With the outlook for Vietnam’s tourism industry bright, international hotel operators are flocking to Vietnam in order to profit from the market’s high growth potential and increasingly diversified tourist arrivals.

The country has witnessed a large amount of growth in the numbers of international hotel brands and foreign management companies over the past few years.

According to the latest figures by Savills Vietnam, the number of international hotel operators has increased from 30 in 2010 to just short of 80 at the end of 2017. In the first half of 2018, some additional famous brand names came to Vietnam. Among them are Mandarin Oriental in Ho Chi Minh City and Best Western Premier in the central province of Quang Binh.

Radisson Hotel Group recently opened Radisson Blu Resort on Phu Quoc-its first hotel in Vietnam. Travelodge Asia also announced plans for its first property in the central coastal city of Nha Trang, which is scheduled to open in 2020.

Meanwhile, Spain’s Melia Hotel International has strengthened its footprint in Vietnam with the recent signing of three new properties in Ho Chi Minh City, namely Melia Saigon Central, INN-SIDE Saigon Central, and INNSIDE Saigon Mariamman, bringing the group’s number of current and future properties in Vietnam to 10.

There have also been new brands introduced into the market in the last three years, including Ozo and X2 Vibe (in New Hoi An City), Double Tree by Hilton (in Halong, Vung Tau, and Hanoi), Four Seasons (in Quang Nam and Hanoi), Oakwood (in Ho Chi Minh City), Glow (in Danang), and Mai House (in Ho Chi Minh City).

Mauro Gasparotti, director of Savills Hotels Asia Pacific, said that he observed a large increase of interest in the country from operators over the past three years, following the expansion of the hospitality market.

“Vietnamese developers are still new to hospitality products, but with the large amount of supply coming, they will learn quickly, and more high-quality assets are expected to be underway. We have forecast that a total of more than 30,000 new rooms will be opened by the end of 2019,” said Gasparotti.

The number of international operators is expected to grow in the coming years, along with the number of local management companies.

“We are very positive about the growth of the sector and the attraction of international operators to Vietnam. It is very interesting to see that operators themselves are launching new brands to target new types of clients such as millennials or health-conscious travellers. Vietnam would be a high-potential market for them to introduce focused brands, as the categories of travellers here are largely diversified,” said Gasparotti.

A recent report by CBRE revealed that foreign investor demand has mostly been led by Asian-based groups. These hold several hotels in large cities and resort destinations.

The comparatively higher yields available in Vietnam continue to lure Asian-based property developers and real estate companies. Mid-market business and hotels in Ho Chi Minh City and Hanoi are the main focus, due to the lack of supply in the gap between high-end and local operators.

Recently, InterContinental Hotel Group (IHG) acquired a 51% stake in Regent Hotels and Resorts for an amount of US$39 million. Regent has an operation contract for BIM Group’s Regent Residences Phu Quoc, which will become operational in 2019. With the transaction, IHG expanded its portfolio to 10 hotels and resorts in Hanoi, Danang and Ho Chi Minh City.

Indochina Capital lately joined with Japan’s Kajima to build up a chain of hotels in Hanoi, Ho Chi Minh City, and Danang under the brand name Wink Hotels. The two first land plots were revealed to be in Ho Chi Minh City and Danang-two business and tourism hubs of Vietnam. The 226-room hotel in Ho Chi Minh City will come online in 2019, whereas the 243-room hotel in Danang will be put into operation in 2020.

The hotel segment has been very active in the last three years and has caught the attention of many foreign investors, mainly from Japan, the Republic of Korea (RoK), Hong Kong, and Singapore.

The RoK’s investors mostly seek large-scale, high-end hotels with up to 250 rooms in Hanoi, Danang, and Ho Chi Minh City, where many South Koreans live, while Japanese investors are interested in smaller-scale hotels with fewer than 150 rooms in Hanoi and Ho Chi Minh City. Singaporean investors, meanwhile, hunt for multi-purpose complexes featuring a hotel segment.

Hanoi and Ho Chi Minh City currently have limited land funds for hotel development, since the prices are high, while Danang and Phu Quoc are offering more opportunities for investors, with much land left to develop.

It can be expected that the number of hotel transactions will remain high until at least 2019, due to the limited supply and high demand.

Vietnam was at the third position of the fastest-growing tourist destinations in 2017 in a report published by the United Nations World Tourism Organisation (UNWTO). Vietnam received more than 13 million international visitors in 2017, an increase of 6.8% compared to 2016. International arrivals to Vietnam in the first eight months of 2018 reached more than 10.4 million, increasing by 22.8% compared to the same period of last year.

VIR