• Investing in Vietnam Hotels: A Foreigner’s Guide

    Posted on Leave a comment

    ho-chi-minh-hotel

    Do you plan to buy property in Vietnam?
    Click here to get in touch with an experienced agent

    The Vietnam tourism industry has grown with double digits year-on-year and it’s set to compete with countries like Thailand and the Philippines.

    The pandemic has undoubtedly affected the market, but analysts also believe that it will be one of the fastest to recover.

    We’ve seen increasingly more activity among foreign investors who look for opportunities to enter the hotel market. That’s why we have written this article and where you will learn the following:

    • Can foreigners buy hotels in Vietnam?
    • Hotel Ownership Regulations for Foreigners
    • Hotel Prices in Vietnam
    • Best Cities for Hotel Investments

    Can foreigners buy hotels in Vietnam?

    As mentioned in my separate article about buying residential property in Vietnam, foreign individuals have no issues to acquire 30% of the units in a commercial condominium project.

    Property ownership regulations are comparatively strict in Vietnam and you cannot get hold of freehold property like in Thailand or Cambodia.

    Buying commercial real estate, such as a hotel, is also a different undertaking.

    In theory, foreign companies don’t have any issues to acquire hotels with 100% ownership in Vietnam. But the process is trickier compared to residential property. It involves more licensing, approvals, and different entities.

    Before you can start the process of buying a hotel, you have to choose a suitable legal entity and where you have two options:

    • Use your overseas entity for 100% foreign ownership
    • Set up a joint venture with a local partner (a nominee structure is typically the most common option)

    Hotel Ownership Regulations for Foreigners

    Even if foreigners can get a full 100% ownership of hotels, you will need a tourism operation license if you intend to provide tourism-related services, which is common.

    If you plan to provide services related to tourism and accommodation, it’s recommended to have two separate legal entities:

    • A company providing tourism services
    • A 100% foreign-owned hotel

    Your best option is to work with a local consultant and lawyer who can help you to draft the documents to avoid any pitfalls later.

    1. International Travel License

    To provide tourism-related services, you also need an international travel license. The license can only be obtained with a 100%-Vietnamese company that currently possesses the license.

    This is the reason why you have to work with a local company and you can only own up to 99.99% of the capital in the entity.

    2. Law of Tourism of 2017

    I won’t go into details regarding the Law of Tourism of 2017, which applies to companies who offer accommodation in Vietnam.

    Below you can find examples of requirements that the law stipulates:

    • Have a registered business by regulations of law
    • The legal representative of the Vietnamese entity must be a Vietnamese citizen with a no criminal background
    • Meet the minimum conditions for infrastructure and services provided for tourists
    • Meet the conditions for security and order, fire prevention and fighting, environmental protection and food safety in accordance with regulations of law

    3. Minimum Capital Requirements

    Vietnamese laws don’t specify any exact minimum investment requirements for foreign investors.

    But, the charter capital shall cover all the expenses for your business activities.

    The sum is around USD 12,000 as a minimum capital required for hotels that are run through joint ventures.

    Hotel Prices in Vietnam

    The Vietnamese hotel market is less developed compared to countries like Thailand, Australia, and Malaysia.

    With that said, we’ve seen large operators, like InterContinental and Le Meridien, setting up establishments in places like Phu Quoc and Da Nang in the past years.

    We can mainly thank the growing tourism industry.

    Vietnam has 10-bed establishments available from USD 100,000 up to large-sized projects run by some of the most renowned brands in the world and that cost hundred of millions of US dollars.

    Hotels and resorts are still less expensive compared to Thailand on average. In Vung Tau, for example, you could buy a 3,000 square meter resort with 40 rooms in Vung Tau City for less than USD 2 million.

    Being just a 1.5-hour drive away from Ho Chi Minh, Vung Tau brings similarities to Hua Hin in Thailand is one of the best beach towns to visit in Vietnam.

    Best Cities for Hotel Investments

    Vietnam has a population of around 95 million people and with a land area almost as big as Germany’s. As it continues to develop economically, we see increasingly more investment destinations.

    Below I have listed some of the most interesting for hotel investors.

    Da Nang

    Da Nang is one of the biggest cities in Vietnam and located in the central parts, just a stone’s throw away from the UNESCO World Heritage town Hoi An.

    It’s one of the fastest-growing cities in Vietnam and unique in the sense as it serves as one of the country’s economic engines, but also as a resort city.

    You will predominantly find Korean investors here, but the city gets increasingly popular among other nationalities too. Many foreigners relocate from Ho Chi Minh to Da Nang as living costs are cheaper, they have access to the beach and nature.

    Below are just some examples of hotels available in Da Nang:

    • Marriott
    • Hilton
    • Novotel
    • InterContinental
    • Le Meridien

    Ho Chi Minh

    Despite not being a coastal city with access to the beach, Ho Chi Minh serves as Vietnam’s financial hub.

    The number of business travelers increases year-on-year and the hotel sector has performed comparatively well here and in the capital Hanoi.

    According to a recent study by CBRE, the profit rate is 2% to 3% higher when investing in hotels compared to office and retail space in Vietnam.

    Unfortunately, the pandemic had a great impact on the hotel industry in Vietnam. Savills claims that international arrivals fell -43% YoY to 1.3 million, just in the first quarter of 2020.

    Hanoi

    Even if Hanoi and Ho Chi Minh have performed well in previous years, the market was hit hard by the COVID-19 lockdowns. Analysts also believe that the hospitality industry will recover quickly, primarily thanks to domestic traveling.

    According to CBRE, Hanoi saw a sharp decrease in international tourist arrivals, down 36.9% from Q1 2019 to Q1 2020.

    The capital remains as one of Vietnam’s most interesting investment destinations thanks to its political and economic importance to the country.

    Nha Trang

    Nha Trang is located along the shoreline and mainly serves as one of Vietnam’s most popular resort hubs. As Russian tourists have been redirected from Nha Trang to Phu Quoc, we now see increasingly more Chinese tourists in the city.

    Despite not being as bustling and popular as Da Nang, Nha Trang should be on your list of potential investment destinations if you look for hotels in Vietnam.

    Phu Quoc

    Phu Quoc is a Vietnamese island located off the coast of Cambodia and in the Gulf of Thailand. It becomes increasingly popular among local and foreign travelers.

    Phu Quoc is not only the home to smaller resorts and local brands but 5-star hotels such as InterContinental.

    FAQ

    Below I have included some commonly asked questions and our replies.

    Can I buy land in Vietnam?

    Foreign companies cannot buy and own land in Vietnam. In fact, few Southeast Asian countries allow foreign land-ownership and where Malaysia is technically your only option.

    Instead, you have to lease the land with an initial leasehold period of 50 years, which can be renewed with an additional 50 years.

    How long does it take to register a hotel in Vietnam?

    The process is divided into four steps and you should set aside around 3 months for the whole process. Larger acquisitions might take a longer time. The steps generally involved are:

    • Investment Registration Certificate: 4 weeks
    • Business Registration Certificate: 1 week
    • Licenses for your Lodging Business: 2 weeks
    • Additional Tourism Licenses: 4 weeks

    How can I find hotels for sale in Vietnam?

    For small and medium-sized local establishments, you can either check listings online or work with a local partner. He or she can help you identify hotels that suit your needs.

    However, if you look for larger branded hotels, it can be worthwhile working with a partner that specializes in commercial real estate and that has a long experience in the industry. They will most likely work with some of the most well-known brands and help you to connect.

  • Want to buy commercial property in Asia?

    Fill out the form to get in touch with a verified real estate agency
    specialized in commercial property in Asia


      Disclaimer: The content on this website is provided for general information about buying property in Asia, developments, agencies, regulations, taxes, and other related topics. However, we don't guarantee that we keep the content up to date or that it's free from error. We do make mistakes from time to time. We never provide legal advice of any sort.
    • Leave a Reply

      Your email address will not be published. Required fields are marked *

      [FREE PDF]
      [FREE PDF]
      [FREE PDF]
      [FREE PDF]