High-end hotel sector dries up Vietnam’s five-star hotels are expectedly hampered by a low occupancy rate due to an increasing supply in the sector. According to Alternaty, a property consultant for hotels and resorts in Ho Chi Minh City, the overall hotel market has shown significant signs of recovery since 2012. “A stronger level of competition is being felt in the upscale segment, with some superior three-star or four-star hotels offering value for money accommodation in attractive central business district (CBD) locations and challenging the larger decentralized five-star properties. This has created fierce competition in the upscale segment, resulting in lower rates and lower occupancy levels, which are expected to be registered at 66% for 2014,” said Alternaty’s latest report on the hotel segment. In 2015, the average market rate increased in the second city, due to the opening of the Le Meridien and the Reverie and the completion of the Caravelle renovations. This deepened tough competition in the high-end sector. Additional increases in supply in the same category will be made when the Union Square Hotel (formerly Vincom A) opens in 2016. The One and the Lavenue project, expected to open in 2017 and 2018, respectively, are also under construction or site clearance. The expansion of the Majestic hotel and the redevelopment of the Satra Tax Centre are also expected to be completed in the next four years. The Viettel project, located in Cach Mang Thang 8 Street, which includes approximately 424 rooms, is expected to be completed in 2016, and it will be positioned as an upscale property managed under a well-known international brand. As of the third quarter of 2015, Ho Chi Minh City had 112 hotels supplying approximately 14,400 rooms, up 4% quarter-on-quarter, and 14% year-on-year. Meanwhile, Savills Vietnam said that for the third quarter of 2015, the average occupancy rate of Hanoi’s hotels was as low as 58%, while its average rental also decreased by 1% compared to the middle of 2015. Hanoi now has more than 9,100 hotel rooms of three-to five-star hotels. A sum of more than 5,000 rooms will be added to this stockpile afterward. Since the financial crisis in 2009, international tourists coming to Vietnam have sharply decreased and big cities have been faced with an abundant supply of hotel rooms. Hanoi has recently welcomed the presence of a range of new hotels, such as the Grand Plaza Hanoi, the Crown Plaza, and the JW Marriott Hanoi. Alternaty figures revealed an evident gap between the different hotel groups in Ho Chi Minh City, with luxury segment leading the market at an average rate of US$170 per night, followed by the topmost upscale group trading at approximately US$118 per night. The mid-upscale group is trading at an average rate of US$90 per night, almost half that compared to the superior five-star. “This is because the upscale five-star group is composed of properties that are generally older and less attractive due to their locations, management, or orientation towards, the local market or group travellers,” Alternaty said. In Ho Chi Minh City, the number of five-star hotels has increased gradually to 16 upscale properties from 1990 to 2014, effectively offering 5,146 rooms in total.  This growth amounts to a remarkable 30% increase since 2007. The newest upscale hotels include the Tan Son Nhat Saigon and the Novotel, which came on line in 2013, and Pullman Saigon Hotel, which officially opened in 2014. A number of two-and three-star family hotels have opened, albeit at a lower rate compared to previous years, due to challenging financial situations for single private investors in the past two years. The majority of the upscale to luxury hotels in Ho Chi Minh City are clustered in District 1, representing a total of 3,921 rooms (76% of the total supply). Only two other upscale hotels are located in District 5, and the remaining hotels are located in Phu Nhuan District, in close proximity to the Tan Son Nhat international airport. VIR