Revitalizing Vietnam’s hospitality sector: A shift in branding

Vietnam's hotel industry is witnessing remarkable growth in 2024, marked by a notable 15 per cent increase in revenue per available room year-to-date through July. This growth rate is among the highest in Southeast Asia, driven largely by a resurgence in occupancy rates.

Popular beach destinations such as Nha Trang-Cam Ranh and Phu Quoc have experienced a significant rebound, with occupancy rates rising by 40-50 per cent compared to the previous year. This surge is attributed to a strong recovery in international tourism.

However, average room rates have decreased by 3 per cent from last year. This decline is primarily due to lower rates in key markets like Nha Trang and Phu Quoc, where newly opened properties are still establishing their market presence.

Mauro Gasparotti, Director of Savills Hotels, noted, “The strong recovery in demand this year, particularly from certain source markets, is promising for hotel owners who have been anticipating this rebound since the global lockdown. With tourism volumes returning, hotels must now effectively capture this demand.

Competition will be intense, and properties are beginning to look towards 2025 to rebuild their margins. This increased market maturity is prompting more owners to consider rebranding and repositioning their properties to higher tiers.”

In addition to new developments, hotel operators are increasingly exploring conversion opportunities to expedite property operations. The ratio of brand conversions to new branded openings in the midscale-and-above segments reached 52 per cent in 2022-2023.

This trend is expected to persist, with 30 per cent of new branded openings in 2024 anticipated to be conversions.

Gasparotti further explained, “The first wave of branded hotel development in Vietnam began around 2008-2010, with many contracts nearing expiration. Developers will have opportunities to renew or seek alternatives, potentially including rebranding to higher tiers. With a more mature market, operators are now more willing to elevate brands if property quality meets their standards, leading to increased brand changes.”

Uyen Nguyen, Head of Consultancy at Savills Hotels, added, “Some projects are collaborating with operators to revitalize stalled developments and refresh branding. Major projects in Danang and Hanoi are restarting construction and seeking international brand partnerships.

Additionally, properties are considering upgrading within the same brand portfolio to align with market maturity. For instance, Hilton Hanoi Opera will become the first Waldorf Astoria in Vietnam, and Meliá Ba Vi Mountain Retreat will be rebranded as Meliá Ba Vi Mountain, part of the Meliá Collection.”

Brand cooperation is also extending to the residential sector through the Branded Residence concept. Gasparotti noted, “Branded residences, including beachfront villas and urban luxury condominiums, are gaining popularity globally. These residences offer enhanced services and increased trust.

In Vietnam, six ultra-luxury branded residence projects are under development. The launch of Nobu Residences in Danang and Mandarin Oriental Residences in Phu Yen and Danang reflects continued interest.”

With the resurgence of international tourism, Vietnam is also seeing a revival in hotel and resort development. The country ranks second in the Asia Pacific region (excluding China) for hotel development pipelines, with 191 projects and 49,800 rooms under construction through 2028. Nearly three-quarters of these projects are in the midscale to upscale segments, with almost 70 per cent being chain-branded.

Gasparotti remarked, “The ultra-luxury segment is expected to grow significantly, doubling its current base of seven properties, all associated with long-standing international brands. Luxury and ultra-luxury properties are predominantly concentrated in Ho Chi Minh City, Hanoi, and Phu Quoc, representing 50 per cent of Vietnam’s luxury properties.

Over the next four years, the market anticipates an increase in luxury properties in emerging destinations such as Phu Yen, Sa Pa, Ninh Binh, and Vinh Phuc, which are ideal for luxury travelers.”

International hotel chains are also focusing on mid-tier expansions. Hilton plans to more than double its Hilton Garden Inn presence in Vietnam in the coming years. The growing middle class is driving demand for value-for-money travel and accommodation options.

Nguyen added, “There is significant interest in the mid-tier segment due to its efficient model and adaptability to market dynamics in Vietnam. The sector is leveraging brand power and distribution networks to enhance competitiveness amid rising competition. Innovations such as technology applications and streamlined processes are crucial for minimizing labor and improving efficiency.”

Select-service hotels, known for their cost-effective approach compared to full-service models, are projected to see a 70 per cent increase in key counts over the next four years, reaching 14,600 rooms.