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Vietnam's pandemic mitigation efforts stall recovery and impact pipeline development

Next on our Asia Pacific tour, we check in with Vietnam, a country that hotel developers have watched closely in recent years. While the APAC region grew supply at 4.1% in 2019, Vietnam has emerged as a power player in the region, with over 5% supply growth in both 2018 and 2019. The country has handled the COVID-19 pandemic with aplomb, much to the detriment of the hospitality industry, but a thriving tourist trade and brand proliferation make the country one to watch once border reopen.

Developer darling

Vietnam’s hotel industry has historically been populated by independent properties: Nearly 73% of hotel supply was unflagged as of 2014. Brands have sought to change the status quo in recent years, and chain hotel supply growth increasingly outpaced independent hotel supply growth from 2015 to 2019.

Vietnam blog - Chain hotel supply growth increasingly larger than independent hotel growth

By 2019, branded hotels accounted for 32% of total supply, up from 27.5% in 2014. The growth was concentrated among Luxury, Upper Upscale, and Upscale chains; combined, the three chain scales increased supply 9.1% in 2019 compared to Upper Midscale and Midscale chains’ 5.0% rooms growth during the same period.

COVID-19 impacts

Vietnam reported its first COVID-19 case on 23 January 2020, and by mid-March, the country locked down and closed its borders to control the virus’s spread, effectively tanking hotel performance. Occupancy began a slow recovery in early May and reached a high of 31% for the week ending 25 July. A second wave and the corresponding lockdown at the end of July set back recovery, and occupancy dropped to 14.3% in early August before beginning another long, slow climb.

Vietnam blog - Strict lockdown and second wave slow Vietnam recovery

Part of the reason for such slow recovery lies with the country’s demand drivers. Business and group travel remain absent, and international arrivals have been suspended, leaving domestic leisure travel the only demand driver. Rural and coastal STR-defined submarkets like Vietnam South Regional, Vietnam Central and North Regional, as well as Phu Quoc, show distinct Saturday “spikes” in occupancy, but larger cities like Hanoi and Danang, the epicenter of the second wave, are still missing predictable day-of-week occupancy patterns.

Pipeline predicaments

The Vietnamese hotel sector entered 2020 poised for another year of strong supply growth with over 59,000 rooms in the pipeline. That number increased by a modest 140 rooms between January and August, but pipeline projects have not escaped the pandemic unscathed.

Vietnam blog - Projects move to abandoned/deferred from...

Eleven projects accounting for 3,200 rooms were abandoned or deferred between January and August. While that number may appear modest, pipeline phase changes are notoriously slow to occur due to the time, money, and paperwork invested in projects. Continued movement out of the active pipeline and into abandoned or deferred phases could occur as late as next year, and new development may be slow to materialize as the economy struggles to recover from COVID-19.


Much like Cambodia and Laos, Vietnam prioritized public health and instituted strict lockdown measures, which curbed the spread of COVID-19 even as they decimated the hospitality industry. Fortunately for Vietnam, medium-haul travelers make up the bulk of overnight stays during normal times, and once borders reopen and travel safely resumes, pent-up demand should help the country to bounce back.

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