Phú Quốc Island, an attractive tourism destination, is challenged by a surplus in the number of available rooms. — Photo courtesy of Nguyễn Mạnh Tuấn

HCM CITY — With around 20 million four- and five-star room nights available in Vietnamese hotels each year, developers should halt new projects in many coastal areas until such time that tourists fill them, according to property consultancy firm Knight Frank.

The company also said robust performance in prime city hotels and high-end resorts shows two different paths for hospitality assets in the country.

Before Covid there were 18 million visitors a year, Ben Gray, the company’s director of capital markets, said.

“In 2023 we received 12.6 million – largely off the back of a buoyant Q4, which continued into a solid Q1 of this year, where we saw 4.6 million people visit our shores.”

“At a high level, if we are to assume 30 per cent of these arrivals were to consider staying in high-end properties and that they travel in pairs with a typical twin-share vacation, for seven nights – which the Việt Nam National Authority of Tourism said was the average stay in commercial accommodation before the pandemic – then Việt Nam is really only able to fill about a third of its current 4-5 star room-stock.”

He acknowledged that local visitation remains a bright-spot, and the five-day extended break at the beginning of May saw eight million local tourists see the sights of their homeland, but said even this is under threat with airlines offering compelling pricing and packages to other countries in the region while domestic airfares continue to climb.

Gray’s concerns echo similar feedback from tourism authorities in places like Khánh Hoà, with appeals to build new attractions rather than more hotels for Nha Trang and its surrounds.

This coincides with low occupancy rates reported in destinations including Phú Quốc and the controversial and widely publicised overdevelopment of various tourist hot spots, including Hạ Long Bay.

“These are areas where development has run rampant, and yet the development of tourism infrastructure and the product itself has not seen demand keep pace with inventory growth – and particularly with the delayed return of visitors from key source markets including China and Russia,” Gray said.

He said investor sentiment about Vietnamese hospitality is challenging. International investors see regional competitors like Thailand, Indonesia, the Philippines, and Malaysia as offering better value for money on investments in travel and tourism than Việt Nam.

“Prime assets remain prime assets, however.

“Internationally branded, well operated CBD hotels in HCM and Hà Nội continue to attract the attention of investors from around the world, and these command a premium which is backed by performance.

“Similarly, well located boutique properties are attracting the interest of international investors, who see the properties as appropriately priced. These are often able to command premium rates all year round from visitors and operate at a lower cost base than larger developments, providing a compelling business opportunity.”

He highlighted other areas where resort strips have emerged, but little accompanying infrastructure or tourism activities have been developed to offer visitors attractive activity options outside the resort’s grounds.

“Much can be done to improve Việt Nam’s appeal to international visitors around its development as a product, the improvement of its landscapes and environment, and the red tape surrounding everything from investments to visa processing.

“These issues need to be addressed to continue Việt Nam’s rise as a travel destination and should be prioritised over the development of further hotels and resorts.” – VNS