VietNamNet Bridge – Though the real estate market remains cool and the hotel business performance is getting worse, this is still an attractive business in the long term.

Asian tycoons conquer Vietnamese high end hotel market

According to Cao Thanh Hoang, General Director of KHM Capital, a South Korean investment fund, a lot of Japanese investors have shown their interest in hotel projects.

Hoang went on to say that it’s now the right time for buyers to contact investment funds which need to sell hotels’ stakes when the fund closing time nears.

Big money was poured into 5-star hotels in 2007-2008, when the hotel room rates and the occupancy rate was very high. However, both the rates have been decreasing continuously over the last two years.

According to Grant Thornton Vientam, the hotel room rate in 2011 dropped to $123 per night from $131 in 2010. The rate decreased further in 2012 which was blamed on the increase of Asian travelers who tent to use 3-star hotels.

Rich Conti, President of The Plasencia Group, the consultancy firm which gives advices in the merger and acquisition (M&A) deals in the high end hotel sector, thinks that investors would not get the desired profits, because the current IRR now just hovers around 16-18 percent, while it was over 20 percent in 2007-2008.

In Vietnam, most of the high end hotels are located on the main routes in central areas of big cities, on the “golden land areas.” Therefore, investors have warned that they would have to spend big money to buy the high grade hotels they want.

Hoang has noted that the land use right value is very high, which makes the hotel prices high. Therefore, the hotel buyers at this moment are mostly the professional hotel managers and investors, the only people who can ensure the good business performance of the hotels.

A senior executive of Thien Minh Company has revealed that besides the 3-4 star hotels, Thien Minh is considering some 5-star hotel projects, hoping to wrap up some transactions in the time to come.

Vice President of Hilton Worldwide South East Asia--William Costley also thinks that it’s now the right time to think of long term investment projects, saying that he can see great opportunities in the high end hotel sector.

The senior executive, in the interview given to the local newspaper VnExpress, also said he was asked why to open a hotel now in Vietnam, when the local economy is in big difficulties.

However, what he can see is the market is still very good, the national economy is not too bad, while the occupancy rate at 4-5 star hotels is still high. Meanwhile, in tourism or hotel development, investors need to keep long term vision, not for one or two years, but 12 years, when making investment decisions

Who have most 5-star hotels in HCM City?

Saigontourist, a well-known travel firm, is the owner of many 5-star hotels in HCM City most of which have become operational. It holds 100 percent of stakes at Rex and Majestic

New World Hotel, $87.5 million, in district 1: developed by Saigon Inn – New World Hotel joint venture of some partners, including Saigontourist and New World Hotel Ltd.

Sheraton Hotel, $97 million, in district 1: developed by Dai Duong Joint Venture of the Saigon Real Estate Corporation, Saigontourist and Lam Ho Investment Pte.

Kumho Asiana Plaza, $223 million, in district 1, developed by HDSC, Saigontourist, Kumho E&C Inc.

DNSG