Tourism Reopening Adds Appeal to Upmarket Property

Free mobility has heated up the domestic tourism market. The reopening of international flights in March is a golden opportunity for Vietnam's tourism industry to revive with new vigor. Leveraged by tourism recovery, will the vacation property market recover?

Domestic tourism plays a key role

After two “lackluster” years, the tourism industry has started to show signs of recovery. Specifically, the order on eased social distancing from October 2021 has brightened the overall picture of the tourism industry in the fourth quarter as many services have been reopened and domestic flights have been resumed. According to a report by Savills, in December, Vietnamese airlines conducted 8,383 flights, up to 538% more than in September with 1,311 flights.

However, recovery momentum became most obvious in early 2022. According to the Vietnam National Administration of Tourism (VNAT), the 9-day Lunar New Year holiday witnessed 6.1 million domestic tourists and generated estimated revenue of more than VND25 trillion. These significant figures also partly show high mobility demand and growth prospects, boosted by domestic factors.

The vacation property market is also benefiting from reviving domestic tourism. The Savills research stated an improvement in hotel occupancy and rents in late 2021. Similarly, the future supply in Hanoi is rising, starting from 2022. These signals show investor confidence in the recovery of the hospitality industry.

Remarking on prospects of vacation property in northern Vietnam, Mr. Matthew Powell, Director of Savills Hanoi, said, “Besides fast-growing tourism cities like Ha Long, we see a large number of projects under construction in Hanoi suburbs and neighborhoods such as Hoa Binh and Thanh Hoa.”

Explaining this phenomenon, he said, “This trend is quite understandable because mobility to suburban districts is becoming much more convenient. Thanks to better infrastructure and transport networks, people will also choose resorts near and around Hanoi for weekend leisure. Therefore, we are looking forward to vacation property development projects in these neighborhoods.”

Driven by domestic factors, Vietnam's tourism industry has shown positive performance in recent months. However, he emphasized international visitors as strong leverage for the rebound of Vietnam's tourism market.

International tourism to be officially reopened

According to the Government's plan, international flights will resume as normal from March 15, coupled with the "Vaccine Passport" Program. With 79 countries and territories recognized by Vietnam for vaccine passports as of February 16, the reopening decision will attract a large number of foreign tourists to Vietnam and help stir up the upbeat tourism sector.

The policy to reopen flights between Vietnam and other countries will also reinvigorate the real estate market, not only hotel and resort segments but also the serviced apartment segment.

According to Savills, Japanese and South Korean experts are popular tenants in Grade A serviced apartments, holding 79% of the market share in the first half of 2021 and 84% in the remaining two quarters. Neil MacGregor, Managing Director of Savills Vietnam, said, “Strong FDI inflows to Vietnam in the past year partly confirmed the large number of international experts who are working and will work in Vietnam. Once international flights are resumed, they will come to the country for long-term work and help bring the serviced apartment segment to previous growth momentum."

According to the Global Buyer Survey 2021, the healthcare system, air quality, and green space are the top chosen criteria of living space for people. Therefore, Savills predicts that branded serviced apartments will have a great advantage when they have cooperation programs with clinics to provide healthcare services for dwellers.

Given existing domestic and international demands, prospects of vacation property and serviced apartments will depend heavily on the Government-initiated strategy and pandemic development.

By Huong Giang, Vietnam Business Forum