Resort glut feared in construction boom

The large number of upscale hotels and resorts being built across the country could create an oversupply and lead to unhealthy competition among hoteliers, experts have warned.
Many of the bigger projects, all of which are expected to open next year, are located in Da Nang, Ha Noi, Nha Trang and HCM City.
STR Global, a market research company, said 7,100 new rooms in hotels and resorts were now being built in Viet Nam, the highest figure in the Asia-Pacific region.
Of those, 4,500 to 5,000 rooms belong to the 4-5-star category and are expected to hit the market next year, according to a report in Dau Tu (Vietnam Investment Review) newspaper.
During the 1995-98 period, only a few five-star hotels were built, including the Hilton, Daewoo and Melia in Ha Noi and Renaissance Riverside and New World in HCM City.
Today, foreign investors are developing many large luxury hotel and resort projects, and domestic investors are also pouring money into big hotels.
Many new resorts have apartments and villas that are sold to buyers who then lease them, creating an oversupply on the market.
Local developer, Bitexco Group, is involved in the construction of two luxury hotels, the JW Mariott in Ha Noi and The Ritz-Carlton in HCM City.
Another domestic investor, the Vingroup, is setting up the Vinpearl hotel chain in Nha Trang, Da Nang and HCM City.
In addition, some local investors are buying hotels and resorts from foreign investors.
Construction has been on the rise primarily because of two reasons: the rising number of foreign visitors in recent years and the potential for tourism recognised by international organisations.
However, many experts warn that the country could have a glut of hotels and resorts as the number of international visitors has been dropping due to an uncertain global economy.
Dau Tu newspaper quoted Kai Marchus Schroter, CEO of HTM Management Consultancy Ltd Co, as saying that the hotel and resort business could face many problems.
One of the biggest challenges will be the severe competition among hotels and resorts in certain locations.
For instance, before 2010, there were only two five-star resorts in Da Nang. But in recent years, the total number of five-star hotel rooms has gone up to 1,650.
If hotels or resorts do not incorporate special features, including location, design, architecture and services, they could face crippling competition, according to Schroter.