Hotel oversupply anticipated

Posted on October 31, 2012


The strong capital flow into the hotel sector has created the profuse supply with luxurious hotels established all over the country. The similar thing was seen a decade ago, when Vietnam witnessed the investment boom.

Poor hospitability services and hotel overbuilding glut will likely result in major market adjustments

Despite the gloomy real estate market, investors still keep injecting money in hotel projects. A report by STR Global, a market research firm, released in July 2012, Vietnam is one of the countries in Asia Pacific which has the highest number of hotel rooms – 7100.

Dau tu newspaper has estimated that 4500-5000 hotel rooms which can meet 4-5 star standards would become operational by early 2013.

Vietnam once witnessed the hotel investment boom in 1995-1998, when foreign direct investment (FDI) created well-known hotels such as Hilton, Daewoo, Melia in Hanoi, or Renaissance Riverside and New World in HCM City.

The movement of investment in luxurious resorts, hotels

One of differences between the hotel investment boom in 1995-1998 and the one in 2012, is the appearance of big scale resorts now, which was not seen in the past. The Ho Tram Strip Complex project in Ba Ria – Vung Tau province, is one of the huge projects with the total investment capital of 4.2 billion dollars.

Lloyd Nathan, CEO of Asian Coast Development Ltd, the investor of the project, said MGM Grand Hotel with 541 rooms is expected to make debut in early 2013. Meanwhile, the second MGM Grand Hotel with 559 rooms would be kicked off soon.

In Thua Thien – Hue province in the central region, the first phase of the Laguna Lang Co resort with the total registered investment capital of 900 million dollars would be operational from November 1, 2012, with Angsana hotel (229 rooms), Banyan Tree resort and a 18-hole golf course.

The ambitious investor plans to execute the next phases of the project which would have seven hotels in total with 2000 hotel rooms, apartment blocs and villas to be situated on an area of 280 hectares.

There is a special thing in the newly developed projects that besides hotel rooms, the resorts would have villas and apartments for sale, while the buyers would be able to rent the villas and apartments.

At Hyatt Regency in Da Nang City, for example, besides the 200 hotel rooms, there are also 182 apartments and 27 villas. At Vinpeal Luxury Da Nang, there are 200 hotel rooms and 39 villas opened for rent.

This proves to be the model followed by many other investors, who are developing projects, including Crowne Plaza Nha Trang or Blue Saphire in Vung Tau City.

Oversupply warned

Experts have voiced their warnings about the oversupply of hotel rooms, which would put big difficulties for investors. The problem is that a big amount of hotels has been put into operation in the context of the economic downturn, which has led to the decrease of the number of travelers.

Kai Marchus Schroter, CEO of the HTM Hotel Management and Tourism, said hotel developers would meet big difficulties in the next year, partially because of the oversupply of hotels and the cutthroat competition among the developers in some certain cities and tourism sites.

In the sea city of Da Nang in the central region, for example, there were only two 5-star hotels in 2010, namely Hoang Anh Gia Lai and Furama Resort, while the figure has increased recently with the appearance of Mercure, InterContinental, Hyatt Regency and Crowne Plaza.

Ha Noi Moi newspaper has quoted CBRE’s report, a real estate service provider, as saying that Hanoi would have 300 3-4 star hotel rooms in the fourth quarter of 2012, while it would have 1000 more hotel rooms in 2013.


Travel firms boycott “arrogant” tourist sites

Overcharging travelers, setting high excursion fees, receiving guests in a discourteous manner, tourist sites have been keeping travelers away.

Bui Minh Tam, Deputy Director of Minh Tam travel firm in Bac Ninh province, showed VietNamNet’s reporters his “black list,” where there are the names of the localities and tourist sites Tam would advise his clients not to go to.

Tam said his travel firm arranges the excursion trips to the Hanoi Zoo for some 10,000 students every year. He complained that the admission tickets are too expensive, with 70 percent of the primary school students having to buy the tickets for adults due to the unreasonable way of classifying children in accordance with height. Meanwhile, the security guards regularly conduct discourteous behaviors when receiving students.

At the Tuan Chau tourist site in Quang Ninh province, the admission ticket for a four year old child is the same as the ticket for a young boy 1.8 meters tall. Visitors have to pay 160,000 dong to use all the services in amusement areas. However, they don’t have many opportunities to play here, because the machines that operate games have broken down.

The Ba Vi National Park in Hanoi is one of the most famous destinations for travelers. However, the admission tickets to some tourist sites managed by the Ao Vua Tourist Company have been raised continually. Visitors now have to pay 70,000-100,000 dong, an overly high level if compared with the service quality they receive.

Therefore, Tam said the firm has boycotted Ba Vi, having stopped running marketing programs and bringing travelers to Ba Vi.

The Ba Na tourist site in the central city of Da Nang has also been cited by Tam as an unattractive destination for travelers. Travelers now wish to go to Ba Na, advertised as the “fairy land,” where people can enjoy all the four reasons within one day.

Tam said that Ba Na would keep travelers away if it does not change the way of management.

In high travel season, hotels all raise the hotel room rates. Especially, the rates travelers have to pay are not the ones quoted on mass media. Hotel managers try to charge as high as possible.

On the April holiday, Minh Tam had to pay 1 million dong for a hotel room in Da Nang with guest house standards, and it had to make payment once before travelers came.

In the north, Sam Son beach in Thanh Hoa province and Cat Ba in Hai Phong are the terrible destinations for domestic travelers. Pedicab drivers or taxi motorbike drivers always persuade passengers to buy seafood products at the shops they introduce, because they would get commissions from the shops.

Meanwhile, hotels would only accept bookings if travelers agree to have meals at the hotels. In most of cases, travelers complained that they were overcharged: they had to pay 120,000 dong per ration while the price should be 70,000 dong only.

A tour guide related that when he asked the owner of a restaurant in Thanh Hoa why everything was so expensive in the locality, he was told that since the tourist season lasts three months only, he has to take full advantage of the opportunities to earn money by overcharging travelers.

Who’s to blame? A reader emailed to VietNamNet from ngocminhtourist14a@…, who introduced himself as the division head of a travel firm in Hanoi, said the Vietnam National Administration of Tourism VNAT has to take responsibility for this.

A question raised at nearly all tourism workshops that why domestic tours do not attract Vietnamese travelers. And the answer to the question could be found in the stories.

Ngoc Ha