The largest private luxury hotel chain in Vietnam suffered severe losses

By Tran Anh - Jul 04, 2018 | 07:45 AM GMT+7

TheLEADERBesides suffering losses in its hotel business over the years, Muong Thanh Hospitality also has to deal with several legal issues, mainly from the construction of high-end apartments.

Established in 1997 with the first hotel located in Dien Bien Phu city, Muong Thanh Hospitality is now the largest private hotel chain in Vietnam with nearly 50 hotels stretching across Vietnam.

In addition to luxury hotels, Muong Thanh Hospitality has also involved in building high-end residential complexes to optimize the land use benefit at some locations.

The growth rate of Muong Thanh Hospitality is proportional to the growth of the tourism industry and low cost airlines in Vietnam.

However, Muong Thanh Hospitality is still unable to make much profit from these large number of hotels due to large initial investment amount of this industry.

Most of Muong Thanh hotels are currently owned by two large enterprises of Le Thanh Than, Chairman of Muong Thanh Group, including Muong Thanh Group Joint Stock Company (JSC) and Private Construction Enterprise No. 1 Dien Bien province (Construction No. 1).

Le Thanh Than, Chairman of Muong Thanh Group

Muong Thanh Group JSC is the managing unit of Muong Thanh new hotel chains such as Muong Thanh Grand Nha Trang, Muong Thanh Hanoi Centre, Muong Thanh Quy Nhon, etc.

In 2016, the revenue of Muong Thanh Group JSC reached $14 million, which was double the revenue in 2015. Most of the company revenues came from the addition of new hotels. 

However, due to the low profit margin and high operating cost, in 2016 the company reported a loss of $4.1 million, a 1.5 times increase compared to the loss of $2.8 million in 2015.

In fact, Muong Thanh Group JSC had suffered losses for many years, leading to an increase in accumulated losses, which by the end of 2016 had reached nearly $8.8 million.

Last year, Muong Thanh Group JSC urgently increased its charter capital from $8.8 million to $96 million to match its rapidly growing business scale.

Soon after that, the Group continued to raise its charter capital to over $117 million with Le Thanh Than and his daughter, Le Thi Hoang Yen remaining as the two biggest shareholders of the Group.

Established in 1987, the Construction No. 1 is also managing a large number of Muong Thanh hotels, specifically currently owning about 20 Muong Thanh hotels across the country. This is also the unit responsible for the construction of Muong Thanh hotels.

Similar to Muong Thanh Group JSC, the business result of the Construction No.1 is not optimistic, especially in 2016, while earning revenue of $32 million, the company also recorded a loss of over $5 million.

Besides, Muong Thanh Hospitality also has to deal with several legal issues, mainly from the construction of high-end apartments.

Specifically, on June 21, Da Nang authorities said that it would carry out coercive removal of 104 condominiums at the Muong Thanh Da Nang project as these particular buildings had not yet been inspected and accepted by the State Authority For Construction Quality Inspection.

Similarly, in Khanh Hoa province, the project built by the Construction No.1 is dealing with legal procedures due to violating project commitments when setting up a building with 43 levels instead of 40 levels, which is going against the planning of Nha Trang city.

After a period of continuous expansion, from mid-2017 until now, Muong Thanh Hotel Group has shown more cautious steps and not launched any more new hotels.