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Hospitality property in short supply

Released at: 20:43, 04/12/2017

Hospitality property in short supply

Photo: Khanh Chi (VET)

Investors at latest Savills' "Meet the Experts" event hear experience and knowledge in changing property trends and future of local hospitality industry.

by Hong Nhung

Millennials have been shaping a completely new lifestyle that is presenting challenges in creativity and adaptation for real estate developers in Vietnam, particularly for the future of the local hospitality industry, according to Savills Hotels. Its third series of the “Meet the Experts” event held recently was again well received.

Hospitality experts share valuable insights with local hotel developers at the regular event, on matters such as emerging industry trends and market conditions, and also present new development approaches.

Mr. Morris Sim, Chief Marketing Officer at Next Story Group, discussed the impact the sharing economy and digital media have had on hospitality and presented the Next Story Group’s new brand Kafnu, which blends living, working, learning, playing, and relaxing and is set to launch in Ho Chi Minh City during 2018.

The key points presented by Mr. Mauro Gasparotti, CEO of Savills Hotels, showed how the sector has experienced strong global growth in 2017, with a remarkable 6.6 per cent increase in the first eight months of this year. Sector growth is expected to continue from cheaper flights, improving travel technologies, relaxed visa policies, falling language barriers, and ever-increasing traveler appetites for discovering new countries and destinations.

Hotel and resort performance this year has been strong, especially in Hanoi and Ho Chi Minh City, where occupancy growth has been outstanding, with levels averaging 81 per cent and 73 per cent, respectively. Da Nang and Nha Trang saw large increases in arrivals, which improved year-on-year occupancies and, despite more new openings this year, a slight increase in average room rates.

“2017 was a particularly good year for hotels in the two main cities,” said Mr. Gasparotti. “The combination of growing demand from leisure and business guests and a supply shortage has lead hotels to run at high occupancy levels; well above budgets set at the start of the year. As there will be relatively limited new supply entering in the next few years in Ho Chi Minh City and Hanoi, this should lead developers to consider hotel developments with potential for higher yields and to diversify real estate portfolios.”

He also warned, however, that the majority of new supply is concentrated in beach destinations and unfortunately condotel volumes are now higher than resort units. With that comes a higher risk of a category price war, especially in the case of a demand slowdown. Often developers fail to carefully consider hotel or resort developments’ positioning and appeal and how to add value to the area itself, rather than simply planning high rise buildings with limited value for the destination besides adding inventory. A more complete development approach will be the only way Vietnam’s hospitality sector will properly evolve with sustainable growth that benefits provinces and communities.

It was also noted that Vietnam lacks product variety compared to more mature tourist destinations like Thailand and Bali. Wellness resorts, spa destination resorts, senior living communities, poshtels and co-working hubs, design and art boutique resorts, high-tech hotels, and selected services hotels are examples of products not in the local market but with a strongly growing global demand.

Mr. Sim explained how the collaborative economy has made sharing resources commonplace, and monetization of sharing is now acceptable to consumers. Additionally, Generations Y and Z have new demands for working, living, playing, and learning. He presented market research the Next Story Group conducted across APAC that shows how hotels must evolve to remain competitive. By connecting real estate with local and transient consumers, and pricing via a membership model rather than by use, Kafnu reinvents urban spaces for the new generation.

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