No new supply in 2018 helps to sustain positive performance of existing hotels
After the opening of one new 5-star hotel, InterContinental Landmark 72 in 2017, the Hanoi Hotel Market experienced a quiet year with no new supply in 2018. Total room count of upscale hotels in Hanoi remained stable at 7,770 rooms.
Overall, Hanoi upscale hotel supply is forecast to grow at 12.3% p.a. over the next three years. Two new 4-star hotels, Novotel Thai Ha and Wyndham Garden Hanoi, are most likely to be completed in 2019, adding 457 rooms to the market. In addition to Tay Ho and Dong Da districts with large development pipeline by 2021, Ha Dong district will welcome one internationally branded 4-star hotel for the first time with the opening of Wyndham Garden Hanoi in 2019.
Other than the above, several hotel developments are under construction with completion dates beyond 2019, including Westin Hanoi, Grand Mercure Hotel, and Dolce Hanoi Golden Lake in Midtown area. Prime sites with announced operator brands including Four Seasons, Hilton Westlake and Doubletree by Hilton appear to be in the stage of planning.
Room rates and occupancy remain at positive levels
Average ADR during 2018 reached US$113, a 2.3% growth y-o-y whereas occupancy averaged 79%, 2.7 ppts lower than the previous year’s. During 2017, the APEC summit and various events leading up to it was a major catalyst boosting overall performance of hotels in Hanoi. During 2018, despite the lack of similar scale events, Hanoi’s upscale hotel performance remained vibrant thanks to solid demand growth on the back of stable supply.
Q4 2018 in particular posted a strong uptick in performance metrics. RevPAR grew by 5.1% y-o-y on the back of 2.6% increase in ADR and 2.1 ppts in occupancy. Market performance is expected to remain strong, maintaining its position as one of the rising hot hospitality markets in the region.
Active tourism promotion policies amid strong demand fundamentals
Growth of international tourist arrivals remained at a high level. International tourist arrivals to Hanoi topped 4.5 million in 2018, an increase of 19.1% compared to 2017. Although Asian countries remain dominant source markets, European countries recorded remarkable increases, signaling more diversification of tourist profiles to Hanoi. Source markets with highest annual visitor growth include the U.K. (115%), Taiwan (52.8%), China (23.3%) and the U.S. (17.6%).
Leveraging on Hanoi’s image as a friendly and cultural tourist destination, the Hanoi People’s Committee has continued to cooperate with the U.S. network (CNN) to promote its image on the American network.
Infrastructure development, on the other hand, is an important factor in connecting tourist destinations in the North of Vietnam, including Hanoi. Although not as congested as Tan Son Nhat International Airport in HCMC, Noi Bai International Airport is showing signs of reaching and exceeding its capacity of 25 million passengers, requiring a plan to expand its capacity to meet with increasing demand. Under such a plan, by 2030, the Airport would undergo major expansion, boosting total capacity to more than 35 million arrivals per annum. Besides, the completion of Van Don International Airport – the first private airport in Vietnam – together with the recent openings of Hanoi – Hai Phong – Ha Long – Van Don highways will create a tourism hub in the Northern area.
Furthermore, FDI has set a record number of newly registered volume in Hanoi by the end of 2018, promising a potential demand source for corporate clients in Hanoi hotel market.
Investment sentiments and rebranding activities
It was observed that several hotel properties have been made available in the market. Buying sentiments among overseas and local investors alike have been positive over the last three years. The most recent transaction includes the 293room hotel, the InterContinental Hanoi Westlake. 75% ownership of the 5-star hotel, InterContinental Hanoi Westlake, was reported to change hands from Berjaya Corporation Berhad (Malaysia) to a local company, Hanoi Tourism Development Company Ltd. The value of this deal is reported to be VND1.2 billion or USD53 million.
During 2018, Hanoi also saw some renovation activities. The previously known Hotel Nikko Hanoi started operating under new management team by Plan Do See, from January 1st, 2019 under the new name of Hotel du Parc Hanoi. The hotel is planning for further renovating activities in 2019, including lobby area, restaurants, and guestrooms.
The Hanoi Hotel Market is expected to further draw investment interests.
Strong outlook remains upbeat
Looking towards 2019, the opening of two 4-star hotels will help ease supply shortage to a certain extent. On the other hand, demand is forecast to remain robust. The city is expected to welcome more than 28 million tourists during 2019, of which more than 6 million are international arrivals. The Trump-Kim summit in February 2019 and its lasting effects will continue to boost the image of Hanoi’s tourism as the “City of Peace”. Also notably, hosting the first Formula 1 (F1) racing in 2020 in My Dinh area is expected to draw even more attention to Hanoi tourism.
With robust hotel performance and high growth of international tourist arrivals, the Hanoi Hotel Market is expected to further draw investment interests.
