'Bright spot' of commercial and service real estate

According to Savills Vietnam's report, in the first quarter of 2023, hotel supply in Ho Chi Minh City was stable with 15,500 rooms from 109 hotels. Room occupancy reached 68%, up 6% quarter-on-quarter.

Average room rates reached VND1.9 million/room/night, up 5% quarter-on-quarter. Increased demand from leisure and business travelers helped improve performance across all hotel segments.

5-star hotel rooms alone cost VND2.8 million/room/night, up 54% year-on-year. Branded hotels have stopped applying tourism stimulus prices. Binh Thanh District has the highest average room rate growth of 99% year-on-year. It is followed by District 1 with an increase of 87% year-on-year and District 5 with 48% year-on-year.

Notably, the city's accommodation service revenue in the first quarter of 2023 reached VND2,281 billion, up 29% year-on-year. The total number of visitors reached 8.54 million, of which 12% were international visitors. However, the number of international visitors decreased by 54% compared to the first quarter of 2019.

According to Savills, although the above performance has not reached the pre-pandemic level in 2019, the market has positive prospects. Investors are focusing on investing in improving project quality to maintain competitiveness as 67% of closed rooms are being renovated and are expected to reopen in the near future.

In addition, Chinese tourists - the city's main tourism market - have returned since March 15. Many plans to simplify the e-visa issuance process and expand the visa exemption list have been proposed.

By 2026, five new hotels with a total of 900 rooms are expected to enter the market. The majority (83%) will be branded hotels from international groups such as Hilton, Sotetsu Group, Elegance Hospitality Group and Minor Hotels Group in District 1.

Elsewhere, serviced apartment rental prices in Ho Chi Minh City increased by 1% quarter-on-quarter and 7% year-on-year. However, they were still 10% lower than in the first quarter of 2019.

The reason pointed out by Savills is due to high competition from rental apartments and hotels, rental prices have not fully recovered compared to 2019.

Specifically, in Q1/2023, supply reached 6,503 units from 113 projects, up 3% QoQ and 5% YoY. Grade C apartments had one new project with 55 units and additional supply from three other projects. Although supply increased QoQ, the market still recorded 22 serviced apartments for rent closed due to poor performance and 14 units temporarily closed for renovation.

Occupancy in the first quarter of the year reached 84%, an improvement of 1% quarter-on-quarter and 16% year-on-year. Grade A serviced apartment rental increased by 1%, grade B increased by 4% quarter-on-quarter, with most of the tenants being experts from Japan, Korea and Taiwan. Meanwhile, Grade C serviced apartment occupancy decreased by 2%.

Ms. Cao Thi Thanh Huong, Manager of Savills Ho Chi Minh City Research Department, said: "The main driving force for sustainable recovery after Covid is the return of foreign workers and FDI capital flows."

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