Danang hotels on sale as owners buckle under financial pressures

Many hotels in the central tourist hub of Danang are being offered for sale under pressures of rising loan interest rates and year-end capital restructuring despite the tourism recovery underway.

Almost all real estate websites are carrying information on hotels for sale in the city, the listing even including four and five star properties.

The districts of Son Tra and Ngu Hanh Son have the largest number of hotels for sale with some located in "prime" tourist locations of Pham Van Dong and Vo Nguyen Giap streets or the Tay An Thuong quarter.

For example, a four-star hotel located on An Thuong 1 street in An Hai Dong ward, Son Tra district, which has 40 rooms and a built up area of 2,000 square meters, is on sale for nearly VND100 billion ($4.03 million). The hotel is located close to the famous My Khe beach.

A 10-storey hotel on Vo Nguyen Giap street - right on the T20 beach in Ngu Hanh Son district, carries a publicized price tag of VND43 billion ($1.73 million).

A relatively new five-star hotel on Vo Nguyen Giap street in Son Tra district with a floor area of 18,000 square meters, 27 floors, two basements and 164 rooms is on sale for VND950 billion ($38.3 million). The sellers are advertising that the hotel was built just three years ago and has current monthly revenues of VND8 billion ($322,500).

According to the municipal Tourism Association, the city has about 1,000 large and small hotels, of which about 20-30% are currently for sale as revenues are not enough to cover loan repayments at high interest rates.

The association’s representative said that after the pandemic, tourism activities are recovering, but the number of visitors visiting Danang is yet to reach pre-pandemic levels.

"Danang tourism mainly depends on three markets - South Korea, China and Japan. However, visitors from these markets have only just begun to return here," the rep said.

According to Nguyen Duc Lap, director of the Danang Real Estate Research and Training Institute, data from the municipal Statistics Department shows that in the 10 months of 2022, tourist arrivals to Da Nang numbered 3.1 million, including 354,000 foreigners, equivalent to about 36% and 10% of their pre-pandemic 2019 peak levels, respectively.

With the rainy season ongoing in the central city, the situation will not improve much until the end of this year. "The value of the hotels has decreased significantly as their income is too low in view of their designed capacity," Lap said.

Amid the myriad of difficulties facing the real estate market including the government's tight monetary policy and the recent sharp increase in bank interest rates, hotel owners are under financial pressure. Moreover, market liquidity is affected as localities are reviewing and adjusting their master plans.

The prospect of attracting international tourists to Danang is not bright as the main tourism market, China, remains mostly closed under the "zero-Covid" policy.

"With the absence of cash flow and gloomy prospects, the real estate market is entering a declining cycle, so offering hotels for sale is understandable action in the current context,” Lap said.

The granting of certificates to resort real estate models like condotel was not uniform in many localities, rendering it “almost dead" in recent times, he added.