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CBRE Releases Hotel Market View For Q1 2020



The COVID-19 pandemic has created many disruptions in Vietnam’s economy, its tourism sector and hotel market.

  • Vietnam suspended flights from China by end of January, and those from Korea by early March. By end of March, all international flights were temporarily suspended.
  • With travel restrictions, social distancing measures and reluctance to travel due to the COVID-19 outbreak, Vietnam welcomed only 3.7 million international tourist arrivals in Q1, down by 18.1% y-o-y, while the number of domestic traveler-trips also saw a decrease of 18.0% y-o-y. In addition, many key tourism events such as the Hanoi Formula 1 Grand Prix were delayed or canceled.
  • Vietnam National Administration on Tourism (VNAT) estimated a loss of $5.9-$7.7 billion to Vietnam’s tourism for the period February – April 2020. Hotels, tour operators and travel agencies were severely impacted during this period. Many hotels had to go through shortening staff’s working hours, laying off staff to eventually closing down the hotel temporarily when break-even couldn’t be achieved.
  • Vietnam Airlines estimated that it would lose US$2.1 billion in revenue in 2020.

VNAT expected a slow recovery post-COVID, and came up with two scenarios for tourism sector in 2020:

  • Scenario 1 – COVID-19 to be contained globally by June 2020: Volume of international tourist arrivals in 2020 to decrease by 70% y-o-y;
  • Scenario 2 – COVID-19 to be contained globally by September 2020: Volume of international tourist arrivals in 2020 to decrease by 75% y-o-y.

In any scenario, the year of 2020 will see an unprecedented drop in terms of tourist volume, and consequently a plunge in occupancy levels at hotels. Also, the possibility of a global recession as a result of COVID-19 will negatively impact the hotel market. However, “with great upheaval comes the opportunity for enormous change: this will be a refining period to select only those resilient and capable investors/developers, helping the market to rebound stronger once the pandemic is over”, said Mr. Thuc Nguyen, Associate Director of CBRE Hotels Vietnam. After the end of nationwide social isolation period, the general decline of wealth level and limited international flight connections will push the domestic tourism demand. Corporate transient segment will also be among the first to recover, due to pent-up demand caused by COVID-19. As for international tourists, those from Northeast Asia are expected to be the first to return to Vietnam once flights are resumed.





In 2019, as the tourism market continued to flourish, a few hotel acquisitions were completed in Vietnam, spanning from Hanoi, Hai Phong to Nha Trang, Ba Ria-Vung Tau and Phu Quoc, with transacted price per key recorded in the range of US$159-224 thousand for existing properties.


However, by the end of Q1 2020, when the hotel market was heavily affected by COVID-19, investment transactions may be halted. Mr. Robert McIntosh, Executive Director of CBRE Hotels Asia Pacific, noted: “As short-term performance metrics of hotels dropped to an all-time low by the end of Q1 2020, while there is uncertainty over how long it will take for the market to fully recover, the expectation is for hotel values to decline. It is forecast that hotels with greater exposure to the international leisure market will be more impacted than those with a strong corporate market.”


In early Q2 2020, CBRE Vietnam observed that there was an increase in inquiries from the Buy side looking for distressed assets, while the number of properties for sale in the 4- and 5-star segments is not significant, as owners in these segments tend to be big groups with sufficient capital to weather this crisis. Some upscale hotels that are currenly for sale on the market were actually launched for sale before the outbreak.





Prior to the COVID-19 outbreak, Hanoi was expected to welcome one 4-star project, Novotel Hanoi Thai Ha Hotel, with 343 keys in Q1 2020 and two other projects in the remainder of 2020. The rapid spread of the disease caused the Hanoi government to suspend all hospitality businesses since late March and to halt all construction works in Hanoi from early April, which would last until at least April 15th. With heightened uncertainty in market conditions, the opening of pipeline projects in 2020 is unpredictable. As of Q1 2020, Hanoi 4-5 star hotel supply stood at 7,882 keys from 35 properties.


In the Q1 2020, Hanoi recorded a sharp decrease in international tourist arrivals, down 36.9% y-o-y. Due to international travel restrictions and widespread concerns over the pandemic, the city’s major sports and tourism event of 2020, Hanoi Formula 1 Grand Prix, was put on hold.


As nationwide social isolation will be in place throughout most of April 2020, along with reluctance to travel, it is expected that the city’s tourism sector will take some time to recover. However, as many projects in Midtown and the West are the ideal location for many foreign corporate clients, the market is expected to pick up its recovery rate once international businesses get back to normal.


ADR of Hanoi in Q1 2020 was recorded at US$115.2, down by 6.6% y-o-y. Occupancy was averaged at 51.2%, a drop of 28.9 ppts y-o-y. RevPAR in Q1 2020 decreased to US$60.3, down by 38.9% y-o-y, which was still better than HCMC. The overall performance is expected to recover once the outbreak is successfully contained, being driven in the early phase mainly by the domestic segment and to some extent international travelers from Northeast Asia.




Hanoi, ForecaHanoi, Forecast Summary

Scenario 1 - The disease is contained by June 2020:

  • Average Daily Rate (ADR) for 2020 to decrease by 8-13% y-o-y
  • Occupancy rate for 2020 to decrease by 46-51 percentage points y-o-y

Scenario 2 - The disease is contained by September 2020:

  • Average Daily Rate (ADR) for 2020 to decrease by 15-20% y-o-y
  • Occupancy rate for 2020 to decrease by 50-55 percentage points y-o-y




In Q1 2020, HCMC hotel market welcomed one new project, lifting total supply to 50 properties with 10,945 keys. Looking beyond, 15 developments are in the pipeline for 2020-2023 period, equivalent to approx. 3,000 additional keys. With existing lodging businesses struggling to stay open due to heavy impact from COVID-19, and some delays in construction of pipeline projects, many new openings may be postponed.


With China and South Korea as major sources of visitors, the suspensions of flights from China by the end of January, from Korea in early March, before stopping all international flights by end March, have put a strain on Vietnam’s tourism sector in general, and HCMC hotel market in particular. HCMC received only 1.3 million international arrivals in Q1 2020, a decrease of 42.3% y-o-y. While there are high hopes that the city may be able to contain the decease in Q2, demand will be slow to recover. Domestic tourists and corporate transient travel are expected to drive the early phase of the rebound.


ADR for Q1 2020 fell by 12.7% y-o-y, at US$110.3, while occupancy level reported a y-o-y decline of 28.4 ppts, standing at 42% in Q1 2020. While hotels were roughly half-filled in February, the market experienced critical drop in occupancy in March, dipping by 56.2 ppts y-o-y.


RevPAR went down significantly to just $46.3 in Q1, a decrease of 48% y-o-y. With international flights to be suspended until at least end of May, there will be minimal, if not none, international arrivals in Q2 2020, while travel from domestic segment will also be limited, RevPAR is expected to come under more pressure in the next quarter. Recovery is forecast to be slow, and is subject to when the situation improves globally.



HCMC, Forecast Summary


Scenario 1 - The disease is contained by June 2020:

  • Average Daily Rate (ADR) for 2020 to decrease by 10-15% y-o-y
  • Occupancy rate for 2020 to decrease by 40-45 percentage points y-o-y

Scenario 2 - The disease is contained by September 2020:

  • Average Daily Rate (ADR) for 2020 to decrease by 17-22% y-o-y
  • Occupancy rate for 2020 to decrease by 44-49 percentage points y-o-y



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