Tourism Property Market: Bright Prospects

Vietnam has a more than 3,260 km coastline with many sandy beaches and spectacular seascapes. The country is famous for its natural landscapes and world-acclaimed natural heritages. These are very favourable elements for the construction of vacation properties or resorts. Besides, the Southeast Asian nation is home to many world-class tourism property projects like Sea Links City (Binh Thuan province), Son Tra Resort & Spa (Da Nang City), Ho Tram Complex (Vung Tau City) and Rong Seaside Resort (Quang Nam province).

Furthermore, Vietnam has a stable political background - an ideal safe destination for domestic and international holidaymakers. The tourism industry has also launched many policies to attract more international visitors. According to the Vietnam National Administration of Tourism (VNAT), in 2009, the country welcomed nearly 5 million foreign visitor arrivals and earned nearly US$4 billion from services for foreign tourists. In the first six months of 2010, the number of international arrivals was 2,510,521, up 32.6 percent year on year, including 1,595,224 holidaymakers, up 40.3 percent. In the second quarter of 2010, no new 3-5 star hotels were opened but nine hotels were ranked up to 3-star and one to 4-star. Room occupancy rates climbed 10-20 percent from 2009, showing better business results of hotels and resorts. In 2010, Vietnam aims to attract 6 - 6.5 million international visitors and earn revenue of US$4.5 billion. The increase in both volume of arrivals and revenues is a key to open up many opportunities for tourism property investors.

Another important advantage is that foreigners and overseas Vietnamese, known as Viet Kieu, have been allowed to purchase houses and land in Vietnam. Many wealthy customers of this group want to own properties in Vietnam.

Actually, many investors have found advantages and started their tourism projects in the county. In recent years, many tourism projects worth of billions of US dollars each have been carried out. By the end of September this year, about 11,000 new villas and 10,000 holiday homes have been launched to the market, representing a five-time increase in villas and a three-time rise in holiday apartments from 2009. Particularly, more than 5,000 new apartments and villas will be built in the north. Vinaconex Investment and Tourism Development Joint Stock Company (VINACONEX-ITC) is developing Cai Gia - Cat Ba urban and tourism complex with more than 800 ecological villas and many 5-star hotels slated for completion in 2012, with proximity and good views over world-famous scenes like Cat Ba World Biosphere Reserve, Cai Gia Bay, Tung Thu Bay and Tran Chau Bay. The investor is making this project a world-class ecological tourist site.

T&H Ha Long Joint Stock Company is building The Long Chau Villas & Residences project with some 700 villas on Tuan Chau Island. The 338.45 ha project, costing US$330 million, is part of a complex constituted by an 18-hole golf course, a marina and villa section. In this project, 50 luxury sea-side villas will be completed in the first phase in 2011.

With more charming beaches, scenery and historical sites than in the north, the central region is the most attractive destination for tourism property investors. As the largest city in the region, Da Nang is home to many large-scale projects, including Furama Villas (costing some US$200 million), Silver Shore Hoang Dat (over US$100 million), Le Meridien (US$110 million invested by Saigon Invest Group, and Hyatt Regency (being offered for sale by Indochina Land and Savills Vietnam).

With a more favourable climate, Nha Trang is the next option for investors. Closer to Ho Chi Minh City and inside the Da Lat - Phan Thiet - Nha Trang attraction triangle which welcomes some 2 million tourists a year, Phan Thiet City is luring many investors and buyers of second homes. Prices of real estate here are still relatively lower than in Da Nang. With upcoming investment in infrastructure development, tourism property is believed to be a highly promising market. In Vung Tau City, apart from Safari Wildlife Zoo and Binh Chau Resort, Oceanami Resort & Luxury Home project was kicked off in September in Phuoc Hai commune, Dat Do district, Ba Ria - Vung Tau province. This project, scheduled to be completed in 2012, will provide 180 vacation villas, 100 apartments and a 5-star 200-room hotel.

The presence of luxury resorts in the northern, central and southern regions demonstrates that real estate investors have seen golden opportunities in this new market. According to the Vietnam Tourism Property Association (VnTPA), in 2010, about US$10 billion of foreign capital will be injected into the Vietnamese real estate market, accounting for half of total foreign investment in the country. Domestic investors will also invest a similar amount in the market. Taken together, the investment flow into the real estate market remains very strong. Mr Marc Townsend, Managing Director of CB Richard Ellis Vietnam (CBRE), said: Compared with regional countries, the second home market is relatively new in Vietnam because its tourism industry also lags behind them. Comparing to Indonesia's Bali City 20 years ago, Vietnam is now behind it in infrastructure. Nonetheless, this shortage also means an opportunity for investors because the resilience of the Vietnamese tourism market will be tremendous in coming years.

The business outlook of hotels and resorts in Vietnam is shifting from the bleak mood to positive one. However, according to experts, the Vietnamese tourism property market is still a nascent industry and poses risks. The supply is bountiful but the market has not fully opened to foreign investors. Hence, investors are warned of market volatility.

Currently, Vietnam has all forms of vacation properties like condo hotels; complex buildings comprising of shopping centres, hotels and offices; villas; and townhouses, with prices ranging from high-end to low end. At present, both domestic and international customers are fond of higher-grade second homes.

Today, consumer tastes for value, service and information change very rapidly and investors need to be familiar with these to develop suitable projects. They must have proper, careful and effective development plans to be successful on the nascent market.

In addition to the efforts of investors, according to Dr Do Thi Loan, General Secretary of the Ho Chi Minh City Real Estate Association, the State should adopt investor-friendly policies to encourage investments and speed up the development of the real estate market. Vietnam should also map out a long-term tourism property market development strategy, and develop infrastructure and traffic systems to support that development. Positively, many artery traffic routes have been built across the nation, including the North - South express railway, Dau Giay - Phan Thiet expressway, Ho Chi Minh City - Long Thanh - Dau Giay highway, Saigon - Trung Luong motorway and Can Tho Bridge.

Indeed, the current tourism property market is very promising and the competition is escalating. According to experts, Vietnam should consult neighbouring countries about their experience to be successful in this market segment.

Kien Cuong