,600 and 7,900 keys respectively, however the growth rate in these cities only stood at 2-4% per year in the past five years. Phu Quoc has recently emerged as an attractive destination witnessing an impressive supply growth of 36% per year, which brought its current supply of upscale hotels nearly equivalent to that in Hanoi, thanks to strong capital investments from the leading developers in Vietnam.
With respect to second-home products such as villa and condotel, the market in notable tourist cities has experienced significant slowdown in terms of new supply since 2018. In particular, accumulated supply of villa in three key areas, Da Nang, Khanh Hoa and Phu Quoc, recorded average annual growth of only 2.6%, 0.9% and 7.3% respectively in the period of 2017-9M 2019, as compared to average annual growth of 5.5%, 35% and 27% respectively in the period of 2015-2017. New supply of condotel also fell sharply after 2017: for instance, supply in Khanh Hoa Province only grew at average rate of 7% per year in the past 2 years, as compared to average rate of 239% per year in the previous two years. According to Mr. Nguyen Trong Thuc, Senior Manager of CBRE Hotels Vietnam, this slowdown in new supply is necessary for the market to adjust itself after a period of overheating, especially in the context that legal framework for second-home products needs improvement to keep pace with latest developments.
Discussing trends for the next phase of hospitality market in Vietnam, Mr. Robert McIntosh, Executive Director of CBRE Hotels Asia Pacific said: “To carry growth forward, hospitality real estate developers in Vietnam will have to go through market diversification, paying attention to potential non-traditional areas such as Nam Hoi An, Binh Thuan, Ba Ria-Vung Tau, as well as diversifying their product offerings and bringing in the professionals to manage their properties.”
The limited new supply in traditional markets goes in parallel with an expansion to new frontiers in 2019, especially to provinces boasting convenient linkages to major cities such as Ba Ria-Vung Tau (close to Ho Chi Minh City), Quang Nam (close to Da Nang), Binh Thuan (4.5 hours driving from Ho Chi Minh City), Ha Long (2.5 hours driving from Ha Noi, with much enhanced connectivity thanks to by Ha Noi – Hai Phong – Ha Long Expressway). Recent notable vacation property projects include Royal Park FLC Ha Long, Malibu Hoi An, NovaHills Mui Ne, NovaWorld Ho Tram, etc.
Beside expanding into non-traditional markets, developers are also active in creating new hospitality products for sales, most notable of which are coastal shophouse/shopvilla in Phu Quoc and Ha Long. By the end of Q3 2019, each of these two markets has roughly 2,000 units of coastal shophouse/shopvilla that have been launched, with sold rate of about 90%. Current developers of these products are mainly top-tier developers on the market, which helped with the absorption of existing launched supply. Shophouse/shopvilla can be used for various purposes such as retail, mini-hotel, and as such has attracted many individual investors who had some prior experiences in operating hotels/restaurants.
Another notable trend in hospitality that CBRE has witnessed recently is the growing interest in developing wellness resorts. Although this format is very popular in the region, it is still relatively new in Vietnam and growth opportunities remain abundant, given the fact that middle-class population of Vietnam is expected to witness the fastest growth in Southeast Asia over the next five years, and tourists from North Asia are increasingly looking for tourism products that can incorporate wellness treatments.
Looking forward, Vietnam continues to be a key target in the expansion plan of many professional hotel operators. Not only well-known international hoteliers such as Accor, Marriott, Best Western, but also Vietnam-originated ones such as Lodgis, Sailing Club, Silk Path and Wink are very active in looking for new projects to gain more market share.
According to experts’ opinions at the event, hospitality designs that can foster memorable experiences will be of high demand in the coming time. Research shows that tourism groups of different segments and purposes have different preferences in terms of hotel design, therefore developers should do a thorough study on their targeted customers in order to implement a suitable design. Moreover, Mr. Christian Low (Regional Strategic Director of SB Architects) commented that in order to assure the sustainability of a project, it is important to consider the local culture and natural settings in its design. Many hotel developers overlooked the fact that foreign tourists to Vietnam (which is a major demand source for upscale hotels) are still more inclined towards designs that can showcase the local elements rather than those that copy foreign architectural styles.
Even though there are still challenges to overcome such as waste management, masterplan supervision to ensure compliance and keeping the market sustainable, and the need for legal framework enhancement for newly developed real estate products, attendees and panelists at CBRE Hospitality Forum 2019 concurred on a positive outlook for Vietnam hospitality real estate market, as the country is getting closer to the well-established tourism markets in ASEAN such as Thailand, Malaysia, Singapore and Indonesia.
© 2016, CBRE, Group Inc. CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.