vietnam – q1/2020 media release · savills plc: savills is a leading global real estate service...

Q1/2020 - Media Release savills.com.vn

VIETNAM – Q1/2020

R E P O R T

Savills ResearchMedia Release

Hotel


HOTEL

16,200 room

SUPPLY

2% QoQ3% YoY

$77/room/night

ARR

-11% QoQ-14% YoY

48%OCCUPANCY

-26 ppts QoQ-27 ppts YoY

Performance

YoY visitor patterns

Source Savills Research and Consultancy

Source VNAT

QoQ: Quarter on Quarter comparisonYoY: Year on Year comparison

(1) Data collection as of Q1/2020(2) Occupancy calculated by occupied units divided by total available units.

(3) Avg. Room Rate: including service charge, excluding VAT

HCMC


Hospitality was the first and most heavily impacted asset class, however it will also be one of the first out of the trough.

Domestic demand in the turnaround will be solid, Vietnam is fortunate to be able to turn hospitality assets back on, quickly.

Troy Griffiths, Deputy Managing DirectorSavills Vietnam

KEYFINDINGS

Supply slowdownIn Q1/2020, there were no new projects, however two 3-star projects supplying 150 rooms permanently closed. Additional supply from upscale project renovations led to 2% QoQ and 3% YoY growth. Overall supply was over 16,250 rooms from 124 projects, 5-star with 41% had the highest share.

Up to 2023, eighteen new developments with approx. 4,000 rooms were planned to enter, mainly in District 1. At Q1/2020 approximately 45% of these projects are either under construction or close to completion. With Covid-19 there is a greater risk of delay and repurposing for those sites that are yet to commence.

Softest Q1 performanceHospitality had the weakest first quarter performance on record, with significant falls in occupancy and ARR. The initial decline in occupancy was from a slump in international demand, first from Chinese tourists, then Koreans and Europeans. The HCMC Department of Tourism reports 90% of tourism SMEs have temporarily closed and international arrivals fell -43% YoY to 1.3 million. Overseas visitors in February dropped -52% YoY and in March -84% YoY. The key market decreases were from China, down -32% YoY and Korea, -26% YoY.

Overall occupancy was down -26 ppts QoQ and -27ppts YoY to 48% in Q1/2020.

Four- star was down -27ppts YoY and 5-star -31ppts YoY. In Q2, further performance declines are expected with air travel limited, social distancing and Covid-19 increasing.

Operators and visitors respondMany reservations were cancelled in February and March. To compete all grades lowered their ARR, especially in District 5 where three-star hotels target Chinese visitors. In Q1/2020, ARR was down 14% YoY to US$77/room/night.

To offset reduced revenues, operators are instigating temporary layoffs and split shifts. Some have cut more than 50% of their staff and others used as temporary hospitals, or quarantine facilities.

Expected Bright OutlookInternational arrivals will cease temporarily. Savills analysis over 2001 to 2019, correlated severe international visitor drops of -8% during SARS in 2003 and -12% during the GFC in 2009. Post 2020 tourism is expected to rebound, particularly domestic.

• International arrivals continuously increased 23% pa from 2015-2019 with the rise of low-cost carriers (LCC) and new and upgraded international airports.

• Post pandemic, domestic visitors are expected to drive tourism. Regardless of SARS and the GFC, domestic volumes increased 4% YoY in 2003 and 22% YoY in 2009, against foreign tourists decreasing -8% YoY in 2003 and -12% YoY in 2009. From 2011-2017, domestic visitor average daily expenditure increased 4% pa. Local demand was 4 times international in 2000-2009 and 8 times greater in 2010-2017. Domestic flights are expected to reopen sooner than international.

• Alongside high local demand, recovery will be aided by government led tourism incentives and support.

• Covid-19 appears to be contained more effectively in Asia, which is positive for local hospitality, with a heavy Asian bias. According to VNAT, they accounted for up to 80% of international visitors. China and Korea together represented 37% of all foreign inbounds in 2015 and 56% in 2019, with China the largest single source.

HCMC


HOTEL

~9,950 rooms

SUPPLY

Stable QoQStable YoY

$99/room/night

ARR

-13% QoQ-13% YoY

44%OCCUPANCY

-31 ppts QoQ-30 ppts YoY

Performance

Future supply



QoQ: Quarter on Quarter comparisonYoY: Year on Year comparison

(1) Data collection as of Q1/2020(2) Occupancy calculated by occupied units divided by total available units.

(3) Avg. Room Rate: including service charge, excluding VAT

HANOI


Hospitality was the first to suffer, however it is likely to be quickest out of the slump. In the midterm domestic

travelers will drive occupancy. Vietnam is fortunate in being able to reactivate quickly.

Troy Griffiths, Deputy Managing DirectorSavills Vietnam

KEYFINDINGS

Performance jittersTotal stock was approximately 9,950 rooms, stable QoQ and YoY from 66 hotels, comprising 16 five-star, 19 four-star and 31 three-star projects. The sudden drop in visitors had 3- to 5- star average occupancy fall -30 ppts YoY, average room rates (ARR) down -13% YoY and revenue per available room falling -49% YoY.

In early Q1 decreasing Chinese and Korean inbounds saw 3- to 5-star occupancy ease to 55%. In March the increased effect of containment measures had 3-5-star occupancy at under 30 percent. Occupancy is expected to be further affected following the April 1st lockdown and with work and holiday visas temporarily on hold.

Five-star unbowed In Q1/2020, five-star average occupancy decreased -32 ppts YoY. ARR was US$127/room/night, down -13% YoY leading to RevPAR down -46% YoY. Business travelers to 5-star hotels decreased, but remained the main guest source to maintain 5-star’s lead in the segment.

Three- and 4-star hotels had the worst performance as RevPAR fell -60%, mostly from a drop in leisure trips to Ha Noi. In March some mostly lower grade projects, temporarily closed and furloughed employees.

Three hotels have been established as quarantine zones: Thang Long Espana Hotel, the 3-star Hoa Binh Hotel and 4-star Muong Thanh Xa La Hotel.

CBD, Secondary suffersThe absence of leisure travelers and closure of city attractions reflected poor segment performance. Secondary area RevPAR was down -51% YoY; and in the CBD, down -49% YoY. The Ha Noi Department of Tourism reports, from February to 19th March, 151 hotels were closed in districts Hoan Kiem (78) & Dong Da (73).

The West RevPAR decreased -43% YoY, hit by a late March performance drop after postponement of the F1 Grand Prix resulted in cancelled bookings.

HANOI


KEYFINDINGS

New Inbound Lows The approximately 3.85 million Q1 visitors were down -47.2% YoY to the lowest in 5 years. International visitors down -43.9% YoY to 956,000; and domestic travelers were down -48.2% YoY to 2.89 million. International staying visitors fell -36.9% YoY to 756,000. Those from China slumped -78.1% YoY; South Korea by -52.1%; and Japan by -33.3 percent. In March, total visitors to Ha Noi were down -76% MoM and -87.4% YoY to 321,390. Total first quarter tourism revenue in Hanoi was VND15,687 billion, down -38.8% YoY.

Aviation CrashesMarch data from the Vietnam National Administration of Tourism reported 375,137 international arrivals by air to Viet Nam, down -62.3% MoM and -65.7% YoY. Q1 total international visitors by air of almost 3 million fell -21.9% YoY. Civil Aviation Authority data from February 19th to March 18th, reported over 21,000 completed Vietnamese carrier flights were down -37.9% MoM and -25.6% YoY. In Q1/2020, down -4.5% YoY, local carriers completed 77,530 flights.

Secondary supply significantFrom 2020 on, over 10,000 rooms will enter, with almost 59% in the Secondary area. Five-star will dominate future supply at 65% and 64% will be in the Secondary area. Six projects with over 1,100 rooms are expected to enter in 2020, of which 75% will be under international management from Accor, Capella and Marriott. However, the impact of coronavirus may see completion delays.

Viet Nam Tourism OutlookWorld Tourism Organization (UNWTO) estimated that global international tourist arrivals in 2020 could decline between 20-30%, which could translate into a loss of US$ 30-50 billion in international visitors spending. According to Vietnam National Administration of Tourism, the best scenario for Vietnam tourism in 2020 is that international visitors will decrease -70% YoY, with 5.5 million. Viet Nam high reliance on domestic travelers (82.5% of arrivals in 2019) and key market such as China and Korean might be a big advantage as these markets are expected to be able to travel again first.

HANOI


Savills ResearchWe’re a dedicated team with an unrivalled reputation for producing well-informed and accurate analysis, research and commentary across all sectors of the Vietnam property market.

Research

Troy Gri�thsDeputy Managing Director

+84 (0) 933 276 663tgri�[email protected]

Savills plc: Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 700 o�ces and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.

This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every e�ort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

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Industry award fees are being redirected to help local people. Charities for underprivileged around the country will receive increased donations.

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Vo Thi Khanh TrangHead of Research, HCMC

+84 (0) 906 948 580 [email protected]

Do Thi Thu HangDirector, Advisory ServicesSavills Hanoi+84 (0) 912 000 [email protected]

vietnam – q1/2020 media release · savills plc: savills is a leading global real estate service...

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