Hundreds of hotels for sale could be seen in Vietnam’s major cities over the past months as the fourth wave of the Covid-19 continues to decimate Vietnam’s hospitality market.
In that situation, some investors been taking opportunities in acquiring hotels for sale in Vietnam with distressed prices, especially an increasing trend from foreign investors penetrating Vietnam’s hospitality segment through M&A.
Related: M&A consulting services in Vietnam
The Vietnam hospitality market is the same as all global markets, that have suffered badly over the recent past. There are two broad categories, the City Hotels catering to business travelers, and the Resort and holiday market. In line with air travel restrictions and border closures there is now effectively zero international tourist demand.
However occupancy of City hotels in both Hanoi and Ho Chi Minh has picked up by around 6% Year on Year, also with improvements in room rates, as hotels are now occupied as quarantine facilities. Many resorts have also benefited from this slight assistance over a troubling period.
Troy Griffiths, Deputy Managing Director, Savills Vietnam commented “In the lead up to the pandemic and between waves of COVID, domestic travel was at heightened levels. New resorts and hotels were opening, airlines were booming and hospitality was the darling asset class. A key benefit of the Vietnamese hospitality market is that there is a very heavy bias towards domestic tourists. Other tourism destinations such as Thailand that have a heavy reliance on international tourists have suffered far more because of their dependence on international visitors.”
Tourism has a ‘long tail’ with extensive downstream economic benefits that pass to the broader community. In more international tourism orientated economies such as Thailand, Singapore and Philippines then the contribution to GDP from tourism is much higher. In these countries the associated industries such as Duty Free sales, Fashion, HORECA etc have also therefore suffered more than in Vietnam- Troy added
Whilst there are several key hospitality transactions underway, the larger hotels under international management agreements and with robust local land owners, remain stable, without deep discounting. In these cases the investors and operators have a longer term investment horizon, can weather the pandemic with stable capital resources, and look forward to the reopening of their hotels. However in the smaller hotel space of which Vietnam has a vast number, then owners and operators dependent on working capital through hotel revenue are suffering, and therefore may be seeking exits. It is these smaller operators with a heavy domestic bias that are exposed. There are certainly well priced assets in tourist destinations. Prior to the pandemic Vietnamese Hospitality was steadily maturing, so now we see international M & As occurring that would have been in process for some time.
Troy stated “Its important to be aware that the pandemic will finish, and so it’s not a new normal. There will certainly be ‘revenge tourism’ that will whiplash Vietnamese hospitality back to where it was trading before. As the general population now has cash reserves waiting to be spent and strong urges to simply go anywhere, then hospitality will boom again. The whiplash recovery is already well documented in the USA and Europe. In some places hotels have room rates of five times pre pandemic levels. The issue is that with a five times room rate, then tourists expect good service, particularly post containment. However in the American cases many hospitality staff are simply not coming back to work. This creates enormous problems in quality service delivery. An advantage of the Vietnamese hospitality market is the domestic tourism bias. Vietnamese tourists are generally more accepting and will be able to accommodate slight changes as the hospitality sector ramps up.”
MICE have always been an important revenue source for local hotels. We can expect that most corporates will be embarking on team building and wellness for their employees once they can travel again. Vietnam is favorably positioned and connected within the region and is very attractive to key feeder markets such as China and Korea. Now is the time for hospitality operators is to be refurbishing, training and getting ready for the ‘revenge tourism’, when it comes.
There is no doubt that the future will be strong for Vietnamese hospitality. Global operators continue to take substantial positions investing in Vietnam, there is a flurry of development throughout the country, with the coastline now almost fully taken up. Well informed local operators such as Wink Hotels still maintain their goal of 20 openings in the next 5 years. The wealth effect flowing through to the broader Vietnamese population will continue to under write domestic tourism, with very strong growth expected from international tourists. Like all hospitality markets its just a question of how much longer to wait.