Hotels: A market-sizing exercise (part 8 of ???)

Ok, yesterday I did a bunch of estimates of hotel rooms to get a sense of where the Ho Chi Minh City (HCMC) hospitality market is right now. Based on my estimates, it was around 125,000 rooms in 2015 and 145,000 in 2017. Let’s go forward from there and see what future needs are using the same methodology.

SOURCE: VIETNAMESE DEPARTMENT OF TOURISM, VIETECON.COM

But first, we need to make some estimates on visits to HCMC in the future. The government has a target of 8.5m foreign and 32.77m domestic visitors in 2019, a 14% and 13% growth rate, respectively. The figures we already came up for the country as a whole for foreign visitors were 13.6% growth in 2020 and then 8.4% a year after that until 2025. For domestic, it was 7% annual growth the whole period through 2025. If we do that, then HCMC would see 14.5m foreign tourists in 2025, or just under half of all visitors to Vietnam. And domestic travelers of just under 50m, or 38% of all domestic travelers in the country.

For reference, Bangkok had 21.47 foreign overnight visitors in 2016. Based on that, HCMC’s 14.5m seems very doable, especially as the country builds up capacity. But one reason for Bangkok’s success is that the airport funnels so many more people through the city. The Suvarnabhumi Airport has a capacity of 45m passengers, which it is currently exceeding by as many as 15-20m a year. It is expanding now, and the first expansion should be completed by 2020 and increase the 45m capacity to 60m (see this article for details, sub req’d). Then a future expansion will increase capacity to 90m by 2022. The second airport in Bangkok, Don Mueang, has a capacity of 30m passengers, but did more than 38m back in 2017, and is expanding to a capacity of 53m by 2020. In total, Bangkok has a capacity of 75m passengers through its’ two airports, and both are already exceeding that capacity.

HCMC’s airport is significantly smaller. The Tan Son Nhat airport handled 36m passengers a year, and is looking at expansions to raise this to 51m by 2025. It is the only airport serving HCMC, so this could be a real bottleneck for travel.

Having said that, I think that sticking with our estimates for the country seem reasonable for HCMC. Even at 65m visitors in 2025, if we assume that a large portion of the domestic ones come by car, train or motorbike (!) and only half of them stay overnight, the capacity at the airport should be enough.

The main risk to our estimate, in my view, is that the government tries to funnel more people to specific resort destinations, like Pho Quoc, or Ha Long Bay, or a central Vietnam destination like Nha Trang or Da Nang, both of which have seen significant hotel construction.

I am running out of time today, so more on the HCMC hospitality market tomorrow in this never-ending series on Vietnam’s hotels.