How would you assess Vietnam’s hotel and resort real estate market at this stage? Do you think there may be a large-scale sell-off of properties?

Mr. Mauro Gasparotti, Director, Savills Hotels APAC: Operations are still fragmented in Vietnam and certain locations perform better than others. The recovery of coastal resorts has been slower than anticipated, especially for those that rely on international demand. Domestic and South Korean markets supported the recovery in Da Nang, with some beachfront properties exceeding 50 per cent occupancy. However, Nha Trang has been heavily affected by the fall in Chinese tourists and the significant number of openings over the past few years.

Certain cities have experienced significant recovery, particularly Ho Chi Minh City, where occupancy is fast reaching 2019 levels. Average daily rates, however, are between 15 and 20 per cent lower than pre-pandemic levels.

Last year, drive-by destinations [those accessible from major cities by car] showed robust performance after the national lockdown was lifted, but there has been a slight decline since the beginning of this year. We have also seen the reopening of borders spur demand for outbound travel.

Prior to the pandemic, Vietnam experienced remarkable growth between 2009 and 2019, with international travelers increasing 16.9 per cent a year. High demand boosted confidence in the sector, with a strong development pipeline. This strong growth was interrupted by the pandemic, and it will take time to recreate the necessary momentum to reach pre-pandemic levels.

The slow recovery and undesirable economic conditions have seen hotel owners and management teams struggle to return to normalcy, with many facing financial pressures, especially given the credit limitations on real estate.

Asset prices remain an obstacle for transactions. This year, there are considerably more hotels and resorts for sale than last year due to the slow recovery and high interest rates. However, in the first quarter, asking prices still included premium expectations and did not accurately reflect the market conditions and risks associated with future volatility. We expect to see the gap narrow and more distressed assets will be on the market over the remaining months of 2023.

What differences can be seen in the hotel and resort real estate market before and after the pandemic?

Ms. Uyen Nguyen, Head of Consultancy, Savills Hotels APAC: The pandemic has accelerated tech adoption in hotel operations, with many having implemented contactless technology, varying from self-check-in / check-out, in-room controls, and other sophisticated AI applications.

There are emerging trends, such as a rise in millennial travelers and travelers with hybrid lifestyles who can work remotely from anywhere in the world, including their favorite holiday destination. These new types of travelers desire unique experiences and tend to look beyond conventional offerings.

Given tourism’s pressure on natural resources and the environment as well as greater health-consciousness post-pandemic, there is rising demand for sustainable tourism options. Travelers want to engage in positive practices, including wellness activities, contributing to local communities, and minimizing their impact on the environment.

We anticipate a decline in demand for large tour groups, with a greater shift towards smaller, experiential tours. Tour groups from traditional feeder markets such as China are expected to resume slowly, due to reduced flight capacity and changes in post-pandemic travel behavior.

What should investors pay attention to when investing in hotel and resort real estate?

Ms. Uyen: Hospitality is a vulnerable industry, easily affected by economic and political movements. Furthermore, the industry faces constant competition and changes in consumer behavior and preferences, which can quickly affect demand for certain types of services or accommodation.

Vietnam suffers from a shortage of high-quality offerings and product diversity. Many developers tend to replicate existing designs or concepts without adequately considering market trends or product identity.

These mass-market products are problematic because they are often large complexes with thousands of units that do not have true identities. These properties appeal to groups and are reliant on the return of Chinese travelers and other key source markets. They also tend to face price wars.

To create a positive long-term outlook, developers must examine industry trends that align with the needs of new travelers and market trends before they build. To be feasible and effective, products must demonstrate a certain understanding of concepts and require that key stakeholders and industry leaders work together.