Hotels: A market-sizing exercise (part 10 of ???)
/So for my final part on HCMC hospitality, I wanted to see how spending is needed to construct the number of hotel rooms anticipated for our tourist estimates in 2025. I went through the details of my estimate of additional hotel rooms yesterday and came to a conclusion of something like 250,000, but up to 300,000 total hotel rooms needed in 2025. That’s up from about 190,000 or so now. That means an additional 60,000 all the way up to 110,000 new rooms in the next 7 years.
I’m not going to re-estimate the cost per hotel room. I did that earlier (scroll down to part 6), when I looked at the cost of adding hotel rooms for the country as a whole. I estimated that it would cost around $175,000 per 5-star room, $125,000 for 4-star, down to $85,000 for 3-star and the remainder, which is really the bulk of the additions, at $20,000 (all US dollars).
Total cost of more than $2.5bn: That results in a total cost of between $2.5bn to $4.7bn. Within this estimate, I believe the biggest risk is really the cost of the smaller hotels, because the range is likely very high (with some rooms costing very little and those close to the 3-star costing much more), but it is hidden in the average. Also, the range is quite high, mainly because the range of the hotel rooms needed is high. My gut is that hospitality investment will be at least $3bn in HCMC, some portion of which, will be foreign investment. That’s something that I might look at later.
SOURCE: VIETECON.COM
SOURCE: VIETECON.COM
Conclusions: My main conclusions to the HCMC hospitality exercise are these:
There are likely going to be more than 12m visitors to HCMC in 2025, unless something drastic happens. And I could easily see this reaching close to 15m.
Domestic tourists/travelers could be as high as 50m, although not all of these will stay overnight.
The city needs to build at least 60,000 hotel rooms, and probably more. That’s a big jump over the 190,000 we estimate currently (which might be a bit high).
The cost of building all of these hotel rooms will be more than $2.5bn, and could reach as high as $4.7bn.
If all the building happens, but the tourists don’t come because of bottlenecks at the airport (which I see as a real possibility), then occupancy rates are going to fall drastically. That would mean lower returns for investors and a slowdown in construction.
Please tell me where I’m wrong!