Crisis puts squeeze on VN's hotel industry

Business Desk
Viet Nam News

The hotel industry in Viet Nam last year faced a turbulent period because of the global financial crisis, according to a recent survey conducted by the accounting and consulting firm Grant Thornton Viet Nam.

The annual survey, the sixth edition of the only comprehensive study on high-end hotels and resorts in Viet Nam, covered 7,911 rooms across 50 three- to five-star hotels and resorts operating throughout the country.

Average occupancy rates for high-end hotels fell 14.2 per cent in 2008 to their lowest level for the past four years.

In 2008, the survey highlighted that high-end hotels across all star rankings experienced a decline in average occupancy rates with three-star hotels suffering the highest decrease at 21 per cent.

Four- and five-star hotels experienced similar trends, with declines of 8.6 per cent and 13.4 per cent year-on-year, respectively.

HCM City had the highest occupancy rate of 67.5 per cent, down 15 per cent, while Da Lat posted the lowest rate of more than 43 per cent, with the biggest fall of nearly 27 per cent.
Notwithstanding the global economic downturn and its affects on the hospitality and tourism sector, average room rates for high-end hotels in the country increased by 9.6 per cent in 2008 to reach US$114.54.

Increases in average room rates occurred in four- and five-star hotels by 14.2 per cent and 1.5 per cent, respectively, but three-star hotels experienced a decline in average room rates.
"Despite the reduction in the number of visitors to Viet Nam in the later part of 2008, our survey shows that hotels managed to maintain the increases in room rates that occurred earlier in 2008 throughout the year," said Grant Thornton Viet Nam managing partner Ken Atkinson.
"However, with sustained global economic pressures we expect to see reductions in average room rates across the country this year," he said.

Vietnamese high-end hotel rates were higher than neighbouring countries, while hotel prices around the world fell significantly in late 2008.

In Viet Nam, HCM City was the most expensive with an average room rate of $136, up 35 per cent from 2007.

Hoi An and Da Nang fell almost 31 per cent to $71, but Da Lat was the most affordable at $40, up 28.5 per cent.

Profits fall
Along with decreases in average occupancy rates, the survey showed that 2008 saw a corresponding decrease in the overall revenue of hotels and a reduction in net profits.
The average net profit margin for five-star hotels was 38 per cent, down 4 per cent from 2007.
Three- and four-star ones were further affected by the crisis with net profits falling more than 18 per cent and 8.7 per cent, respectively.

Domestic hotel guests in 2008 increased to 21 per cent from 13 per cent in 2007.
International guests fell to 79 per cent from 87 per cent previously. Asia represented the largest foreign group, of almost 38 per cent.

This year’s first four months saw the number of foreign arrivals drop by 18 per cent, but room rates remained high.

Currently Viet Nam has around 330 hotels with three to five stars totalling 32,000 rooms, including 200 five-star ones.