How will international tourism support Hanoi-based hotels?

Hilton Ha Noi Opera

Despite significant demand from local customers in 2022, international traveller numbers still trail 2019. Developers need to create comprehensive strategies to increase occupancy and should carefully assess the market while planning new developments.

Tourism in Vietnam

In 2022, there were 101.3 million domestic tourists and 3.7 million foreign visitors, up 2,228% year, according to the General Statistics Office (GSO). (YoY). The percentage of foreign visitors increased from 0.4% in 2021 to 3% in 2019, however it was still less than 17%. Without Chinese tourists, Koreans made up 26% of all foreign visitors, followed by Americans with 9%. India has a 3% share in the emerging market. 18.7 million people visited Ha Noi, well exceeding the intended 10 million. The 1.5 million foreign tourists surged by 650% YoY, while the 17.2 domestic visitors increased by 330% YoY.

Regular flights between Viet Nam and China will resume soon as Chinese travelers are anticipated to return. The Chinese government has postponed the restart until the end of April or the beginning of May 2023. The return of this important source market is eagerly anticipated by the hospitality industry.

Along with leisure travelers, business travelers, MICE visitors, and international investors also contribute to demand. Given the strong FDI inflows to Viet Nam, demand from these visitors is strong. Foreign investors typically travel to nearby regions like Bac Ninh and Hai Phong but remain in major towns like Ha Noi.

According to Savills' Q4/2022 market report, occupancy increased by 7 points (quarter-over-quarter) QoQ and 22 points (year-over-year) to reach 49%. ARR of VND 2.5 million increased by 41% year over year and 15% quarter over quarter. ARR of VND 2.2 million climbed by 23% in 2022, while overall occupancy improved by 16 percentage points to 39%.

Increasingly diverse products

There will be eight constructions totaling 1,300 rooms in 2023. With the help of foreign operators like Four Seasons, Lotte, Dusit, Wink, Accor, The Shilla, Hyatt, Marriott, and Hilton, 60 developments totaling over 10,300 rooms will open in Ha Noi starting in 2024. Due to renovations, the Hilton Ha Noi Opera will temporarily close and reopen under the Waldorf Astoria name.

The pandemic has highlighted the value of design, user experience, and high-quality service. Instead of large initiatives, customers want unforgettable experiences. Developers need to take this into consideration and consider alternative goods like wellness resorts, resorts with entertainment amenities like beach clubs and adventure sports, poshtel (an accommodation concept geared at the young), senior living resorts, or premium serviced apartments.

Ms. Do Thu Hang, Senior Director of Advisory Services, Savills Ha Noi said: “Demand still trails supply in Viet Nam, particularly in coastal markets. For example, occupancy in Da Nang is still -50% less than in 2019. Given the highly competitive market, developers must use very careful planning, development, and operational strategies.”

Investors should also research the available properties on the market before they invest. Hotels and resorts have different characteristics and varied opportunities and challenges. Therefore, investors must understand the nature of the product and the long-term potential rather than just the cash flow statement.

Ms. Uyen Nguyen, Head of Consultancy, Savills Hotels APAC, said: "Investors must determine why they want to own a product. They should also partner with developers with good track records who produce high-quality products. Understanding the operator, its reputation, the leasing structure, and the amenities are also basic parts of acquiring a hospitality asset.”