In mergers and acquisitions (M&As) deals between Vietnamese companies and international hotel operators, the domestic side tends to be the seller.
In Vietnam, the high-end hotel segment is dominated by hotel chains from Hong Kong, Singapore, Korea, Japan and Malaysia, who want to expand their business in Vietnam by scooping up properties from domestic firms. At least two-thirds of the 35 five-star hotels in Hanoi and Ho Chi Minh City are run by international brands so far.
However, the market has recently been witnessing a reversal of the trend. In early of March, Hanoi Tourism Development JSC, said to be a member of Vietnam’s BRG Group, bought 75 percent of TPC Nghi Tam Village from Malaysia’s Berjaya Group. The latter runs the five-star Intercontinental Hanoi Westlake hotel, which is located near many popular tourist attractions of the capital city.
It is said that Hanoi Tourism Development paid $46.9 million in the deal. In addition, the seller Berjaya also sold off its financial centre and university township projects in HCMC to local investors.
Hanoi Tourism Development chose to take over Intercontinental Hanoi Westlake because hotels are a low-risk business with low depreciation rates of assets, said a representative of the company. He stated: “We can also create a steady cash flow thanks to business activities.”
Other hotel and resort chains have also been taken over by Vietnamese buyers, including Thien Minh Group and Victoria Hotel & Resorts, or Bong Sen Corporation and Daewoo Hanoi Hotel. Hilton Hanoi, another five-star hotel, is also under the management of BRG Group.
“Domestic investors have shown their financial capacity and long-term vision via recent M&As. The buyers have both an understanding of international markets and in-depth experience of Vietnam’s culture and consumers,” said Nguyen Cong Ai, partner at KPMG Vietnam.
According to Savills Vietnam, M&A opportunities are set to become even more plentiful for domestic investors who are eyeing upscale hotels in Hanoi and HCMC. The two major cities are emerging as the top destinations in Southeast Asia region for business and leisure travellers, with double-digit growth each year. Thanks to their promise of a stable cash flow and lower risks than other property segments, five-star hotels are very attractive to investors.
Businessmen may also frequently visit Hanoi and HCMC for work, making them repeated patrons of these upscale hotels. Additionally, investors are further interested in M&As as empty land plots in central locations are few and far between, prompting hoteliers to buy existing projects instead.
Managing Director at consulting firm Economica Vietnam Le Duy Binh welcomed the emerging trend. He said: “Vietnam should have its own deep-pocketed investors that can compete against overseas buyers. Fair and transparent competition between Vietnamese and other investors is always good for the market.”