Vietnam hotels are the worst performers in Southeast Asia

By Ha Linh - Sep 29, 2023 | 09:38 AM GMT+7

TheLEADERGovernment and private businesses are paying attention to reviving Vietnam's hospitality industry.

Vietnam hotels are the worst performers in Southeast Asia
Beachside hotels are struggling to stay tune

The global hotel market is on the path to recovery, with occupancies in most regions nearly reaching 2019 levels.

However, the Asia Pacific region is still trails with Vietnam still struggling to surpass its 2019 occupancy and rate benchmarks.

The current situation has positioned Vietnam's performance behind that of regional competitors like Thailand, the Philippines, Indonesia, and Malaysia.

These competitors reached occupancy of above 50 per cent and Singapore’s occupancy was nearly 75 per cent, but occupancy in Vietnam struggled at 40 per cent in the first eight months of 2023, 20 percentage points below pre-pandemic levels, according to Savills Hotels.

Vietnam’s recovery had been uneven across different destinations. Nha Trang and Phu Quoc have faced challenges increasing occupancy rates, with Phu Quoc struggling to reach 30 per cent, one of the lowest in Southeast Asia.

Nha Trang – Cam Ranh had slightly higher occupancy levels but at low rates of below $100 per room per night.

Conversely, main cities are performing well with Ho Chi Minh City and Hanoi over 60 per cent occupied; while this is below 2019 levels, it certainly is better than beach destinations.

In upper midscale to luxury segment, room rates are holding up better than occupancy. Nationwide, rates averaged $120 per room per night in the first eight months of 2023, approaching 2019 levels.

Mauro Gasparotti, director of Savills Hotels points out short, medium, and long-term causes to the challenges hotels in Vietnam have been facing.

The short-term problem is still that key source markets like China are still strained; China had a 32 per cent share of all of Vietnam’s international arrivals in 2019.

Another influential factor is the increasing prices of long-distance flights, which has limited the return of some European markets. Viet Nam had a substantial 38 per cent decline in visitors in the first eight months this year compared to the same period in 2019.

Asian source markets to Viet Nam remained 32 per cent below 2019 levels, with South Korea leading as the dominant source market but still lower compared to 2019.

China is gradually recovering but only reached 28 per cent of its 2019 arrivals, totalling 950,000 visitors.

The American and Oceania markets are close to pre-pandemic levels, with 900,000 arrivals, primarily from the US and Australia. However, they remain 8 per cent below 2019 figures.

Another crucial short-term factor straining performance is the oversupply in certain destinations. 

This results from significant new supply in recent years, primarily beach destinations like Phu Quoc, Nha Trang, and Danang, which added approximately 15,000 additional rooms every year since 2016.

This has resulted in a twofold increase in the base supply within six years. As a result, hotels in Vietnam are not only facing reduced demand but also stronger competition.