Opportunities in transitional Vietnam

VIETNAM - Linh Vu’s parents were Vietnamese boat people who escaped their war-torn country in 1975, landing in Paris and soon had a baby daughter as they started their new life. They succeeded professionally and raised Linh, who went on to graduate university and start working overseas. By 2007, Linh landed where her parents started, in Vietnam, and went to work for Accor as a local development director.

What Linh noticed was brand companies taking advantage of first-time Vietnamese developers, negotiating mostly one-sided agreements. So, she started a consultancy by 2009 to advise new owners in Vietnam and other emerging markets in the Middle East, Southern Europe, Africa, and even Cuba. Today, her Key Hospitality Consulting, with offices in Ho Chi Minh City and Paris, works with PE firms, ultra-high net worth individuals and other investors moving into the hotel space.

Vu has guided Vietnamese investors through a wide range of hotel development projects, including sourcing opportunities in overseas markets and negotiating deals with top-tier operators. She has also worked with global hotel investors interested in Vietnam.

It’s an accessible market compared to the massive markets of China and India. You also have amazing demographics, which is a prerequisite for hotel development, and it’s very manageable. You literally cover north to south in two hours… It’s less intimidating because it’s more consolidated.

Linh Vu

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Among the projects listed on her CV are the Novotel Saigon Center, Pullman Saigon Center, Le Meridien Cam Ranh, Ibis Styles Nha Trang, Hyatt Place Saigon, Club Med Ho Tram, Fairmont Phu Quoc Resort & Residences and more. She also sits on the board for Maison Elle, which is developing hotels in France and is expected to expand to Saudi Arabia.

With Vietnam in the headlines with scandal surrounding a woman hotel owner found guilty of fraud and embezzlement, and in April sentenced to death, there are a lot of questions about the current hotel development climate there. The case marked the country’s biggest-ever financial fraud and Vu said it now serves as an example for the nation’s new anti-corruption campaign.

With what Vu said is a newly stabilizing government in Vietnam that welcomes American investors, and with regional developers taking more of a wait-and-see approach to further development in the country, she said now is a potentially good moment in time for other outside investors to consider hotel development opportunities in concert with local partners to help manage the red tape, including repatriating funds.

Managing growth

As Vietnam emerges from its Least Developed Country status to an Emerging Market with big ambitions, Vu said it grew too fast as its 100 million people tried to put the trauma of the Vietnam War behind them. Not too surprisingly, with emerging growth came mistakes and criminal activity.

“Vietnam was dirty poor and in such a short amount of time it managed to create wealth and now an emerging middle class,” Vu said. “Now we faced a bump (the aforementioned fraud scandal) which has been showcased around the world. My take is that it’s a normal part of an emerging country’s development. The upside is that now we have to reset. We have to clean up things and it will become beneficial to the overall development of the country and hospitality wise.”

For hotel development, the “bump” will force owners, operators and advisors in Vietnam to be more diligent and rigorous, Vu said. “It brings more discipline, which sometimes is what is lacking in the learning curve of an emerging country because we want to go fast, especially when we’re surrounded by tigers in Thailand, Singapore and China. Those countries are both our role models, but also, they are our competitors in the region.”

My take is that it’s a normal part of an emerging country’s development. The upside is that now we have to reset. We have to clean up things and it will become beneficial to the overall development of the country and hospitality wise.

Linh Vu

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Because of the government clamp down on corruption and a new president taking control, Vu added that there is a “wait and see” mentality to hotel development, especially among neighboring developers who have the regional expertise.

She said that will there have been some new development signings and greenfield projects emerging in diverse leisure destinations outside of the major markets of Ho Chi Minh City, Danang and Hoi An, there is what she called “a very unique momentum, a unique window in the next 12 to 18 months” for developers coming from further afield because interest coming from neighboring country developers has lessened.

“President Biden’s visit to Vietnam in September 2023 also kind of created that geopolitical environment where Vietnamese government is very open to American investors,” Vu continued. “Sometimes U.S. investors maybe have those biases due to the war thinking that they might not be welcome. Actually, to the contrary, the Vietnamese government and the private sector are more than happy to do business with U.S. investors.”

Vu advises most every outside investor to find a local partner in Vietnam to help manage local and national bureaucracies, as well as human resource challenges. She also suggested starting small in a strong, existing tourism hub. “There’s still a lot of room for growth locally, for sure,” she said.

When asked about repatriating investments, Vu admitted that is still something outsiders will need to be advised on. “When you enter the market, there is still some control when it comes to repatriation of funds. But it is possible. It is feasible, and it’s possible if you are being advised from the beginning by the right people,” she said.

Going deeper on investment opportunities, Vu said she is seeing the continued growth of Phú Quốc island, the country’s single tropical island in the south that has attracted a lot of development with a Park Hyatt and other hotels currently under construction. “If you are willing to look outside of Hanoi and Ho Chi Minh City and tap into emerging destinations, there are plenty of opportunities,” she added.

Because of the emerging middle class, Vu also said there are opportunities in key urban markets like Hanoi and Ho Chi Minh City as new rings of outer development take shape. Vu said Hanoi has a new quarter being developed and Ho Chi Minh city is developing a new airport – both presenting hotel growth opportunities. On top of that, she said the country’s geography always puts locals and guest no more than 90 minutes from a beach destination.

While leisure development makes sense, Vu added that there is very strong domestic MICE market that further feeds resort destinations.

Bigger picture, Vu sees the main advantage of hotel development in Vietnam being its approachability. “It’s an accessible market compared to the massive markets of China and India,” she said. “You also have amazing demographics, which is a prerequisite for hotel development, and it’s very manageable. You literally cover north to south in two hours… It’s less intimidating because it’s more consolidated.”