The 2008 Vietnam Tourism Property Opportunities Conference & Exhibition (VnTPO), hosted at the New World Hotel in HCM City on April 16th and 17th, was an ambitious gathering for the future of Vietnam’s tourism industry, Bringing together bigwigs from the People’s Committee, provincial party leaders, and potential tourism investors, the VnTPO featured keynote speeches from some of the biggest names in the real estate and finance sectors.
Investors and government officials shared their enthusiasm for the tourism industry’s potential growth, but the reoccurring topic was the reality of Vietnam’s infrastructural shortcomings. The need to increase transportation capacities and add more hotel rooms to the available supply was highlighted by all presenters during the plenary session, and these infrastructural challenges as well as rising land and building costs are Vietnam’s biggest short-term hurdles.
Robert Hecker of Horwath HTL noted that, “the lack of supply is inflating room rates and ultimately depressing foreign arrivals.” Describing the country as a “multidimensional resource,” he recognized the strategic advantage of Vietnam as being the diversity of its tourism product with offerings to please budget travelers, specific-interest groups and the elite leisure market.
The competitive positioning, in addition to the lack of inventory, are what make Vietnam such a hot tourism market for investors. While developers are building the future of Vietnam’s tourism industry — and chasing down investment certificates to do so — operators are reaping the benefits of the growing demand. Vietnam’s small supply of upscale accommodations is sustaining high occupancy and average daily rates across the market.
Asking for a reality check in the industry, Kenneth Atkinson of Grant Thorton compared the $US250-300 room rates at the Park Hyatt Saigon to the $US125-200 rates at similar 5-star properties in Kuala Lumpur, demonstrating the need for local operators to consider regional competition and the price inelasticity of travelers.
However, competitive pricing is not a current concern of operators.
Thibaud Paquin, General Manager Development Asia, Accor Hospitality, noted that average daily rates at Accor’s properties have risen 69% since 2006, attributing this increase to the lack of inventory in the market.
Representing the public sector, Nguyen Trung Tin, the Deputy Chairman of the People’s Committee of HCM City, delivered a welcoming address to the conference attendees, signaling the government’s support of investments into the country’s tourism sector. Phan Huu Thang, the Head of the Foreign Investment Agency for the Ministry of Planning & Investment (MPI), also participated in the plenary session with a presentation of foreign direct investment (FDI) figures. Quoting the conferences theme, Phan urged investors to “unveil the hidden charm to make the potential [of Vietnam’s tourism industry] a reality.” He cited that FDI for the last 20 years has exceeded $US104 billion, of which more than 10% has been for the development of hotels, resorts and leisure projects.
Phan’s presentation highlighted the government’s commitment to make infrastructural improvements in the form of roadways and ports as well as its policy of providing special incentives such as exemptions and tax holidays on land leases to facilitate investments in the tourism industry. Anticipating the audiences concern about licensing issues, he confirmed that, “the Vietnam Government and Foreign Investment Authority will do its best to support investments into the tourism sector. We strongly commit to advance the legal environment and complete the investment incentive policies for attracting more investors into the tourism sector.”
Bringing everything to a head, Marc Townsend, the managing director of CBRE Vietnam, famous for his rapturous speeches, modified a Sir Winston Churchill quote saying, “let’s get it right this time, or it will be the beginning of the end.” His caveat was targeted at the adverse effects of escalating land and construction prices on foreign investments into the real estate sector. “Tourist arrivals are great; FDI is great; Vietnam’s international media exposure is great; but the country’s valuation and due diligence systems are way out-of-line.” Vietnam has certainly “entered the world stage,” he proclaimed, but in the face of rampant inflation, the financial outlook is dire.
High prices will cause investors to look elsewhere in Asia, he warned.
When asked by an associate from Lehman Brothers, “why investors should look towards Vietnam,” Townsend pointed to the usual factors of affordability, urbanization and the lack of infrastructure as the ultimate attraction but noted that, “a lot of people come to Vietnam and fall in love with it for their own reason. And this is the charm of Vietnam.”
Reported by B. Hawkins Pham of Blackwell Media
HCM CIty, Vietnam
info (at) blackwellmedi (dot) com