Huge potential
Vietnam has welcomed nearly 13 million international visitors in the first 10 months of 2018, increasing 22.4 per cent over the same period last year, according to the Vietnam National Administration of Tourism (VNAT). The majority of these tourists coming from China and Korea.
Vietnam's tourism industry promises huge benefits for investors. Its impressive growth has lead to the widespread development of resort real estate over recent years, which has proven to be very succesful. Though success is not limited to resort development. Traditional models such as hotels and villas, as well as newer, tourist-focused developments such as hotel apartments and condominiums have also reporterd great success. However, the latest model emerging in the recent two years, is homestays.
A homestay is defined as a type of accomodation based on the term "home from home". That means during a business or travel trip, you book a stay with a local family in their own house. For foreigners, the model of homestay is not unfamiliar due to the introduction of Airbnb, a booking service connecting people with rooms for rent and guests seeking a bed.
In Vietnam, homestay services are attracting numerous individual investors and households. According to the experts, the service has boomed nationwide, but understandably, concentration is predominantly in regions with famous tourist sites, and upcoming tourist destination regions, for example, Sapa, Da Lat, Da Nang, Hue, Phan Thiet, and Vung Tau. With the motto of "eating together, staying together, doing the same", this model helps tourists have a chance to explore the local culture. A house can be used for stay and for rent at the same time. The investors can also rent a house then renovate it to an accommodation for young, dynamic travellers.
Homestay businesses are an excellent chance for investors as it requires less capital and brings rapid capital pay-off. Therefore, it has attracted many individuals, especially young people who want to try their hand in business.
Being a short-term type of accommodation, so the income can be higher than traditional rent by an average of 20-30%, this rate can be two or three times higher again for homestay services in high volume tourist sites.
Homestay rental price ranges from VND 500,000-5 million per night ineach room/villa depending on its location, quality and amenities. If the booking rate is 60 per cent, the owner can earn VND 10-100 million per room, minus the cost for management. This is a dream figure for investors now.
Also a hidden risk
Homestay business is considered a new investment type with huge potential to develop in the future. However, it’s not easy to operate this model successfully.
Most notably, homestay business in Vietnam has attracted small and young investors, not professional real estate organisations.
According to the experts, a homestay business requires a lot of different skills. Without careful calculations, it is possible to incur heavy losses due to unplanned costs and the unstable number of tenants.
Nguyen Van Dung, CEO of Luxstay, a start-up providing the platform for homestays, said “you need more than a house if you want to do business with homestay.”
Service quality is one of the most important factors in this business but it is often ignored. With the homestay market growing rapidly, competition also soars. Therefore, investors should focus on improving the quality of service and give the most reasonable price.
With investors increasing the development of the industry, guests are increasing the demand for additional services such as smart locks, furniture, necessities, cleaning services, and customer care. Unfortunately, apart from Luxstay and Airbnb, there are very few professional systems which provide and support these services in Vietnam.
Currently, most homestay services are spontaneous and depend on foreign systems such as Airbnb, Homestay, Counchsurfing, and Home Exchange. Meaning investors in Vietnam are faced with more difficulties and less support. But also means there is room for a local system, if professionally and carefully planned, that can thrive as long as it is adapted accordingly.
Real estate experts expect the homestay business model to grow dynamically in Vietnam in the next three or five years in mirroring the rapid development of the tourism industry (value of profit can be up to US$20 billion).
However, to make a boom, the business needs the involvement of professional organisations and investors as well as the policy to support it.
