The future of homestays in Viet Nam

Monday, Jun 24, 2019 08:30

A view of Sapa Homestay Ta May in Sapa District, Lao Cai Province. — Photo

The number of people coming to Viet Nam combining business with tourism has increased significantly in recent times, and is one of the reasons for arrival numbers to jump in recent years.

According to the General Statistics Office, last year 15.6 million international visitors came, 2.7 million higher than in 2017. Nearly 7.3 million have arrived in the first five months of this year.

Many opt for vacation rentals and homestays because they find it cheaper than traditional accommodation at hotels.

Besides, it enables them to experience living together with locals and so has become a popular choice, especially among young people who like to travel and explore cultures and eat, live and work with homestay hosts.

Thanks to its many advantages, homestay tourism is also increasingly preferred by foreign tourists and also many Vietnamese, especially younger tourists.

The homestay and vacation rental business models are growing as a result.

Seeing their potential, many Vietnamese are renovating their houses and turning them into accommodation targeted at young local and foreign visitors.

According to tourism sector insiders, the homestay business appeared in Viet Nam a few years ago but has only become popular across the country in the last two years.

A report from Viet Nam National Administration of Tourism said in 2017 Viet Nam had 1.76 million homestays with 12.94 million rooms.

They accounted for 10.1 per cent of the country’s total accommodation facilities.

But many tourism experts dispute these figures saying they are incomplete and the actual number must be much higher.

According to market research firm AirDNA, the number of Ha Noi homestays topped 11,200 as of the middle of last year while in HCM City it was over 20,000 after increasing quite rapidly in the year or so before that.

As of August 2018 the two cities had 21,994 properties on Airbnb. The average rental was around $36 per room per night in Ha Noi and $44 in HCM City.

Trinh Thanh Hung, the owner of a villa in HCM City he offers as vacation rental, said he earns VND200 million ($8,564) a month in revenue.

The rent for a room at the villa is relatively high at VND1.2 -1.6 million ($51 -8) per day, he said.

Phan Thi Man Chi, owner of the Nam Thi Homestay in Tien Giang Province’s Cai Be Town, said she earns around VND20 million a month. The average price of a room is VND900,000-1 million per night.

It is quickly becoming popular because developing it involves little difficulty on the part of house owners, especially if they are young and tech-savvy.

They can easily advertise their services at no cost on social media and a myriad of other platforms.

Some market observers said the success of homestays and vacation homes depends on digital marketing and so it is not just about investing in a property but embracing technology.

This explains why most homestay investors are young people who are not fazed by the latest technologies.

Is the business really profitable?

Many tourism experts are of the opinion that it might be profitable in the short-run but not in the long-run since this model mainly caters to adventure tourists, whose tastes are constantly changing.

According to Vina Retail, many young people seem to think it is as simple as having a house or apartment and renting it out whereas this business model involves a lot of different factors and if they fail to work things out carefully, they could lose heavily.

In fact, many young investors have suffered severe losses in the early stages and even wound up because of unexpected expenses and lack of tenants.

Nguyen Thuy Trang rents out a house with a garden near the forest in the coastal district of Can Gio for VND8.5 million ($364) a month.

She said she runs the business herself and only hires cleaners so that costs are not so high. But it was very hard for her to find guests during the rainy season, which lasts nearly six months in a year.

“I have to find a way to make up for it during the dry season,” she said.

Villa owner Hung said the cost of running the vacation home is quite high. His staff wages are VND20 million a month, while his income could be as low as VND30 million during the off-peak season from November to March.

Experts said the demand is very high now and so the market is likely to flourish for the next three to five years but it is fragmented and needs times to develop. Profit margins in the business are not high compared to traditional accommodation services such as hotels and condotels, they said.

M&A deals likely to be further controlled

All mergers and acquisitions (M&A) deals by large enterprises are likely to be required to be reported to authorities.

This is included in a draft decree to guide the Competition Law from the Viet Nam Competition and Consumer Protection Authority.

Article 13 of the draft decree requires enterprises to notify the national competition authority about economic concentration activities they intend to pursue such as M&A deals and share purchases.

The four instances when notification is mandatory are when the firm’s total assets amount to VND2 trillion (US$85 million) or more; its revenues are VND2 trillion or more; the value of the tentative M&A deal is at least VND1 trillion; and the combined market share after the acquisition amounts to 20 per cent.

The decree gives the competition authority 30 days from the date of receiving the communication to announce its preliminary verdict to either allow the M&A deal or subject the firms to an official appraisal.

If the authority fails to make the announcement, the firms are automatically permitted to go ahead with their M&A transaction.

The M&A scene in Viet Nam has become increasingly active, with more and more local enterprises setting up ties with global partners as a strategy to expand their global reach or foster their growth at home.

Vietnamese corporations signed M&A deals worth US$9.9 billion last year, a 160 percent jump from a year earlier.

Over the last few years such deals appear to have resulted a win-win situation for both the Vietnamese companies and their foreign partners. — VNS


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