Four- and five-star hotels in Ho Chi Minh City have seen a slight decline in room rates although the rising number of tourists has resulted in an increase in occupancy rates at high-end hotels.

Tourists visiting Bui Vien walking street, District 1, HCM City. 

The average room rate of three- to five-star hotels was more than 1.914 million VND (84 USD) in the first six months of the year, a decrease of 11.3 percent compared to 2014, according to the city’s Department of Tourism.

The average occupancy rate for four- and five-star hotels rose to 85 percent from 70 percent of the same period last year.

According to one five-star hotel, its current room rate is 112 USD compared to 130 USD of the same period last year.

The hotel market remains a lucrative business but the competition is fierce due to expanding room inventory, a manager of a downtown five-star hotel said.

“An increase of 2 USD in room rates will result in a fall in the occupancy rate,” the manager said.

From 2013 to 2016, the supply of four- and five-star hotels increased 20 percent per year to meet international tourist demand for upscale resorts and luxury accommodation, according to Savills Vietnam, the property consultant.

HCM City has the largest hotel supply in Vietnam, with approximately 16,000 three- to five-star rooms.

Over the next three years, the city expects to have 3,500 new rooms, a 22 percent increase.

Besides an abundant supply of two- to three-star hotels, the growth of apartments and houses rented out to tourists has increased the competition in the hotel segment, experts in the hospitality sector said.

Lam Quang Huy, deputy general director of the Grand Hotel in HCM City’s District 1, said the hotel’s occupancy rate rose to 87-90 percent in the last few months.

“The hotel is offering additional services to attract customers and maintain the room rate,” Huy said.

Travel firms said that around 70 percent of tourists chose to stay at two- to three-star hotels as the difference of room rates between three-star and five-star hotels could reach 60-70 percent.

Three- to four-star hotels usually sell at least 50-60 percent of their rooms in advance to travel firms and offer flexible and incentive policies on room rates for them, a representative of TransViet Travel said.

As accommodation costs make up around 40-60 percent of tour prices, tour operators often choose three- to four-star hotels with reasonable prices instead of five-star hotels.

In the first nine months of the year, the city welcomed 4.2 million foreign tourists, a year-on-year rise of 16.6 percent, according to the Department of Tourism.

Tourism revenue was estimated at 84.57 trillion VND (3.72 billion USD), a year-on-year increase of 10 percent.-VNA