Hotel oversupply anticipated

The strong capital flow into the hotel sector has created the profuse supply with luxurious hotels established all over the country. The similar thing was seen a decade ago, when Vietnam witnessed the investment boom.
Despite the gloomy real estate market, investors still keep injecting money in hotel projects. A report by STR Global, a market research firm, released in July 2012, Vietnam is one of the countries in Asia Pacific which has the highest number of hotel rooms – 7100.
Dau tu newspaper has estimated that 4500-5000 hotel rooms which can meet 4-5 star standards would become operational by early 2013.
Vietnam once witnessed the hotel investment boom in 1995-1998, when foreign direct investment (FDI) created well-known hotels such as Hilton, Daewoo, Melia in Hanoi, or Renaissance Riverside and New World in HCM City.
The movement of investment in luxurious resorts, hotels
One of differences between the hotel investment boom in 1995-1998 and the one in 2012, is the appearance of big scale resorts now, which was not seen in the past. The Ho Tram Strip Complex project in Ba Ria – Vung Tau province, is one of the huge projects with the total investment capital of 4.2 billion dollars.
Lloyd Nathan, CEO of Asian Coast Development Ltd, the investor of the project, said MGM Grand Hotel with 541 rooms is expected to make debut in early 2013. Meanwhile, the second MGM Grand Hotel with 559 rooms would be kicked off soon.
In Thua Thien – Hue province in the central region, the first phase of the Laguna Lang Co resort with the total registered investment capital of 900 million dollars would be operational from November 1, 2012, with Angsana hotel (229 rooms), Banyan Tree resort and a 18-hole golf course.
The ambitious investor plans to execute the next phases of the project which would have seven hotels in total with 2000 hotel rooms, apartment blocs and villas to be situated on an area of 280 hectares.
There is a special thing in the newly developed projects that besides hotel rooms, the resorts would have villas and apartments for sale, while the buyers would be able to rent the villas and apartments.
At Hyatt Regency in Da Nang City, for example, besides the 200 hotel rooms, there are also 182 apartments and 27 villas. At Vinpeal Luxury Da Nang, there are 200 hotel rooms and 39 villas opened for rent.
This proves to be the model followed by many other investors, who are developing projects, including Crowne Plaza Nha Trang or Blue Saphire in Vung Tau City.
Oversupply warned
Experts have voiced their warnings about the oversupply of hotel rooms, which would put big difficulties for investors. The problem is that a big amount of hotels has been put into operation in the context of the economic downturn, which has led to the decrease of the number of travelers.
Kai Marchus Schroter, CEO of the HTM Hotel Management and Tourism, said hotel developers would meet big difficulties in the next year, partially because of the oversupply of hotels and the cutthroat competition among the developers in some certain cities and tourism sites.
In the sea city of Da Nang in the central region, for example, there were only two 5-star hotels in 2010, namely Hoang Anh Gia Lai and Furama Resort, while the figure has increased recently with the appearance of Mercure, InterContinental, Hyatt Regency and Crowne Plaza.
Ha Noi Moi newspaper has quoted CBRE’s report, a real estate service provider, as saying that Hanoi would have 300 3-4 star hotel rooms in the fourth quarter of 2012, while it would have 1000 more hotel rooms in 2013.