The five-star Park Hyatt Sai Gon Hotel in downtown HCM City (Photo: VNA)

It has been attributed to the slow recovery in key tourism markets like Russia and China, compounded by increased supply in coastal destinations since 2020, as many projects delayed during the tourism boom are now coming online.

In the first half of 2024, the number of international tourists visiting Vietnam reached 8.8 million, slightly higher than pre-COVID-19 levels in 2019.

Overall, the market has fully recovered on the demand side.

Mauro Gasparotti, director of Savills Hotels, said: “Demand recovery is nearly complete, yet the market faces challenges ranging from oversupply in certain destinations, largely due to large-scale projects now operational, to undersupply in places like HCM City, necessitating new and improved products to remain competitive regionally.

“Many developers seized opportunities during the tourism boom but often neglected comprehensive project planning and execution, and so relied heavily on tourism growth instead of meeting market demand with suitable products.

“This oversight has left several condotel properties in coastal areas vulnerable, unable to progress amidst shifting market conditions.

“We observe a trend towards rebranding and repositioning, with hotels and condotels enhancing competitiveness and market share through brand changes, upgraded F&B offerings and other strategic adjustments.”

In recent years, the presence of international hotel brands has increased significantly in Vietnam.

After the pandemic, this trend has become evident, with hotels undergoing brand conversions or upgrades.

In 2013, less than 25% of hotels in the country were affiliated with international brands. This is projected to rise to 40% in the next three years.

The uncertainty of recent market conditions has challenged hoteliers to maintain typical profitability levels.

Large operations are particularly vulnerable, underscoring the increasing importance of enhancing the operational efficiency of hotels and resorts, especially with the rising costs of qualified staff.

“We observe two distinct trends. Firstly, there is a rise in interest in lifestyle brands emphasising robust F&B offerings, particularly within mixed-use buildings.

“On the other hand, there’s a growing preference for properties offering limited or no F&B services, known as focused service hotels. These cater well to the rapidly expanding mid-tier market, a concept prevalent in other destinations but still emerging in Vietnam.”

Uyen Nguyen, head of consultancy at Savills Hotels, said: “For properties located in bustling markets or surrounded by diverse amenities and F&B options, a leaner hotel model focusing solely on accommodation may be considered.

“Such hotels rely on the surrounding neighbourhood to provide guests with a wide selection of food and beverages.

“We have observed the expansion of the focused-service model across various locations in Vietnam, particularly in dynamic cities attracting diverse business and leisure guests such as HCM City, Nha Trang, and Da Nang. However, this model constitutes a smaller proportion compared to neighbouring Thailand.

“Among the top five international hotel chains, the number of midscale focused-service properties in Vietnam is only one-third of that in Thailand. In Thailand, nearly 60% of these properties are concentrated in Bangkok, whereas only 27% are located in HCM City.

“We anticipate the focused-service model to gain prominence in HCM City due to its diverse mix of business and leisure travellers and its evolving market dynamics.”

The recovery in the Chinese market and the impact of the new visa policy and stimulus programme are poised to accelerate the hospitality sector’s rebound.

According to Savills Hotels, the Vietnamese hospitality market has been steadily evolving in terms of product quality and diversification, catering to the various needs of both the leisure and business markets./.