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How Will the Resumption of International Flights Help Real Estate?

As travel restrictions ease, domestic (and gradually international) tourism is heating up. The resumption of international flights and the borders reopening in March will not only benefit Viet Nam’s hospitality sector but will also drive demand for serviced apartments.

 

Domestic Tourism Drives Hospitality

After two dormant years, tourism in Viet Nam is slowly coming back to life. After social distancing restrictions eased in October 2021, Vietnamese airlines completed 8,383 flights in December, 538% more than the 1,311 flights in September. Hotel occupancy also improved in the last quarter, along with the average room rate, which reached VND 1.8 million, increasing 12% compared to the last quarter of 2020. Between 2022 and 2023, supply is also expected to increase with the entry of 2,900 rooms, demonstrating the rekindling of investor confidence in the hospitality sector.

Domestic travel boomed in early 2022, thanks to travel during the Lunar New Year. According to the Viet Nam National Administration of Tourism, during the nine-day festival, there were more than 6.1 million domestic tourists, generating revenue of VND 25 trillion. These numbers represent a very real demand and an optimistic outlook for the revival of domestic tourism. 

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Mr Matthew Powell, Director of Savills Ha Noi, said: “Northern Viet Nam has an interesting hospitality market. Apart from thriving tourist destinations like Ha Long, we are witnessing development in Ha Noi’s suburbs and surrounding provinces like Hoa Binh and Thanh Hoa. This trend is understandable, given that transportation links to these areas continue to improve, as such, people can easily travel to surrounding provinces for weekend trips.”

“While domestic travellers currently drive Viet Nam’s hospitality sector, we cannot forget how important foreign tourists are for the market. There are positive signs though, as Viet Nam’s vaccination rate is high and authorities plan to reopen the borders to international travellers from mid-March,” he added.

Foreigners Return as Borders Reopen

As part of Viet Nam’s plan to reopen to international guests, the authorities have announced that international flights will resume from the 15th of March 2022. This reopening will not only benefit the country’s tourism and hospitality segment but is forecast to benefit serviced apartments too.

Foreign experts are the predominant occupiers in serviced apartments in Ha Noi. Japanese and Korean expatriates are the main tenants in Grade A serviced apartments, accounting for 84% of the tenants in the second half of 2021.

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According to Mr Neil MacGregor, Managing Director of Savills Viet Nam: “There is a strong correlation between FDI flows and serviced apartments. As such, it is no surprise that countries leading FDI investments, such as Japan and Korea, also drive serviced apartment demand. We know that in 2021, many international experts could not enter Viet Nam due to strict border controls; however, once international flights resume, many foreign experts will be able to return, which will greatly enhance tenant pools for serviced apartments."

According to a 2021 Global Buyer Survey, good healthcare, air quality and green spaces are top priorities when selecting accommodation. As such, branded serviced apartments could take full advantage of global health initiatives that the brands rolled out, collaborating with sanitisation experts to create safer and healthier projects.

Currently, the outlook for hotels and serviced apartments looks good with the borders set to open in the middle of March. However, both sectors will continue to rely heavily on how well the pandemic is managed and the strategies the authorities implement to do so.

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