Travel demand decrease puts hotels in very reduced circumstances

In the economic downturn, when the travel demand decreases sharply, hotels, both big and small, have to go through many hardships. A lot of businessmen have decided to sell the hotels.
Vinaconex ITC is offering Holiday View hotel in Cat Ba of Hai Phong City for sale. The starting price is 70 billion dong. This is a three star hotel, one of the biggest hotels on the Cat Ba Island. The hotel began its operation in 2004, while it has the land leasing duration of 20 years more.
The current hotel owner said that the hotel got the turnover of 18 billion dong in 2010 and 18.97 billion dong in 2011. However, analysts have warned that in the context of economic downturn, when the travel demand decreases significantly, it would be not easy to take back the investment capital.
Daewoo Hanoi hotel has fallen into the hands of Hanel. The value of the deal has not been revealed. However, the decision of selling the hotel located on the most advantageous position of Hanoi, which is considered the symbol of South Korean businesses in Vietnam, has raised curiosity of many people. Some analysts have said that hotel development is no more a “delicious of cake.”
Another five star hotel in Hanoi, Hilton Opera, has also been sold to BRG, headed by a Vietnamese businesswoman, by the German and Austrian businessmen, which has also stirred up the public. To date, the business result of the hotel after it changed hands has not been revealed.
However, it’s obvious that it’s now not a prosperous period for hotel business. Previously, big hotels all had high occupancy rate of 80-90 percent. Meanwhile, the figure is just 50 percent now, though it is very costly to maintain normal operation.
The report by the Vietnam National Administration of Tourism (VNAT) showed that in March, 561,877 foreigners traveled to Vietnam, an increase of 18.7 percent in comparison with the same period of 2011. As such, Vietnam received 1,873,726 foreign travelers in the first three months of 2012, increasing by 24.5 percent in comparison with the same period of 2011.
A survey by Savills Vietnam, a real estate service provider, also pointed out that though the hotel market is now in the high season, the capacity and the hotel room rates have decreased. The occupancy rate has dropped by five percent, while the room rate by 7 percent from the rates in the fourth quarter of 2011.
Three star hotels prove to be the ones which have the highest occupancy rates. Meanwhile, Hanoi is going to have 42 more hotel projects in the future, of which 23 projects would provide 6600 hotel rooms to the market.
A hotel expert has also said that a lot of hotels are taking profit because of the escalating input costs and the sharp fall of the number of foreign travelers to Vietnam. Most of the travelers are businessmen and politicians who pay working visits to Vietnam.
In order to obtain the right to serve in international events, big hotels have to compete fiercely with each other to obtain the sources of revenue. Hotels also earn money from leasing rooms for even organization and the retail premises on the ground floors.
The expert went on to say that hotel owners would not be able to take back the investment capital if they do not have loyal clients. Foreign travelers now tend to stay at three star hotels or in the residential quarters in ancient streets’ area. Besides, the increasingly high number of apartments opened for accommodation services also provides big rivals to hotels.
Vu Minh Tien, a hotel owner in Da Nang City, said that his hotel has also seen the revenue decreasing, because Jetstar Pacific airline has stopped the air route from Hanoi to Da Nang, which has led to the sharp fall of clients. He said he may consider selling the hotel if the situation cannot be improved.