Vietnam Management Channel

Investment funds eye hotels in debt in Vietnam

 

As Vietnam’s tourism industry continues to reel from the impact of the global Covid-19 pandemic, many independent and small hotels across the country have faced incredible financial hardships with loans and staff payments due, without having any guests or revenue coming into to pay for their expenses.

It’s a hard reality for many hotel owners that they’re going to need to sell the properties or seek investors to keep them afloat and data compiled by CBRE Vietnam’s hotel group suggests that a number of both domestic and international funds are now looking to acquire hotels and resorts at low prices, taking advantage of the huge debt that many properties have.

Although several funds are actively looking at acquisition and takeover deals, their have not yet been any major deals announced in either the middle hotel or the luxury hotel segments.

Many small hotel owners who have quietly listed their properties with real estate brokers had been hoping that they could complete deals and get funding in the third quarter, but this dream seems to be increasingly elusive as investment funds say they are still waiting for a “bottom” to be hit before they will make any decisions on acquisitions.

Tran Thi Thanh Tam, director of Chez Mimosa Hotel Management and Consulting Company was asked to comment on investment funds acquiring hotels and resorts and said that: “Some investment funds told us to help them find large-scale hotels being offered for sale, but they then canceled their request and said they needed time to re-evaluate the market. Currently, we are receiving other requests, mainly for small hotels.”

Tam said that investors have been interested in four and five-star hotels, especially in the Ho Chi Minh City area, but that the prices for properties remain quite high, even though tourism is not expected to recover to 2019 and 2020 pre-Covid numbers until 2023 or later.

Meanwhile, many smaller hotels in the two-star and three-star category, especially in beach areas like Da Nang, Nha Trang and Phan Tiet are for sale, at relatively low prices

CBRE Vietnam notes in all of their hotel and travel industry reports that Vietnam’s hotel industry is facing a deep recession with hotel revenues in Hanoi dropping an average of 56% from last year, while hotels in Ho Chi Minh City have seen a drop of 64% year-on-year.

And while the occupancy numbers for hotels in Hanoi and Ho Chi Minh City are terrible, they are still good compared to hotels in some of Vietnam’s smaller cities and provinces.

As an example, hotel officials in Khanh Hoa Province, were only 20% in July, but now, with the second-wave Covid-19 outbreak, their occupancy rates are only 2% and that many of the provinces small hotels could close within the next 60 ~ 90 days.

Nguyen Trong Thuc, deputy director of CBRE Hotels Vietnam, said in the report on the impact of Covid-19 on the local hotel market that, “The hotel market in the 2020-2021 period is expected to play defense due to the complicated development of the disease in Vietnam and many other countries."

 

 

 

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