VietNamNet Bridge – The recent downturn in the hospitality industry has left many potential developers hesitant to pour money into new investments, while others are seeking opportunities to offload their hotels.

Hanoi suffers from an over-saturation of hotel rooms and corresponding low occupancy and room rates.

According to Richard Leech, executive director of CBRE Vietnam, property developers should be careful when investing in Hanoi’s hotel market due to oversupply, while average room rates and occupancy continue decreasing.

“We have seen an oversupply of five-star hotel rooms and there have been signs of divestment as some hotels are being offered for sale,” Leech said.

“There are a number of hotel developers who intend to sell their hotels, however the problem is how much the transaction is fixed,” Leech said.

He added that there had been limited interest in these assets from foreign and domestic investors because of the fact that they provide little benefit at present.

Meanwhile, Troy Grifitths, national director of Savills Vietnam, told VIR that hotels were the least positive segment of the real estate market when it comes to attracting investors in merger and acquisition deals.

“It is very difficult to find buyers for hotel projects nowadays, except when the developer can provide evidence of improved business of this segment in the future,” Grifitths said.

Vietnam’s hotel sector now is suffering the lowest room rates in Asia, he added.

Grifitths said some developers could convert hotels into other segments such as serviced apartments to survive.

According to the latest figures from CBRE Vietnam, as of July this year, the accumulated stock of the entire hotel market of Hanoi was at 8,831 rooms in 68 hotels, mostly located in the two districts of Hoan Kiem and Ba Dinh.

However, market-wide, occupancy in the first quarter of 2013 only was at 57 percent, a decline of 0.6 per cent quarter-on-quarter.

Decline in occupancy occurred across all three- to five-star hotel segments. Three-star hotels declined 1.4 per cent quarter-on-quarter when compared to the same period of last year.

“The occupancy rate is low compared with other cities such as Ho Chi Minh City, Bangkok or Phnom Penh” added Leech.

Specifically, in the first quarter of this year, the hotel occupancy rate in Bangkok reached over 80 per cent, Ho Chi Minh City reported 70 per cent, and Phnom Penh 67 per cent.

The average daily room rate for the whole market was approximately $73 per room per night, declining 3.5 per cent quarter-on-quarter and 5.1 per cent year-on-year.

The second half of 2013 will see approximately 9,840 rooms available, up 13.5 per cent year-on-year. Some four- and five-star hotels, including InterContinental Hanoi Landmark and JW Marriott are expected to enter Hanoi’s market this year.

Despite the market downturn, in the last few months, Lotte group had acquired Legend Saigon Hotel, a 283 room hotel in Ho Chi Minh City’s downtown area.

Meanwhile, VinaLand Limited just announced that it had divested its stake in the company that owns the Sheraton Nha Trang Hotel & Spa located in Nha Trang City, Khanh Hoa Province at the end of April 2013.

VinaLand also divested its stake in the company that owns the 30 Nguyen Du office building located in Hanoi at the beginning of this year.

The 30 Nguyen Du office building is an operating asset with 2,240 square metres of net leasable area which was originally acquired by VinaLand in 2008 for future redevelopment into an inner city boutique hotel.

However, subsequent to this acquisition the market experienced a significant increase in the number of three star hotels being developed in central Hanoi and the building continued to be used as an office building.

Source: VIR