Vietnam condotel market ineffective, past its boom: consultant

Condotel projects in Vietnam have been ineffective in general because developers promised attractive profits without thorough consideration of all relevant factors, says Mauro Gasparotti, director of Savills Hotel Asia Pacific.

Vietnam saw a large number of condotels put up for sale, especially in the 2016-2019 period, with an estimated average of 12,000 properties each year, he said, adding that other countries in Southeast Asia had also experienced condotel booms, such as Indonesia in 2008.

However, the market has passed the "booming" period and was developing slowly but with quality, Gasparotti said.

While several projects on Indonesia’s Bali island and Thailand’s Hua Hin were also suffering because they were not carefully planned and developed, the Vietnamese market was facing greater challenges, he noted.

If a product was not carefully planned and developed, it cannot operate effectively no matter which market it was developed in, Gasparotti added.

He pointed out that the southern island of Phu Quoc had many advantages for becoming an internationally renowned travel destination. But, most suppliers there focused primarily on providing rooms and paid insufficient attention to customer experience.

The island market has a surplus of shophouses and most of them have not started doing business, he said, adding that Phu Quoc needed to diversify its accommodation scene with better designed, truly luxurious resorts.

Choosing models and products suitable to market conditions and customer needs was a crucial factor in deciding the success of products like condotels, he said.

Gasparotti noted that there were successful condotel projects in Vietnam, like Hyatt Regency Danang in the central city of Danang and Melia Ho Tram in the southern province of Ba Ria-Vung Tau. These were well planned, built and managed, delivering value to investors and owners, according to Gasparotti.

A report from consultancy firm DKRA Vietnam showed that Vietnam’s condotel supply in the first quarter mainly came from Quang Nam (8%), Binh Dinh (9%), Khanh Hoa (21%), Binh Thuan (10%), and Ba Ria - Vung Tau (19%).

Primary supply increased by 6% over the same period last year, mainly coming from inventories of old projects (accounting for more than 98%). Meanwhile, new supply has tended to decrease due to legal barriers as well as construction delays by many investors in the current difficult context.

Overall market demand hit the lowest level in the past five years, with the absorption rate just 35% of the same period last year. Most projects saw slow sales, with 90% recording no transactions during the quarter, the DKRA report said.

It noted many projects with legal problems had to “close their shopping carts.” Inventories comprised mainly of high-value products which had to compete directly with loss-cutting products. The majority of Q1/2024 transactions were of products with a value of less than VND3 billion ($117,860).

The government’s Decree 10, dated April 2023, was expected to help condotels get due recognition after many years, but granting ownership certificates to such properties remained a barrier-strewn process, it added.