Vietnam'S Tourism and Hospitality Market: Duong Thuy Dung, Associate Director

VIETNAMS TOURISM AND HOSPITALITY MARKET
Duong Thuy Dung, Associate Director

October 14, 2014
CONTENT
1. Regional Hotel Peformance
2. Vietnam Hotel Peformance
3. A glimpse on Phu Quoc
4. Hospitality Investment
CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE
REGIONAL HOTEL PERFORMANCE

Vietnam has one of the smallest number of international visitor per
year in the region
Tourist arrivals ('000)
Tourist Arrivals by Year
30,000
25,000
20,000
15,000
10,000
5,000
2010
2011
2012
Indonesia
Malaysia
Singapore
Philippines
Thailand
Viet Nam
2013
Source: Association of Southeast Asian Nations.

Occupancy level also lowest compared to other cities
Occupancy Rate (%) 4-5 star
78%
76%
74%
72%
70%
68%
66%
64%
62%
60%
Dec-11
Jun-12
Hanoi
Dec-12
HCMC
Jun-13
Kuala Lumpur
Bangkok
Dec-13
Jun-14
Jakarta
Source: STR Data.

but ADRs have demonstrated a fair growth
Average Daily Rate 4-5 star
140
US$/room/night
130
120
110
100
90
80
Dec-11
Jun-12
Hanoi
HCMC
Dec-12
Jun-13
Kuala Lumpur
Bangkok
Dec-13
Jun-14
Jakarta
Source: STR Data.

ensuring RevPAR levels remain above that of many regional
competitors
Revenue per Available Room 4-5 star
95
US$/room/night
90
85
80
75
70
65
60
55
Dec-11
Jun-12
Hanoi
HCMC
Dec-12
Jun-13
Kuala Lumpur
Bangkok
Dec-13
Jun-14
Jakarta
Source: STR Data.
VIETNAM HOTEL PERFORMANCE
INTERNATIONAL ARRIVALS
International visitor arrivals to Vietnam have grown rapidly over the past
few years, but will have problems reaching the VNAT target (8 mil in2014)
8
50%
30%
10%
-10%
2013
2012
2011
Growth rate
9M 2014
International arrivals
2010
2009
2008
2007
2006
2005
2004
2003
-30%
2002
Growth Rate (%)
Arrivals (Million persons)
International Tourist Arrivals
Source: Vietnamese Government Statistical Office, Q3 2014.
INTERNATIONAL ARRIVALS STRUCTURE

China accounts for the largest proportion
20%
1,600
16%
1,200
12%
4%
0%
Korea
No. of tourists
Taiwan
400
USA
8%
Japan
800
% growth y-o-y
2,000
China
No. of tourists ('000)
International Tourist by Top 5 Countries, 9M 2014
% growth y-o-y
Source: Vietnam National Administration of Tourism, Q3 2014.
INTERNATIONAL ARRIVALS STRUCTURE

Vacation tourists dominate the market
International Tourist Arrivals ('000)
International Tourist by Purpose, 9M 2014

5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
2007
2008
2009
Leisure
2010
2011
Business/MICE
2012
2013
9M 2014
Others
Source: Vietnam National Administration of Tourism, Q3 2014.
10

Total Supply by Hotel rooms (3-5 star)
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
2007
2008
2009
2010
HCMC
2011
Hanoi
2012
Da Nang
2013
Nha Trang
2014
2015
2016
Phu Quoc
Source: CBRE Vietnam, Q3 2014.
11

Recovery on the way
Occupancy Rate (5 star)
90%
Occupancy rate
80%
70%
60%
50%
40%
30%
Q4 2010
HCMC
Q4 2011
Hanoi
Q4 2012
Da Nang
Q4 2013
Nha Trang
Q2 2014
Phu Quoc
12

Da Nang and Phu Quoc are leading the ADR growth
Average Daily Rate (5 star)
220
ADR (US$/room/night)
200
180
160
140
120
100
80
Q4 2010
HCMC
Q4 2011
Hanoi
Q4 2012
Da Nang
Q4 2013
Nha Trang
Q2 2014
Phu Quoc
13

Phu Quoc in a different class
Revenue per Available Room (5 star)
180
RevPar (US$/room/night)
160
140
120
100
80
60
40
20
Q4 2010
HCMC
Q4 2011
Hanoi
Q4 2012
Da Nang
Q4 2013
Nha Trang
Q2 2014
Phu Quoc
14
A GLIMPSE ON PHU QUOC
PHU QUOC HOSPITALITY MARKET

Opportunities
Phu Quoc has
huge potential to
develop into a
favoured beach
escape
150 km
With
99
62%
coastal length
scenic mountains
forest area
eco
Potential for eco-tourism and eco-resort development
s
s s
Investors: A few number of top-tier hotels/resorts and no existing second home

villa creates a good opportunity for the hospitality investors
Hotel operators: lack of big brand names also creates a good opportunity for
international operators

16

Concerns
Infrastructure: Poor infrastructure, low progress
on road upgrading
Facilities and amenities : Lack of international
hospitals, supermarkets or retail chains, nightlife,
bars and clubs
Master plan: Too many projects under planning
while local government keeps changing the
islands master plan
Labour force: Lack of skilled workforce
Development cost: High cost of construction

and operation
17

New airport raises seat capacity by 60%
New airport
Old airport
100
90
450,000
Flights per week

max pax per flight
max pax per year
115
187
760,000
2,700,000
Flights per week (current capacity)

max pax per flight (current capacity)
max pax per year (current capacity)
max pax per year (expected capacity in 2020)
Source: Centre for Aviation (CAPA), Q2 2014.
Only domestic airlines area operating in

Phu Quoc International Airport (Vietnam
Airline, Vietjet Air and Jetstar Pacific)
New flights open soon:
Phu Quoc - Singapore: 2 flights/week starting

on November 2, 2014 (Airbus 321)
Phu Quoc Siem Reap: 3 flights/week starting

December 18, 2014 (ATR-72)
18

Existing supply Limited & Small Scale Accommodation
Location of Top-tier Hotels in Phu Quoc
100 establishments offering

approximately 2,900 rooms
Only 15 (with 952 rooms in
total) are classified as 3-5
hotels
All top-tier hotels in Phu
Quoc are on the west side
of the island
19

Operating Cost
50-60% ENERGY COST DROPS WITH
POWER CONNECTED TO
NATIONAL GRIDLINE
ENERGY COST
F&B COST
Expected lower ADR
6-8%
TOTAL
REVENUE
=> Phu Quoc become more attractive

destination
30-35%
12-15%
TOTAL REVENUE
20-25%
TOTAL REVENUE
Increasing operating
revenue as energy cost is expected
TOTAL REVENUE
to reduce significantly
4-STAR
HOTELS IN
MAINLAND
4-STAR
HOTELS IN
PHU QUOC
4-STAR
HOTELS IN
MAINLAND
4-STAR
HOTELS IN
PHU QUOC

20

Market Leader in Vietnam
RevPAR of Top Hotels in Selected Coastal Provinces
RevPAR
(US$/room/night)
130
120
110
100
90
80
70
Phu Quoc
HCMC
Nha Trang Phan Thiet
Da Nang
Hanoi
Vung Tau
Top-tier hotels in Phu Quoc are among the best performers
Small-scale hotels (from 17 to 43 keys) can achieve occupancy rates from 80% upward
Luxury four-star and three-star categories obtained average occupancy rates of above 80%, standard
four-star hotels obtained average occupancy rates of around 60%.
Bungalow-style resorts achieve higher occupancy rates than block hotels as most of traveller are holidaymakers and like to stay in a nature-oriented accommodation
21

Future supply Big Names Lining Up
Salinda Premium Resort and Spa

open for booking now
VINPEARL PHU QUOC
SUNSET SANATO
NOVOTEL PHU QUOC RESORT BY

CEO GROUP
INTERCONTINENTAL BY
BIM GROUP

22
HOSPITALITY INVESTMENT
Big investments are seeping into hospitality sector
POSITION
INVESTORS /
DEVELOPERS
Sapa
Hanoi
Hanoi
Fansipan cable car

Hotel
Entertainment complex
Sun Group
Thanh Hoa
Construction Corp. *
Nakheel
Sovico Holding
Quang
Ninh
ISC Corporation
Tuan Chau
VLC
Thanh Hoa
FLC Group
Phu Yen
Vung Ro Petroleum
VinGroup
Ho Chi Minh
City
Phu Quoc
CEO Group
BIM Group
VALUE
$206 mil.
4-star Hotel
Urban- tourism complex
Resort complex
VinGroup
Hai Phong
COMPONENTS
Casino
Recreation complex
200-room hotel/Accor
24 serviced apartments
18-hole golf course,
Resort complex
Resort complex
27-hole golf course

Resort complex
Resort complex
406-room Hotel (Novotel)
Resort complex
400-room Hotel (Crowne Plaza)
$550 mil.
$45 mil.
$7,000 mil.
$257.5 mil.
$2,500 mil
$796 mil.
$210.7 mil.
$70.2 mil
Acquired project from Ha Do Group

Source: Compiled from various sources, Q3 2014.
24
54 TRANSACTIONS
Hotel is the most sought-after property (2011-2014)

2%
6%
Hotel
Office
11%
Hotel accounts for 35%

transactions and 36% value
35%
Development site
Apartment
26%
Industrial
Hotel
21%
36%
29%
only 6% value
Office
Development site
6%
Development sites account
for 26% transactions but
1%
7%
Office accounts for 20%

transactions and 29% value
Retail
20%
TOTAL VALUE US$1,498 MIL
Retail accounts for 21%
Apartment
value although only 6% of
Retail
transactions
Industrial
Proportion is calculated based on transactions made during 2011 1H2014

Source: RCA, Sep 2014
25
US$ Millions
Increasing number of hotel transactions since 2009

350
300
250
200
150
100
50
-
7
5
3
2
2006
2007
2008
2009
2010
Total Value
2011
2012
2013
8
7
6
5
4
3
2
1
0
YTD2014
Number of transactions
The number of hotel sales in Vietnam has dropped in 2009 as a

consequence of lack of liquidity and concern about future performance.
In 2009, lower prices, additional liquidity and more stable economic
conditions have helped increase the sales volume.
26
Highest transacted price per key recorded in 2013
Transaction price per key (min-max range)
Transaction price per key

(US$)
600,000
500,000
400,000
300,000
200,000
100,000
2006
2007
2008
2009
2010
2011
2012
2013
YTD2014
The market experienced the highest transacted price per room in 2013
27
Key indicators
Hotel
No. of
transactions
Office
Retail
Apartment
Dev Site
19
11
14
No. of rooms
sqm
sqm
No. of apartments
Sqm/ ha
54-411
2,240 - 31,562
6,880 - 55,000
260 - 550
2,994 sqm - 7.8ha
171
18,261
33,778
407
18,521 sqm (*)
US$5.2-$155.2 mil
US$5.1-$67.4 mil
US$5.3-$314 mil
US$10.7-$43.2 mil
US$7.3-26.7 mil
US$31.81 mil
US$43.87 mil
US$159.65 mil
US$20.62 mil
USS$12.56 mil
per room
per sqm
per sqm
per apartment
per sqm
US$38,267-$531,652
US$1,428 - $3,749
US$776-$7,958
US$24,280 - $78,596
US$185-$2,036
US$153,352
US$2,514
US$4,367
US$47,422
US$936
HCMC, Hanoi, Hoi An
HCMC, Hanoi
HCMC
HCMC, Hanoi
HCMC, Hanoi
N/A
8.5%-13.6%
N/A
N/A
N/A
Size
Range
Average
Value
Range
Average
Value per unit

Range
Average
Key markets
Cap Rate
(*) Exclude Alaska Garden of 7.8ha
28
HOSPITALITY TRANSACTIONS 2012 - YTD2014

MOVEMPICK SAIGON
VINPEARL LUXURY
SHERATON NHA TRANG
LIFE HERITAGE RESORT
Location: HCMC
Location: HCMC
Location: Nha Trang
Location: Hoi An
Seller: VinaCapital
Seller: Vingroup
Seller: Vinaland
Seller: IBUS
Buyer: Tung Shing
Buyer: VIPD Group
Buyer: n/a
Buyer: Minor International
Amount: $30.4 mil
Amount: $155.2 million
Amount: $42 million
LIFE WELLNESS RESORT
LOTTE LEGEND HOTEL
HANOI DAEWOO HOTEL
CENTURY RIVERSIDE HOTEL
Location: Quy Nhon
Location: HCMC
Location: Hanoi
Location: Hue
Seller: IBUS
Seller: Vinaland + Kotobuki
Seller: Daewoo
Seller: Crowndale International
Buyer: Minor International
Buyer: Lotte
Buyer: Hanel
Buyer: Hue People Committeel
Amount: 65.1
Source: RCA, retrieved September 2014.

29
VIETNAM INVESTMENT
Domestic Players Dominate both Buyers and Sellers
BUYERS
Taiwan
2%
Singapore
8%
Offshore
4%
SELLERS
Thailand
4%
Domestic
Hong Kong
Japan
Korea
Malaysia
Korea
13%
Netherlands
Domestic
63%
Japan
6%
Offshore
Singapore
(blank)
Taiwan
Offshore
8%
Netherlands
5%
Malaysia
3%
Korea
13%
Japan
2%
Domestic
54%
Hong Kong
15%
Thailand
Data recorded during the period of 2011- YTD 2014
Koreans are active in both selling (Kumho Asiana, Daewoo) and buying (Lotte, CJ, Asiana Airlines).
Singaporeans have become active buyers (Keppel, Mapletree, Capitaland, Ascott).
Proportion is calculated based on transactions made during 2011 1H2014

30
VIETNAM INVESTMENT
Continued pockets of interest from overseas investors
Significant and varied interest in Vietnam but investors (and agents) frustrated
by limited deal opportunities;
Demand for deals continues to significantly outstrip supply particularly for
operating assets in city centre (HN and HCMC);
For the majority of deals the big four questions still remain - Without a
realistic and honest approach to these, foreign investors will look elsewhere.
VALUATION
TRANSPARENCY
STRUCTURING
31
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For more information regarding this presentation please contact:

CBRE Vietnam Co., Ltd.
Research & Consulting
T +84 8 3824 6125
F +84 8 3823 8418
Email.research.vietnam@cbre.com
2014 CBRE (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CBRE (Vietnam) Co., Ltd. We obtained some of the
information above from sources we believe to be reliable. However, we have not verified the accuracy of the information which we obtained from other
sources and make no guarantee, warranty or representation about it. We include projections, opinions, assumptions or estimates which are made with
careful consideration of factors known to us for example only, and they may not represent current or future performance of the market. This information is
designed exclusively for use by CBRE clients, and cannot be reproduced without prior written permission of CBRE.

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VIETNAMS TOURISM AND HOSPITALITY MARKET

Duong Thuy Dung, Associate Director

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

REGIONAL HOTEL PERFORMANCE

Tourist arrivals ('000)

Tourist Arrivals by Year

Source: Association of Southeast Asian Nations.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

REGIONAL HOTEL PERFORMANCE

Source: STR Data.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

REGIONAL HOTEL PERFORMANCE

Source: STR Data.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

REGIONAL HOTEL PERFORMANCE

Source: STR Data.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

VIETNAM HOTEL PERFORMANCE

Growth Rate (%)

Arrivals (Million persons)

International Tourist Arrivals

Source: Vietnamese Government Statistical Office, Q3 2014.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

INTERNATIONAL ARRIVALS STRUCTURE

No. of tourists ('000)

International Tourist by Top 5 Countries, 9M 2014

Source: Vietnam National Administration of Tourism, Q3 2014.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

INTERNATIONAL ARRIVALS STRUCTURE

International Tourist Arrivals ('000)

International Tourist by Purpose, 9M 2014

Source: Vietnam National Administration of Tourism, Q3 2014.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

VIETNAM HOTEL PERFORMANCE

Source: CBRE Vietnam, Q3 2014.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

VIETNAM HOTEL PERFORMANCE

Source: CBRE Vietnam, Q2 2014.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

VIETNAM HOTEL PERFORMANCE

Source: CBRE Vietnam, Q2 2014.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

VIETNAM HOTEL PERFORMANCE

Source: CBRE Vietnam, Q2 2014.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

A GLIMPSE ON PHU QUOC

PHU QUOC HOSPITALITY MARKET

Investors: A few number of top-tier hotels/resorts and no existing second home

Source: CBRE Vietnam, Q3 2014.

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

PHU QUOC HOSPITALITY MARKET

Labour force: Lack of skilled workforce

Development cost: High cost of construction

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE

PHU QUOC HOSPITALITY MARKET

Flights per week

Flights per week (current capacity)

Source: Centre for Aviation (CAPA), Q2 2014.

Only domestic airlines area operating in

New flights open soon:

Phu Quoc - Singapore: 2 flights/week starting

Phu Quoc Siem Reap: 3 flights/week starting

CBRE | VIETNAMS TOURISM AND HOSPITALITY LANDSCAPE