A undated photo of foreigners drinking at a street shop in Ho Chi MInh City's famous backpack area, which is crowded with two- and three-star hotels. Photo: Diep Duc Minh
After growing strongly for several years, four- and five-star hotels in Ho Chi Minh City are facing a tough time as a wide range of more affordable choices has become much more appealing to tourists who want to cut down on their spending.
The Saigon Times reported on Thursday that market analysts and tourism agencies have seen both occupancy and room rates falling in the upscale hotel market.
The average room rate of five-star hotels declined by 14.2 percent from the beginning of this year to less than VND1.5 million (US$66.7) in the third quarter, according to Savills Vietnam's latest report.
A similar decrease was reported among four-star hotels which offered their rooms at VND1 million ($44.5) per room per night, down 20 percent from the second quarter.
The declines were not only due to the low season but also a strong competition, the company said.
Statistics from the HCMC Hotel Association showed that the city now has 21 five-star hotels with more than 5,000 rooms, compared to less than 15 hotels five years ago.
Speaking to Saigon Times, Phan Xuan Anh, chairman of HCMC-based travel company Viet Excursions, said even though the current room rates at top hotels are now lower than the prices listed in 2007, they are still struggling to fill up.
Foreign tourists are reducing their expenses, especially accommodation costs, he said.
Those who visit Vietnam through cruise tours, for instance, are known for their big pocket, but these days they ask for three-star or even two-star hotels, instead of five-star hotels, Anh was quoted as saying.
Tao Van Nghe, chairman of the HCMC Hotel Association, expected the difficulties that upscale hotels are facing will continue.
More than 300 rooms from one new four-star hotel and two existing five-star hotels will be added to the city's supply by the end of the year, Savills Vietnam said.
Nghe said with the shift in tourist spending habits, both Vietnamese and foreign investors are now more interested in opening two- and three-star hotels, he said.
For instance, some Japanese investors have recently bought mid-range hotels in downtown areas such as Le Thanh Ton and Le Lai streets to serve Japanese customers, Nghe told Saigon Times.
Other downtown streets such as Thai Van Lung, Thu Khoa Huan and Pham Ngu Lao are now too crowded with budget hotels.
Regardless of the crowd, an unnamed hotel investor was quoted as saying that the city's market of two-star hotels still has room to grow more, considering that people now prefer to travel with a low to moderate budget.
HCMC recorded 3.2 million foreign visitors in the first nine months, up 5 percent year on year, according to official figures.