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Out on their own

Released at: 02:45, 28/10/2014 Hospitality Sector

Out on their own

Luxury hotel and resort developers have noted the increasing popularity of Da Nang and Nha Trang as tourist destinations.

by Ngoc Anh & Nguyen Quynh

The Bach Dang Hotel (now known as the Hilton Da Nang) project, invested by the Bach Dang Hotel Commercial and Service Co., has recently restarted after a long delay due to a lack of capital. The promising large-scale, five-star luxury hotel project saw the contractor actually assist investors in seeking the funds needed to reboot the plan. The director of the company expects the project, with 221 rooms, to be finished in the first quarter of 2016 and then officially open in the following quarter. There are a number of new luxury hotel projects in Da Nang, such as Mercure Son Tra Resort, Furama Villas, and Fuison Maia.
 
Taking the prize

Before Da Nang and Nha Trang become the hot destinations they are now, hotel and resort developers were primarily attracted to Mui Ne in Phan Thiet city. After becoming so popular, though, there is now little space left in Mui Ne and developers have headed to Nha Trang and Da Nang, according to Mr Dang Anh Duc, Director of Hanoi Golden Palace, who spent years seeking opportunities in Mui Ne.

Phu Quoc Island has also become a popular destination for investors, with a number of preferential policies being offered by local authorities. Some investors, however, have complained about the high construction costs on the island. For example, the cost of building a five-star hotel on the mainland is between $1,000 and $1,500 per square metre, but on Phu Quoc, Con Dao and Co To islands the figure is 20 to 30 per cent higher because of transport costs. Ms Doan Thai Mai, General Director of Syrena Vietnam, explained that the biggest difficulties her company faces on Phu Quoc are the land clearance process, under-developed infrastructure, inadequate transport links and expensive transport costs. Such matters have resulted in Phu Quoc attracting fewer investors than Da Nang and Nha Trang.

In the past, having a handful of resorts was enough for Da Nang and Nha Trang to meet demand, but both are now attracting so many visitors that the number of luxury hotels is increasing. Incomes are rising in Vietnam and even those on a medium income want to enjoy a holiday at a resort, said Ms Le Thi Thu Diep, General Director of the Phuc An Thinh Co., the owner of Pullman Da Nang Beach Resort. “We will focus on enhancing the quality of the luxury hotel and resort segment to meet the increasing demand from customers,” she said.

Luxury resorts are booming, she added, with the five-star hotel and resort segment in Nha Trang and Da Nang becoming particularly attractive for many developers. In Nha Trang, Mia Resort is building 12 more villas and Amiana Resort plans to open a second resort in Cam Ranh Bay, under plans to cover the four- and five-star segment in Nha Trang before spreading out to other places such as Hanoi and Ho Chi Minh City.

Investors with strong financial capacity are giving priority to luxury projects because the resort business still has potential to develop despite the economic conditions and will turn a profit if it has a prestigious name, said Mr Timothy Lai Tri Thiem, Director of Sales and Marketing at Amiana Resort.

Analysing the annual average occupancy rate by star rankings, the Vietnam Hotel Survey 2014 by Grant Thornton revealed that four- and five-star hotels recorded good performance, with occupancy growing at 3.6 per cent and 4.7 per cent, respectively, while falling 8.1 per cent in the three-star segment. The changes indicate a new trend in Vietnam’s hotel and resort segment in general and in Da Nang and Nha Trang in particular. Since 2013 the five-star hotel and resort segment has been the favourite of investors, with Da Nang seeing the opening of many hotels and resorts such as the Pullman Da Nang Beach Resort, the InterContinental Da Nang Sun Peninsula Resort, the Hyatt Regency Danang Resort & Spa, the Melia Danang Resort, the Olalani Resort, and Codotel. Likewise in Nha Trang, with the Mia Resort, Amiana Resort, and The Costa Nha Trang Residences.

Five-star hotels and resorts have recorded the best business results in recent times, especially in Da Nang, according to a report from CBRE. In Nha Trang the luxury hotel segment also recorded better results than other sectors. In the first half of this year the revenue per available room in the city’s four- and five-star hotels went up 9.1 per cent and 25.4 per cent, respectively, thanks to improvements in occupancy rates even though the average daily rate fell. The report also stated that new projects in Da Nang are mostly four- and five-star hotels, with a total of nearly 1,500 rooms to become available in 2016-2017.

In recent years, due to the global economic woes, investment in five-star hotels and resort has declined overall. “This is a temporary situation because when the economy is stable the market still needs luxury hotels, especially in areas such as Hanoi and Ho Chi Minh City, to accommodate the large numbers of foreign tourist arriving in Vietnam,” said Ms Nguyen Thi Uyen Chi, Reservation and Sales Manager at Havana Nha Trang.

The business results of Novotel, a luxury hotel in Da Nang, have been less affected by the economic circumstances because of its location in the city centre. During the peak season, from May to August, it is full of domestic and international guests. In off-peak times the hotel still sees stable numbers of guests, who are in the city for either business or pleasure. Moreover, its presidential suites, of which it has more than other hotels, often sees rising occupancy rates, sometimes at record levels. 

Nha Trang, however, has an ace up its sleeve. Ms Tran Hoang Yen, Director of the Nhat Minh Co., a hotel developer in Da Nang, said that developers in Nha Trang have the advantage of thousands of Russian tourists descending upon the city, which some estimates indicate are growing at the 50 per cent mark annually.
 
Investment incentives

Resort developers in Nha Trang have been encouraged to increase the number of rooms of four- and five-star standard to 4,000 by 2020, with local authorities providing more in the way of support. Tax policies, though, are more flexible in Da Nang than in Nha Trang, and the former benefits from being located near three world cultural heritage sites - the imperial capital of Hue, Hoi An ancient town, and the My Son holy land. The city’s tourism market also gets a boost from the international fireworks competition held in April every year, which brings in around 395,000 visitors. 

The Vietnam Provincial Competitiveness Index 2014, meanwhile, has Da Nang ranked top, with Khanh Hoa (where Nha Trang is located) ranked eighth. Local authorities also work hard to simplify investment procedures, said Mr Lam Quang Minh, Director of Da Nang’s Investment Promotion Centre (IPC). “We regularly conduct surveys on the problems faced in investment and support businesses in seeking markets and conducting trade promotions,” he said.

From the perspective of experts, developers and operators have similar advantages in both cities. “Da Nang and Nha Trang are popular destinations for both Vietnamese and foreign visitors,” said Mr Kenneth Atkinson, Executive Chairman of Grant Thornton. “Both now have international airports, making them more attractive.” Generally speaking, their favourable natural conditions mean Da Nang and Nha Trang hold many advantages in tourism development over other locations in Vietnam.

DA NANG HOTEL SNAPSHOT, Q2 2014

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