A five-star contest for Ho Chi Minh City

10:07 | 04/12/2012
With the changes in the trend of tourists’ demands for accommodation and the high future supply, a fierce completion among five-star hotel operators in Ho Chi Minh City is expected to happen in 2013.

Grant Thornton Vietnam’s managing director Ken Atkinson said “Whilst overall visitor arrivals are increasing and will reach at least 6.6 million foreign visitor arrivals this year the mix is changing with FITs (frequent independent travellers) and tour groups from North America and Europe being replaced by groups from neighboring countries, in particular Taiwan China and Korea. This is tending to lower occupancy in five-star hotels.”

Atkinson also said that the opening of the new five-star hotel properties including Le Meridien, Times Square, Vinpearl Saigon and The One will create an oversupply in the segment in the short term.

Savills Vietnam’s deputy managing director Troy Griffiths agreed that although there were normal delays in a long and complicated development process, he knew that all issues have been resolved and the five- star hotels [Le Meridien, Times Square, Vinpearl Saigon] would be opened the next two quarters. “With nearly 900 five-star rooms expected to come on line in the next 6 months so it will be interesting to see how operators handle the competitive pressure,” said Griffiths.

According to the latest report of Savills, Ho Chi Minh City currently has around 4,600 five-star hotel rooms from 14 projects. The average room rate of the segment has decreased by four per cent quarter while the overall revenue per available room significantly decreased by seven per cent quarter and quarter.

Griffiths explained that the third quarter is historically the low season and has naturally seen lower performance, however these metrics are generally around the same levels as 2011.  

“The primary clients of five star hotels are international tourists that have increased year on year by around 10 per cent.  Ho Chi Minh City also enjoys a relatively long average length of stay at approximately five days.  So the overall demand side picture is healthy,” added Griffiths.

However, Pham Ha, CEO of Luxury Travel shared that luxury hotels do a lot of promotion for tour operators, such as stay three, pay two in the high season, never seen it before. That meant the operators’ business is hard and the market is now oversupply before all above new hotels open.  
Ha believed that next year will be a hard year for Ho Chi Minh City hotels as in the tough global economy, travelers stay shorter and less luxurious whereas MICE and leisure international travelers would choose Bangkok or Kuala Lumpur which are offering lower five-star room rates than Ho Chi Minh City.

Dealing with the problems, Ha advised hotel operators to sit back, think about pricing policies and market share, work better with tour operators or travel agents instead of promoting directly to customers.

Atkinson said that the market for five star hotels will continue to run in cycles and for the next 12 - 24 months will be one of oversupply until visitor arrivals from Europe and North America start to increase and also business travelers in particular.

“Those hotels catering to Japanese business travelers will likely perform better than those who do not,” said Atkinson.

By Thanh Thuy


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