Promising land for foreign hotel management groups

Race among high-end hoteliers heats up Vietnamese hotels among world’s top 25 best hotels for service Hotel managers hold upper hand in negotiations with hoteliers

The president of a HCM City-based large real estate group said she is looking for a hotel manager for her hotel in Ba Ria – Vung Tau province. “We are considering some famous foreign management groups,” she said. “We would sign contracts with those who offer the most reasonable service fees”.

The hotel developer said that travel firms and hoteliers have been meeting big difficulties in recent years due to the economic downturn, but the hotel and resort management fees have been increasing steadily. She noted that about 10 years ago, foreign hotel management groups only eyed luxurious 4-5-star hotels, but now they undertake 3-star hotels as well.

“Hotel managers are usually in the upper hand when negotiating with us,” she said. “As soon as we sign contracts, we will have to pay a deposit of US$200,000. Therefore, we will have to think carefully before making decision”.

An analyst, who said he once read 37 important agreements on hotel management in South East Asia signed in 2009-2014 by Jones Lang LaSalle, a world’s big real estate service provider, noted that the provisions were of great advantage to hotel managers.

The hotel management contracts usually have long-term validity, for 15-19 years on average. Meanwhile, hotels’ owners have to pay many kinds of fees, from basic fee to royalty and technique service fee.
In case hotel developers transfer their hotels to new owners, hotel managers still can continue their works as agreed in the contracts. If the new owners want to terminate the contracts, they will have to compensate for the contract break.

However, an analyst noted though hotel managers still hold great advantages, they would no longer be able to impose their rules on the market, because many rivals have appeared.
The analyst noted that more and more websites allowing travelers to book hotel rooms online have been set up, which would scramble with hotel management groups for clients

Vietnam fertile land for foreign managers
Vietnam, with 16,000 operational accommodation establishments and a lot of hotel projects under construction, is really a fertile land for foreign hotel management groups. However, while there are more and more Vietnamese-owned hotels, the number of Vietnamese hotel management brands remains modest. Most high-end hotels, both foreign-owned and Vietnamese owned, have been managed by foreign groups.

Tao Van Nghe, chair of the HCM City Hotel Association, confirmed that the hotel management market is controlled by foreign groups. However, Nghe thinks the situation would change in some years. A new Vietnamese face has appeared in the market - Odyssea Hospitality JSC, owned by Que Huong Liberty JSC.