Vietnam Hotel Industry

Tourism Industry in Vietnam[1]

2016 is considered to have been a “fantastic year with history-making results”. The Vietnamese Tourism Industry saw an increase in both to an all-time high, with 26% increase in total foreign visitor arrivals and an18.4% increase in total revenue. In 2016, Vietnam welcomed 72 million domestic and International visitors, higher than the target of 68.5 million visitors as set out by Vietnam National Administration of Tourism (VNAT). This is a remarkable achievement considering the ecological disaster in the Central coast, which haunted the industry in mid-year 2016, and where the number of visitor dropped significantly. The Vietnam Tourism Industry recorded a record 10 million international visitors and the highest yearly increase of 2 million international visitors

To accommodate the increasing arrivals for leisure and recreation, new hotels have been completed across the country. Over 8,700 rooms from 41 new 3-5 star hotels came into operation in 2016, increasing the total number of rooms to over 420,000 rooms, much higher than the number of neighbouring countries like Malaysia, Laos, and Cambodia.

Average Room Rate

The analysis of upscale hotels was performed by Star Ranking and Region. By Star Ranking, Room Rate for 4-Star hotels in 2016 started to pick up reaching USD75.0, recording an increase of 3.8% but still far behind the 2014 level. However, 5-Star hotels continued to see their rates dropped slightly by 2.2% from USD106.8 in 2015 to USD104.4 in 2016. The annual overall average room rate of upscale hotels in 2016 increased from USD87.0 in 2015 to USD88.1 in 2016.

RevPAR

RevPAR for Hotels increased in both Star categories, with a 10% rise at 4-Star hotels and 4.1% rise in 5-Star hotels. RevPAR for 4 star being US$ 51.4 and US$ 68.7 for 5 star properties.

Year 2016 marked a year of recovery with Occupancy Rates in general increasing for both Star Rankings. However, with the expanding room inventory and a lot of projects scheduled to launch in the near future, the competition in the upscale hotel market will start to heat up, especially for 5-Star hotels.

Profitability

In 2016, the upscale hotel sector saw a better year with EBITDA margin increased by 1.7% to 33.8% and GOP reached 36%. While the proportion of Fixed Charges and FF&E – Furniture, Fixtures and Equipment Reserves remained nearly the same for both years, the improvement in EBITDA was largely contributed by the positive change in both Departmental Expenses and Undistributed Operating Expenses.

Regarding purpose of stay, Individual tourists, Tour groups and Business travelers together comprised for over three quarters (77.6%) of total guests staying in high-end hotels in 2016. Looking at 4-Star and 5-Star hotels separately, the three segments made up for 83.1% and 71.8%, respectively.

The industry in 2017 continues to flourish with Grant Thornton forecasting 12 million foreign visitor arrivals. But as seen above this does not translate into a direct benefit to the upscale lodging industry as a lot of the growth is driven by budget airlines and budget regional travelers.