Fewer tourists, more competitors for Ho Chi Minh City hotels

HO CHI MINH CITY, Vietnam – The 3-5 star hotels in HCM City rush to lower the hotel room rates and run sale promotion programs amid the modest growth rate in the number of foreign tourists. Meanwhile, they have to compete with apartment developers, who also provide short term accommodations.

The HCM City Department of Culture, Sports and Tourism has estimated that about 246,000 foreign travelers arrived in Vietnam in July and 2.15 million in the first seven months of the year. The figures represent a modest growth rate of 5.5 percent, a lower growth rate in comparison with the same period of the last year.

Since the number of foreign tourists increased more slightly than expected, the hotels in the city had to cut down the hotel room rates and offer preferences to guests.

Travel firms have confirmed that the room rate in HCM City has decreased. Especially, hotels have offered big preferences to the travelers from Asian markets. In general, Asian travelers book tours later than European travelers, just some days before the departure time. Therefore, the sale promotion campaigns would show effects immediately in attracting tourists.

According to Bui Viet Thuy Tien, Managing Director of Asian Trails, hotels have offered the discount rates of 5-10 percent on average.

The Q2 report of Savills Vietnam, a real estate consultancy firm, showed that the hotel room rate and the average occupancy rate of the hotels in HCM City has been on the decrease.

The average hotel room rate is VND1.750 million per room per night, down by 12 percent over the same period of 2012, while the average room occupancy rate is 62 percent.

According to Savills Vietnam, the 4-5 star hotels in the center of the city have been operating better than that in other areas, but the 3-star hotels in the other areas have been operating better than that in the central area. In general, the 3-star hotels in the suburbs target domestic travelers and foreign backpackers who prefer saying at cheaper hotel rooms.

Not only does the decrease in the tourist growth rate cause a big headache to hotels, they now also have to deal with another problem – the appearance of new rivals.

In principle, hotels and apartments target two different groups of clients. While hotels provide short term accommodation services, apartments target the clients who plan long term stay. While hotels serve breakfast, the clients staying at apartments don’t receive the service.

However, apartment developers now tend to scramble for clients with hotels when offering flexible room rent services.

Capri by Fraser, the apartment building which joined the market in early March, has leased rooms to the clients’ orders. They can choose long term renting, or rent by days.

Located in Phu My Hung urban area in district 7 in HCM City, the building has 175 apartments for rent at VND1.6 million ($75) per night and VND25 million ($1,200) per month. The above said rates include the fees for the breakfasts. This means that the clients staying at the apartments would receive the same services as if they are in hotels.

SSG Group has put the Saigon Airport Plaza building, located near the Tan Son Nhat airport, into operation. This is a complex of apartments and offices for rent, and 84 service apartments.

The rates here are VND25-29 million for a month stay and VND1.4 million for a day stay.