April 5, 2017 11:00 am JST

Budget hotels sprout up in Vietnam as business travel booms

Small, midsize companies' expansion drives lodging demand

ATSUSHI TOMIYAMA, Nikkei staff writer

An A25 business hotel in central Hanoi.

HANOI -- Budget hotel chains are expanding in Vietnam as brisk economic growth pulls in smaller foreign companies, and with them business travelers in need of an economical place to stay.

Route Inn Japan will open the first Vietnamese location of its namesake chain of business hotels in the heart of Danang on Wednesday. The 2 billion yen ($18 million), 168-room facility sits halfway between the city's airport and the popular My Khe beach, and offers rates as low as $70 a night -- one-third what a room costs at the nearby Novotel.

Route Inn expects low prices to attract tourists and business travelers from not only Japan, but also other Asian countries and the U.S. and Europe. A second Danang location will open in late May, with more to follow in nearby cities as soon as October 2018.

Danang is both a transportation hub for central Vietnam and a burgeoning center of the country's information technology sector. FPT, Vietnam's largest IT company, opened a roughly 6-hectare operation base there in April 2016. Tech service companies from the U.S., Europe, Japan and elsewhere are starting to cluster there as well. The number of major conferences, such as a November 2017 meeting of Asia-Pacific Economic Cooperation leaders, is also increasing, driving up demand for lodging.

Hotel chains have Hanoi, the country's capital, in their sights as well. Japan's Super Hotel has two locations here. Hotel and event space operator Kuretakeso opened its first facility here in 2016 and a second in February. Both locations offer rooms for around $60 per night, as well as service in Japanese and English and internet connectivity. Benefits such as free access to laundry facilities cater to longer-term stays.

Azumaya Hotel, a Japanese-run chain founded in Vietnam, has nine locations in the country. Japanese-style breakfast and open-air baths appeal to Japanese visitors, all at prices as low as $40 a night. "It's convenient -- I'll come here every time I'm on a business trip," said one 37-year-old worker at a Yamaha group company.

Growing need

Vietnam welcomed some 10 million foreign visitors in 2016 amid a surge in business travel from Japan, China and South Korea. But until now, visitors have largely been forced to choose between foreign luxury hotels charging around $200 a night and budget lodgings aimed at locals. Demand is on the rise for foreigner-friendly facilities that keep costs low by running operations more efficiently and eschewing resort offerings and event halls.

Vietnamese companies are also helping fill this niche. A25 Hotel Group runs 34 facilities in Hanoi, Danang and Ho Chi Minh City. A room in Hanoi goes for $30 a night, with unique offerings such as discounts for late-night check-in. Some 30% of customers are foreigners, many from Japan.

At Hanoi's Silk Path Hotel, that figure is 95%. For $70, customers get a room as well as many features found at luxury hotels, including a guarded entryway and an upscale breakfast with Western, Japanese and Vietnamese selections. Occupancy is near 100%, according to the hotel.

While new investment in Vietnam by major companies such as South Korea's Samsung group and Japanese automakers has slowed, some 341 Japanese companies entered Vietnam in 2016, or 26% more than four years prior. Small and midsize businesses drove this growth, and with it a steep increase in the number of business travelers.

In a Japan External Trade Organization survey of members and clients released in March, some 34% of respondents said they intended to expand existing operations in Vietnam. This is the third-highest result for any country, behind China and Thailand, and rose for the second year running while China and Thailand's figures fell.

Vietnam was also the most frequently named country by far as a target for planned forays among 900 small and midsize businesses that Teikoku Databank polled in 2015.

A number of retailers and service companies have jumped into Vietnam of late, drawn by the country's 7% growth rate and 93-million-strong population. Foreign industrial component manufacturers are growing more common as well. Land development by Japanese trading house Sumitomo Corp. and others has aided this expansion by putting more industrial land up for rent. Cheaper serviced apartments, which offer roughly half the normal rent in exchange for limited services, are also increasing to cater to the demand from arriving foreign workers.

Yamaha Corp.

Japan

Market(Ticker): TKS(7951)
Sector:
Industry:
Consumer Durables
Recreational Products
Market cap(USD): 6,731.08M
Shares: 197.25M

Sumitomo Corp.

Japan

Market(Ticker): TKS(8053)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 17,374.10M
Shares: 1,250.60M

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