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Ho Chi Minh City hotels impacted by supply glut

Despite the fact that Ho Chi Minh City has been able to withstand the impact of a decline in arrivals to Vietnam from China and Russia, the city's hotels have reported a drop in the average rate of reserved rooms in the first half of 2015. A surge in the number rooms available has weighed on the market, particularly the four-star segment.

Ho Chi Minh City hotels impacted by supply glut

The latest analysis from property services provider Savills Vietnam indicate that Ho Chi Minh City hotels are feeling the impact of the fierce competition in the local hotel market. According to Savills’ recent report, the average rate of reserved rooms in the first half of 2015 has fallen well below the levels recorded over the previous five years.

Four-star hotels suffered the most with a six per cent year-on year decline in occupancy, this compared to a four per cent drop across both the three and five star segments.

Much of the decline was owed to a continuous increase in supply with 540 three star hotel rooms and 446 luxury five star hotel rooms added to the market during the second quarter of 2015 alone. By the end of the second quarter, the number of hotels in Ho Chi Minh City stood at 106 providing a total of 13,800 rooms, these figures represent a 6 per cent increased quarter-on-quarter and a ten per cent increase year-on-year.

Notably, nine more hotels, three five-star and six three-star hotels, are expected to be launched before the end of year adding a further 1,100+ rooms to the market.

Hoteliers in Ho Chi Minh City will likely be uplifted by the fact that they City has proven to be more resilient to the drop in arrivals from China and Russia to Vietnam than the rest of the country. Vietnam’s Ministry of Culture, Sports and Tourism recently reported an 11 per cent decline in arrivals in Vietnam during the first half of 2015 however Ho Chi Minh City bucked the trend posting a modest three per cent year-on-year increase during this period.

The decision to offer visa free holidays in Vietnam for citizens of the UK, France, Germany, Spain, Italy and Belarus for up to 15 days, which was implemented on 1st July 2015, is expected to have a further positive impact on Ho Chi Minh City’s tourism sector in the second half of 2015.

Reportedly the city tourism department will now lobby for the tourism ministry to double the waiver period to 30 days.

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