Vietnam’s real estate and hospitality markets are transforming but are facing several significant short-term challenges, according to experts at the “Meet The Experts (MTE)” conference hosted by Savills Hotels in partnership with WeHub on March 30.

The hospitality market had major momentum prior to the pandemic, moving from a destination only for experienced travelers to a place for holiday and leisure travelers, according to Mr. Mauro Gasparotti, Director of Savills Hotels. It rivaled international travel hubs like Thailand thanks to the joint efforts of many industry players.

However, development outpaced demand, he added, and now we are dealing with the consequences of overdevelopment, like incomplete or underperforming projects. The market needs time to readjust. On a positive note, several high-quality hotels and resorts in the country are doing exceptionally well, and they will keep doing so for the foreseeable future. Projects that have been properly implemented and are correctly managed will recover faster.

Tourism also faces difficulties, such as inflation, global political tensions, higher airfares, and labor shortages. Recovery in Vietnam is fragmented. Ho Chi Minh City has seen significant recovery, with occupancy fast reaching 2019 levels. “However, properties in Nha Trang and Da Nang are still struggling to improve performance,” he said. “Operating margins in these areas are 40 to 60 per cent lower than in Bali and Phuket.”

Similarly, Ms. Fenady Uriarte, Business Development Manager, Southeast Asia, at STR, said that while Southeast Asia’s RevPAR (revenue per available room) year-to-date in February moves closer to 2019 levels, at -3.6 per cent, Vietnam’s overall RevPAR is still 33.4 per cent behind. “However, ADR [average daily rate] is moving in the right direction,” she said. “As we look ahead, key source market reopenings, such as China and Japan, could present an upside for Vietnam.”

Classic hotel brands dominate in Vietnam. By 2026, more lifestyle brands are expected, including Voco, Hyde, Hotel Indigo, Caption by Hyatt, L7, and Garrya. New types of travelers are emerging, who focus on the overall experience and have higher expectations, which has fueled the rise of lifestyle hotels.

Millennials make up 30 per cent of Vietnam’s population and are shaping the travel landscape. “I am both concerned and optimistic about this sector in Vietnam,” said Mr. Norbert Vas, COO of Archipelago Indochina. “Concerned about where big operators are taking the concept, but optimistic because there is vast local talent and creativity and a burgeoning young domestic class of sophisticated travelers who would gladly embrace the lifestyle concept if executed correctly,” he added.

Over the next three years, forecasts are for significant growth in the luxury hotel segment. While luxury rooms currently have 2 per cent of total supply, they have 5 per cent of the pipeline. Luxury-branded residences are increasingly popular in Vietnam.