Local hotels: room to grow

Karl Derek John is back in business in Vietnam

John, backed by a large amount of international investment funds, is hammering ahead with a state hotel project boasting a budget of $500 million in cash. The project was initiated in 1994 when John first came to Vietnam.
“At that time, there were no five-star hotels in Hanoi and I stayed in state hotels. I realised that in order for state hotels to compete with foreign-invested hotels, they needed structural improvement and staff training,” he said.
The Australian’s initial aim was to find financing for state hotels to upgrade their facilities and services. However, the project was interrupted by 1997’s Asian financial crisis, which destroyed numerous joint venture contracts and made his job impossible.
Four years later, John was back in Vietnam and determined to see the project through. This year he reached a memorandum of understanding with four state-owned hotels and, if final agreements are reached, foreign investors will set up joint ventures with hotels to upgrade their facilities.
John said the need for upgrading state-owned hotels was more critical than ever as foreign-invested hotels had spiced up the market.
“In the next few years, state hotels will have real problems because they do not have international standard services and rooms,” he said.
He said Vietnam is attracting more high-end visitors who require international standard services that cannot be provided by state-owned hotels.
John quickly gained the support of foreign investors. But, it has taken a long time for Vietnamese interests to come around to his way of thinking.
“I know it takes a long time, I know it is difficult, but I believe that it is possible.”
His ambition is to replicate the project, if it is successful, across the country. To back up this initiative, John is going to open Nha Trang’s first international hospitality training school next year to train hotel staff, a pressing need for Vietnam’s nascent hospitality sector.
“We want to open nine hotel schools and Nha Trang will be the first,” he said.
John also has a special interest in Phu Quoc island. He is working with local companies on behalf of foreign investors on three large resort developments on the island, which is just a one hour flight from Ho Chi Minh City.
The first project, with an estimated price tag of $250 million, will see three- to five-star hotels built with villas for sale and lease, plus commercial and entertainment facilities. Another is a casino resort on an islet and the third is a resort to be built on Truong beach.
Foreign investors came with him this month to talk about the projects with local companies.
John said he was confident Phu Quoc could become another Phuket and Bali due to its fine climate and accessibility from regional hubs such as Bangkok and Singapore.
John is confident Vietnam is going to be a leading tourist destination in the future, but knows it will take time – especially for foreign investment to trickle down into the hotel and tourism sector.
“Quick investment won’t come.”
“One of the criteria, when I look for investors, is those who can take a long-term view for Vietnam. You cannot take a short-term view because in Vietnam everything has to go step by step.”
He pointed out that Vietnam had no luxury hotels a decade ago, but now boasts a lot of high-end accommodation. He was confident that there would be strides forward in the next 10 years.
“That’s why we plan to invest in Phu Quoc in 10 years time.”
He added that foreign investors saw China, followed by India, as the best places to do business. However, he is trying to convince them to give Vietnam time.
“We cannot expect Vietnam [to be] like other countries because it is developing.”