Q1/2020 - Media Release savills.com.vn

HCMC – Q1/2020

R E P O R T

Savills ResearchMedia Release

Hotel

Q1/2020 - Media Release savills.com.vn

HOTEL

16,200 room

SUPPLY

2% QoQ3% YoY

$77/room/night

ARR

-11% QoQ-14% YoY

48%OCCUPANCY

-26ppts QoQ-27ppts 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

Hotel

Q1/2020 - Media Release savills.com.vn

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.

Retail

Q1/2020 - Media Release savills.com.vn

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�ths@savills.com.vn

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.

Vo Thi Khanh TrangHead of Research, HCMC

+84 (0) 906 948 580 vthikhanhtrang@savills.com.vn

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