Vietnam is only country still developing condotels

The Vietnamese condotel market, the only one in the region, shows serious problems because of legal deadlocks.

Kai Marcus Schroter, CEO of Hospitality Tourism Management, commented that local authorities still lack necessary knowledge when assessing condotel projects.

Vietnam is only country still developing condotels

Running a condotel is not similar to operating a housing or hotel project.


Condotels are very attractive to many investors because they can generate cash flow even when products are still under construction. However, condotels seem to be overvalued in Vietnam.

In the real estate market, the world once witnessed a condotel boom 15-20 years ago in the Mediterranean and Europe. But now this kind of product no longer has influence on the market.

Thailand also saw a condotel boom 5-10 years ago, but there have been no new condotel projects. The investment model does not bring high profits as thought. In most Asia-Pacific markets, this product is no longer developed.

The committed profit of 10 percent per annum is not seen in any other market in the world except Vietnam.

The high committed profit rate is seen in Vietnam because many businesses still do not understand the operations of condotels. The expert said that investors will have to spend big money on operation costs to obtain a 10-15 percent profit rate.

The high committed profit rate is seen in Vietnam because many businesses still do not understand the operations of condotels. The expert said that investors will have to spend big money on operation costs to obtain a 10-15 percent profit rate.

The high profit rate can be attained only if condotels are located in famous positions and tourists return regularly.

 

It will take investors decades to make investments and advertise. In Vietnam, the profit rate of 10-15 percent is just for advertisements.

Sharing the same view, Adam Bury from JLL Hotels & Hospitality said if investors borrow 50-60 percent of capital needed to develop a condotel project, and they commit to a 10 percent profit for 10 years, this means that they will have to borrow nearly 100 percent of capital at the interest rate of 10 percent.

He went on to say that investors can sell products without commitment about profits. The Hyatt Park project in Da Nang is a success story.

Luis Mesquita De Melo from Asian Coast Development said that it is difficult for investors with limited financial capability to succeed with the condotel model.

To develop a condotel market, Vietnam needs to create a legal framework to regulate it.

According to DKRA, a market analysis firm, 2,100 condotels were marketed in the second quarter of 2018, but only 850 products were sold.

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