Hospitality property: The worst is already behind us

Following the opening of Phu Quoc to fully vaccinated tourists in Nov 2021, the government plans to introduce similar schemes for other tourism sites such as Khanh Hoa. Photo: Phu Quoc Island.

New supply for hospitality properties in 9M21 gradually bounced with 3,382 units, up 281.3% YoY, mostly from Ba Ria–Vung Tau, Phu Quoc, Binh Thuan, Khanh Hoa; leading sales volume to recover by 469.9% YoY to 1,744 units. The Take-up rate remained low at 51.6% (17.1% pts YoY).

VNDirect believed that hospitality property would recover quickly since 2022F on the back of Covid-19 vaccines along with recovery of Vietnam tourism. The headwinds from the pandemic may be over in the hospitality property market from end-2021. Landed hospitality property will be the first segment to benefit from the recovery as consumers sought locations offering seclusion and an outdoor environment. Following these points, this stock company like NVL, HDC, BCG, and CEO that are well-positioned to meet these factors with their ongoing hospitality resort projects in Ba Ria- Vung Tau, Phan Thiet.

According to the Vietnam National Administration of Tourism, the path to recovery for Vietnam’s tourism will follow four stages: 1) recovery led by domestic tourism; 2) pilot reception of limit ed international tourist groups in certain tourist sites; 3) reception of visitors from countries with good progress in Covid-19 containment; 4) full recovery of international tourism. Currently, VNDirect sees Vietnam entering the second stage with approval for Phu Quoc to welcome foreign tourists having vaccine passports since Nov 2021.

As for stage 1, domestic market visitors have returned since 2021 on the back of pent-up demand. VNDirect sees hospitality property in tourist areas with a strong domestic market such as Vung Tau, Phan Thiet, Mui Ne, Ho Tram become the first to recover since 2021, on the back of the resumption of domestic business travel and the rise in staycation demand. Although the recovery weakened from 3Q21 due to the emergence of the delta variant of COVID-19, there is already evidence of a recovery. The volume of domestic tourists reached 67% of pre-pandemic levels in 1H21. 

In addition, these areas also enjoy the advantage of infrastructure development such as Dau Giay – Phan Thiet expressway, Long Thanh international airport, providing a high potential for growth for investors. Of which, VNDirect sees NVL’s hospitality projects stand out with three project launches in these areas in 2021- 22F. NVL’s hospitality projects will be one of the first developers to recover post-pandemic.

With regards to stage 2, Phu Quoc, Khanh Hoa will be the first tourism site to open for international visitors with vaccine passports, recovery since 2022F. 

On 13 Jun 21, the Politburo has approved for Phu Quoc to welcome foreign tourists with vaccine passports. This will boost the recovery of hospitality performance on this island from 4Q21F. Especially, Phu Quoc has become Vietnam’s first island city in early-2021, therefore, real estate on this island remains healthy with land prices continuing to rise despite COVID-19. With the recovery from tourism, VNDirect believes hospitality property in Phu Quoc has much room for growth post-pandemic. Vingroup – one of the largest developers in Phu Quoc – will benefit the most to recover strongly with ongoing Vinpearl projects and the upcoming launch at Grand World project. 

Following the opening of Phu Quoc to fully vaccinated tourists in Nov 2021, the government plans to introduce similar schemes for other tourism sites such as Khanh Hoa.

Concerning stages 3&4, the hospitality property market will see a full recovery from 2023-24F with the bounces of international visitors. VNDirect sees all countries around the world are stepping up their immunization efforts to combat the COVID-19 pandemic. Several countries stand out for rolling out vaccination, of which Canada has the highest percentage of the population (61.6%) vaccinated with at least one dose of the COVID-19 vaccine, followed by the UK (59.4%), US (50.9%), Germany (45.1%), Italy (43.1%), France (41.2%) and China (estimated at 36.0%). The International Air Transport Association (IATA) is forecasting global air passenger volume recovery to pre-pandemic numbers sometime in 2023-24F.

According to CBRE, Asia Pacific recorded the largest decline in international visitor arrivals in 7M21, down 81.0% YoY due to the emergence of delta variant and slow vaccination rollout. VNDirect sees signs of recovery for the regional tourism market since 4Q21F with many countries already commencing to re-open for fully-vaccinated international tourists.