The tourism property market – including the development of coastal resorts and villas – is primed to explode in the near future, says the head of the Foreign Investment Agency (FIA), Phan Huu Thang.

The country’s natural environment, including a long coastline and fine beaches, promised a strong development of this market, Thang said, but investors would face some difficulties in getting some tourism projects off the ground because they remained new and unfamiliar to the domestic market.

The nation also lacked strong services to support the development of tourist properties, he said.

To promote development, authorities needed to further reform administrative procedures and offer investment incentives, Thang added. The Government also needed a long-term development strategy for tourism properties, including a plan to upgrade transportation and other infrastructure.

A call for foreign investment should be issued to develop transport systems, Thang added.

VinaCapital Da Nang general director Le Minh Phuc agreed, noting that convenient airways and other transportation infrastructure would promote the sales of holiday homes in resort centres of Phan Thiet and Nha Trang to residents of HCM City.

Financing was also lacking on both large scale for developers of projects and on a smaller scale, to enable buyers to finance purchases of vacation properties, Phuc suggested. Favourable systems for providing credit would have a positive impact on demand for tourism properties, he said.

Domestic developers, Phuc suggested, should move more strongly into building tourism properties, as they enjoy advantages of cheap land compared to the land use rentals paid by foreign firms. Foreign firms have greater financial capacity and experience but face higher costs overall, he said.

Thang said domestic firms could improve their projects’ competitiveness by joining forces to create major, high-value tourism development.

While pitfalls exist, Indochina Land has put solid stakes in the ground to lead the hotel charge in a land ripe with potential.

Indochina Hotels and Resorts’ leaders (l. to r.) Peter Ryder, Baron Ah Moo and Rick Mayo-Smith.

It took a cowboy’s posture, a pioneer’s spirit and really good timing to be the first international developer to make inroads into the burgeoning Vietnam hotel market, which, with limited new supply, witnessed RevPAR growth in excess of 30% between 2005 and 2007. Peter Ryder and Rick Mayo-Smith, co-founders of Indochina Capital, Ho Chi Minh City, have been able to raise a lot of cash during a roaring five-year run and, at the same time, learned to be steadfast and resilient in their approach to upscale hotel development driven through their real estate division, Indochina Land (IL).Along with Indochina Hotels and Resorts’ (IHR) CEO Baron Ah Moo, the principals have, perhaps, absorbed a lifetime’s worth of business lessons in a land still so new to Western-style commerce, with multiple infrastructure hurdles, internal financial growing pains and, now, exposure to global financial headwinds. Such are the trials and tribulations facing pioneers as IHR’s hotel performance through June was running about 20% behind 2008’s numbers, according to Ryder. IHR forecasts that this year’s portfolio performance is tracking 10% to 15% below that of 2008 on an EBITDA basis. Those numbers reflect the 19% falloff in international arrivals this year with key markets, including China, Japan and South Korea, dropping as much as 39%.

Ryder, a trained anthropologist and former Wall Street banker who has been toiling in Vietnam for nearly 20 years, had nearly perfect timing in 2005 when he and Mayo-Smith raised a US$42 million property fund, sold the Sofitel Metropole in Hanoi and quickly provided a 20% return. Soon thereafter, as Vietnam’s prospects began to catch the attention of the global investment community and property prices skyrocketed as much as 30% per year, Ryder and Mayo-Smith were able to secure a US$265 million second fund, which helped their team create a beautiful yet still underutilized flagship in The Nam Hai resort managed by General Hotel Management Ltd. in Hoi An; among others acquire a palace hotel and golf facilities in Dalat; develop the nearly completed Six Senses Hideaway resort in Con Dao; build a golf and country club retreat designed by Colin Montgomerie in Quang Nam Province near China Beach; and, most recently, start development on a Hyatt-branded, mixed-use beachfront development in Danang on China Beach. In fact, some experts are calling the Danang beach area the next great Southeast Asia resort destination similar to Phuket, Thailand. In total, Ryder estimates Indochina Land’s hospitality investment at approximately US$300 million.

Now comes the tricky part—managing hotel real estate, as well as commercial and residential property, through a dicey downturn in a still immature market with fund investors hungry for returns. In fact, rumors surfaced earlier in the year that Indochina Capital was seeking an exit from Vietnam as investment became difficult and real estate values diminished. “We have reached an overall agreement with all of our investors, and announcements will come soon about the direction of the fund, but exiting Vietnam is not an option,” Ryder said in mid-July.

Not An Easy MarketA third fund valued at approximately US$150 million also has been raised but not yet deployed as the global economic crisis has weakened demand, values and returns. Some analysts speculate the property market will not rebound in Vietnam for another three years, but Ryder—not one easily deterred or ruffled by the recent turn of events—says his group’s track record speaks for itself and is quite confident about his team’s ability to manage and perform in difficult times. “Most importantly, our exits to date have been very profitable and our projections show attractive returns going forward,” Ryder says.

In fact, Indochina Land is about 50% exited from its first fund, with Ryder expecting another big sale before the end of the year. “We are in good shape. The basic fee income from the funds keeps us comfortable enough—but not too comfortable,” Ryder adds.

Indochina Hotels and Resorts’ flagship Nam Hai resort in Hoi An.

While the ever-confident Ryder says he is starting to look at exits from the second fund, there is still about US$250 million not yet put to work that likely will be spent on for-sale residential products—not hospitality. “The for-sale residential market has legs and is something we have been good at. We plan to focus on what we do well.” In fact, Ryder says a memorandum of understanding has recently been signed on a large residential project in Hanoi.As for the exit from funds, Ryder says, “We are not in a hurry [to exit]. If someone makes us an offer we can’t refuse, of course we will consider it,” he says. “But this is not the best time to be exiting, even though things have recovered significantly from their lows about a year ago.”

Ah Moo believes the Vietnam economy has turned the corner, with financial markets rebounding slightly and lending and liquidity coming back. However, Vietnam is primarily an exporter, and a rebound also will depend on a global recovery. “Real estate lending is no longer a dirty word here,” Ah Moo says. “The interesting dynamic is that local companies are buying international projects being shopped, including hotel projects.” He cites Kingdom Holding’s sale of the Raffles hotel project in Danang, as well as other local companies coming in as joint-venture partners to inject the necessary cash to activate existing projects.

“The internal issues affecting foreign investment have abated and inflows are starting to return, though still constrained by global economic conditions,” says Robert Hecker, managing director of Horwath HTL, Singapore. “So material recovery is not really expected until next year… There are certainly plenty of beachfront sites and projects in the works, but financing has been an issue.”

Ryder says it is a good time for his group to pause with hospitality development and see how the market develops over the next few years. “We think we are well positioned with what we have but must focus on how to make it work—to improve access, whether it is Danang, Dalat or Con Dao,” he says.

In the meantime, Ryder says the hotel company has been very proactive on the expense side. With the decline in foreign visitors to Vietnam, the sales and marketing strategy for the hotel portfolio has shifted, focusing on the domestic market to drive occupancy through aggressive pricing and promotional campaigns. Domestic travel within Vietnam during the second quarter remained robust, and across the portfolio IL reports witnessing a significant increase in the percentage of guests originating from within the country—both Vietnamese nationals and foreign residents. Early indications also point to a positive fourth quarter. “We are suffering less than a lot of our competitors, but it is a tough market,” Ryder says.

Critics Chime InWhile Indochina Land is doing work to ride out the global downturn, it is not without its critics who point to poor execution on acquired properties, questionable site selection and concerns about the viability of golf operations in Vietnam. Ryder is quick to respond on all points, and that includes whether or not IL is feeling any pressure from its lenders or investors.

“Our investments are not heavily geared (total borrowings of US$35 million on approximately US$1 billion asset values) and, therefore, our debt exposure is very limited,” Ryder says. “In fact, we are seen as a preferential borrower and our onshore reputation and relationships with our financial partners is so strong that, as liquidity returned to the market after Vietnam’s domestic credit crunch in 2008, we were able to secure two of the largest real estate-associated credit facilities in 2009—US$44 million for Indochina Plaza Hanoi, a mixed-use residential development, and US$39 million for the Hyatt Regency Danang Resort and Spa.”

Ryder adds that on a portfolio basis within each fund, the businesses are cash-flow positive (after debt service). “Most important, we have never missed a debt service payment and are current with all of our (limited) borrowing.”

What about investor anxiety? “They are, of course, being rigorous with their due diligence and asking the right questions,” Ryder says. “However, the sentiment amongst our investors is that Vietnam’s long-term growth potential outweighs the current downturn in the market, and the country’s GDP in the first half of 2009 not only outpaced the world average but all other Southeast Asia nations.”

Ryder adds that unlike other funds, Indochina Capital has not requested additional money from investors and has been able to delay capital draw-downs in certain situations by acting fiscally prudent. “This speaks volumes to the investment community about our ability to manage and perform in difficult times,” he says.

As a developer, Ryder says his group has been quite skillful over the last decade. For example, IL acquired the land on which it developed The Nam Hai in 2002 for approximately US$3 per square meter. “Today, the land would trade for at least US$70 per square meter,” Ryder says, adding that he could point to three other land acquisitions made from the first fund that sold at prices significantly more than they paid.

“Did we overpay for the Dalat portfolio? Probably,” Ryder says. “The market was red hot and we should have exercised more discipline and, yes, we have been stymied in our attempt to expand the development entitlements… As we now refine our redevelopment and exit plans for the Danao portfolio (Dalat, Phan Thiet and Saigon) we remain confident that our investment will not have lost value and, in fact, will result in solid profitability.”

The Hyatt-branded mixed-use development in Danang.

As for overspending on The Nam Hai, which was somewhat intentional as the group positions the property as its flagship, Ryder says it had good years in 2007 and 2008 and will remain cash-flow positive in 2009, despite the big decline in global tourism. “Today, we have a relatively small amount (US$13 million) of inexpensive debt on the property, and we were ahead of the curve by beginning to cut expenses this time last year,” he says.In response to the secluded location of the Six Senses resort, Ah Moo says it is in keeping with the Six Senses criteria and, to date, it has been a successful model for owners. “In fact, given the style of the Six Senses product and services, operating costs are extremely low, yet revenues are in line with 5-star luxury resorts,” Ah Moo says.

IL launched residential villa sales at the Six Senses site in 2007, which were well received at the time, attracting buyers for one-third of the 16 available villas, according to Ah Moo. “While interest has been subdued, we have seen a renewed interest in the project from international buyers, many of which own a residence at another Six Senses property.”

Lastly, Ryder responds to the viability of golf in Vietnam by stating that the government has placed a moratorium on any further golf course development and believes fundamentals truly line up well for private course ownership. “Vietnamese have fallen for golf in a big way,” he says. “Think Japan in the 1960s, Korea in the 1970s and Thailand in the 1980s. Let’s assume only 5% of today’s population could access golf—that translates to 4.5 million golfers. OK, say only 1%, which still equals 900,000 golfers.”

The IL Model

The 43-key Sofitel Dalat Palace was built in 1922 as a summer home for Emperor Bao Dai.

So what is it like being a trailblazer in an emerging market? Indochina Land—along with a handful of other local developers such as Saigon tourist, VinaCapital and Serenity Holdings—has endured numerous detours and delays. Without Ryder’s 20 years on the ground, the outcome might have been much different. “My biggest weakness is that I am myopically focused on Vietnam, and my biggest strength is that I am myopically focused on Vietnam,” Ryder says.The IL model has been to create a hotel with a residential component—not too surprising by today’s lending standards, but nonetheless a requirement.

At the Hyatt project in Danang, Ryder says 100 of the 180 residential units have been sold with the first 10% of hard money put down on 80 of the 100 units. With foundations in the ground, Ah Moo estimates a January 2011 soft opening for the 225-room Hyatt Regency.

IL went with Hyatt, which also will manage the villas and condominiums, because of its strong presence in the region. “They operate the best hotel in Ho Chi Minh City and moved the bar in terms of quality in Vietnam,” Ah Moo says. “We courted them, initially, and got good terms. It helped that Hyatt was more than willing to do the residential with us and has some experience in that area.”

Certainly, IL is not alone in its interest to develop hotels, as during the first half of 2009, half of the US$8 billion in foreign direct investment was hospitality-related. What could make life easier for all developers, say Ryder and Ah Moo, would be accelerated infrastructure investments, including better lift options into the country, especially to resort destinations like Danang and other beachfronts, where access can sometimes require a three- to five-hour ride over poor quality roadways. In addition, to date there is not one direct flight from the United States to Vietnam. “The country is in its infancy of being able to provide quality services, infrastructure and efficient services to mid-level tourists,” Ah Moo says. “We are at the turning point—the fork in the road—for Vietnam if it is going to consider tourism as a true industry that requires investment.”

One issue Ah Moo is dealing with as chairman of the country’s tourism working group is the visa on arrival program, which he calls a farce as visitors still need a “piece of paper” to get into the country. “The government says visas don’t stop people from coming and can’t get past the fact that an efficient system would double or triple visitation. There is hesitation and resistance to change, and opening the country and really investing in tourism.”

On the development side, things like entitlement issues are breaking down and the approach is becoming more professional, according to Ah Moo. “Vietnam is slightly behind China but ahead of India on deal complexities,” he says. “If you have the right partner, access and representation, deals can be expedited in Vietnam. Some things are built in to protect national interests, but we can stand toe-to-toe with India as a good place to build.”

That being said, Ah Moo admits some roadblocks exist where people sit on things to the point where deals die on the vine. “Opportunities elsewhere in the region can get done quicker, so why wait,” he says. “It is an issue of timing and maturation of the market, which will happen. Fifteen years ago there was one real hotel in the country, so we have come a long way.”

Dynamics AheadWhile a lot of concerns remain about hotel development in Vietnam right now, both Ryder and Ah Moo still allude to opportunities in the untapped middle market as most developments to date have been at the luxury end. Ah Moo says a quality product could work at the beaches as well as the city center if you get out of District One. He adds that advanced discussions have taken place with a well-known 3-star brand to help bring them into Vietnam to open multiple units. “One major operator has bit in return for access and development expertise. We are looking at this seriously.”

In the Hoi An area, Ah Moo says IL has rights to several pieces of land along the coast that have great potential but are not yet active. However, he says one potential development there could include a vocational hospitality school to meet the growing need for trained staff. “It would be a good community investment there,” he says.

Ryder also would caution anyone trying to get into the hotel market in Vietnam right now. “There is a fair amount in the pipeline and this being Vietnam, about 20% will actually happen. TIV—This Is Vietnam,” Ryder says. “It is not hard to get a license for a real estate project. It is very difficult to implement, though, and do the 100 things one has to do to get the first nod from the government to open the doors—from clearing the site, design approval, etc. This is not an easy place to operate.”

Will the dynamics change soon? Ryder is not so sure. “It will be difficult for awhile. There are issues that have long been resolved and processes made more transparent only to be matched by new rules and regulations.”

The Six Senses Hideaway Con Dao will have a phased opening, starting in mid-2010.

That being said, a few major hotel projects have been announced in recent months, including Marriott International’s deal with Binh Minh Import Export Production and Trade to develop a 450-room JW Marriott Hotel Hanoi adjacent to the new National Convention Centre. Singapore’s Banyan Tree Group has announced plans to build a US$900 million complex near Hue in central Vietnam which, when completed, will include seven international branded hotels (2,000 rooms), golf, convention facilities and a town center.“There is tremendous potential for arrivals,” Ah Moo says. For example, Siem Reap in Cambodia gets about 4 million annual visitors, while all of Vietnam just barely hit 4 million in 2008. “Domestic demand with 85 million people is just starting to develop. With 90% of the population literate it offers great fundamentals for travel and tourism, as well as general economic growth,” Ah Moo says. “We have been focusing on domestic travel and it has paid off. Still, discretionary income is limited here.”

Eventually, Ryder says, the infrastructure issues will be overcome, but he estimates it might take a good 10 years. He adds that Vietnam’s political stability is a serious advantage in the region. “As long as the government delivers on economic growth and basic material benefits, Vietnamese have a heart-felt urge for stability. It would take a big screw-up to consider alternatives.”

At the end of the day, Vietnam has as much upside as any market and, Ryder says, “maybe more. Costs are low and you still don’t have a whole lot of supply. It is a rapidly growing market with a very young population. The long-term macroeconomic positives translate into a profitable investment.”

The head of planning and foreign investment in Vietnam is predicting that the country’s tourism real estate market will see a boom in five years time and declared he has no worries about exploiting beautiful areas.

Phan Huu Thang is encouraging developers to promote property investment in real estate resorts to foreign buyers as this will be a key part of the growth of Vietnam’s property sector.
‘Investment in real estate has been increasing significantly in the last two years, responding to many changes in the land laws. Foreign investors have shown special interest in real estate projects that will serve the tourism sector,’ he said.

Indeed, real estate is now the second biggest magnet for foreign direct investment with nearly 300 projects currently licensed and total registered capital of $33.9 billion.

Thang described the Vietnam coastline as ‘an ideal setting for luxury resorts’ and said the government is keen to ‘exploit’ the coast. ‘If we can effectively exploit our 3,260 kilometres of coast, 125 beaches, beautiful landscape and cultural heritage, we will be able to build up a tourism real estate market of international scope,’ he explained.
Initially development is likely to be concentrated on beaches from Quang Binh south to Ninh Thuan. ‘Looking further, we can exploit the big potential in other areas such as the Red River Delta, Mekong Delta, the mountains of northwest Vietnam and the Central Highlands area. All these places can be ideal areas for resort development,’ said Thang.

The developments are likely to be chains of villas, resort apartments and villas associated with golf courses. ‘These have become the favourite models. Villas have been designed with features that allow people to relax while staying close to nature. Hill slope, forest and mountain areas, lake or coastal areas are the top choice for resorts,’ added Thang.

But for this vision to be realised developers need to attract foreign money, he explained. ‘Many Vietnamese investors do not follow long term investment plans. They just wait to see the land price escalating and then sell the right to develop a project to foreign investors. Meanwhile, foreign investors do not have the land to carry our projects and encounter difficulties in site clearance,’ he said.

He added that a sub department is to be created to attract foreign investment, particularly from the US, Japan and Asia.(Property Wire)

Rang Dong Group recently announced that it will officially start construction and put up for sales the Ocean Vista resort project in Mui Ne in the central province of Binh Thuan’s Phan Thiet city in September.

Covering an area of 7.8 hectares with 557 condotel apartments (combining resort and business, house owner will be granted certificate of land using right), Ocean Vista project is part of Sea Links Golf-Hotel-Villa (Sea Links) project that consists of 300 luxury villas, an 18-hole golf course and a five star hotel with 200 rooms.

The project will also include other entertainment services such as Café terrace, library, game room, gym room, hall, shops, Spa, Bar, restaurant, tennis course, two swimming pools, playing yard for children, Barbecue area, outdoor stage, mini supermarket and clinic centre.

The project’s designer-Hassell was established in 1938 in Australia with some well-known works such as Victoria Park (Australia’s Sydney), National Economic Institute (Nida, Sydney, NSW, Australia).

Saigon Phuong Nam (Southern) Real Estate Co-SaPro will be the monopoly marketing adviser for the project.

After a period of downturn along with the real estate and tourism sectors in Vietnam, the market for tourism property has recently become more active. Some projects have been speeded up to be put into operation soon and work on others is starting.According to the Foreign Investment Agency under the Ministry of Planning and Investment, of the US$10.1 billion of total foreign direct investment (FDI) registered capital in the first seven months of this year, 18% flowed into real estate while 45% went to hospitality services. As of July, some 10,482 FDI projects worth over US$165.6 billion were still active, of which those in the real estate sector made up 20% with capital of US$34.3 billion.

Phan Huu Thang, the Agency’s director cum president of Vietnam’s Tourism Property Association, said that many of the projects in the real estate sector are related to hospitality. Big cities like Hanoi and HCM City and the coastline from Thua Thien-Hue to Binh Thuan provinces are still “hot” places for projects, he added.
Mushrooming resorts

The central region not only boasts beautiful beaches but is home to a series of UNESCO-listed world heritage sites. So, the region has a tremendous amount of potential tourism and hospitality related to real estate for foreign investors.

Indochina Land, an affiliate of Indochina Captial, recently introduced the Hyatt Regency Danang Resort and Spa at an official function held in HCM City. The resort and residential project on a 20-hectare site near Ngu Hanh Son Mountains in the central city of Danang will have 174 luxury condominiums, 27 three-bedroom villas and some 200 hotel rooms and suites. The company said that half of the 125 condominiums in the first phase and all the villas have been sold.

Montgomerie Links Vietnam, the first 18-hole course to open in Vietnam outside the orbits of Hanoi and HCM City, has announced the completion of its final four holes and will hold an informal opening on August 17. Grand opening ceremonies are slated for March 2010. The project is unprecedented in several respects, beginning with the golf experience itself.

Baron Ah. Moo, the CEO of Indochina Land, told the Weekly that resort areas such as Danang, Dalat and Phan Thiet are holding great tourism growth potential due to lower land prices. With a great deal of interest from international tourists and a burgeoning domestic travel segment, investors believe that markets such as HCM City and Hanoi are severely undersupplied.

Some other projects have also speeded up their construction. Following requirements from the Danang government, South Korea’s Daewon Co., is increasing work on the Daphuoc International New Town. Daewon said it would spend US$250 million, including US$50 million for construction, developing the town over the next 10 years. The new town will cover 210 hectares in Da Phuoc, Hai Chau District, including 180 hectares reclaimed from the sea. It consists of an 18-hole international standard golf course, buildings, an international school, a marina, an international hotel and conference center, a 60-story office building, villas and 8,500 apartments, an opera house, a theme park, trade centers and channel tunnels.

Korea Investment and Development Co. recently introduced a model apartment of the Blooming Tower Danang project and named Savills Vietnam as the exclusive distributor of the luxury condos. Blooming Tower Danang has two 37-floor towers with nearly 700 luxury flats, a commercial section, a swimming pool, a spa, a fitness center, a mini-golf course, a restaurant and a conference room.

Danang’s neighbor, Thua Thien-Hue Province, is also very active in tourism property projects. Early this month work began on an eco-tourism resort and an industrial and customs-free park in Chan May-Lang Co economic zone, which together will require total capital of nearly US$1 billion. The 280-hectare Laguna Hue Resort will be built at a total cost of US$875 million and have about 2,000 hotel rooms (under the management of seven internationally branded hotel and resort operators), spas, a golf course, resort residences, convention facilities and a town center with retail and recreational facilities, according to the investor.

More duluxe hotels
As the economic hubs in the north and the south, Hanoi and HCM City are home to the most five-star hotels in Vietnam (about 20). More deluxe hotel projects are under construction in these cities, so in the next four to five years, the number will increase to 25-30. For example, the InterContinental Hotel Saigon in the Kumho Asiana Plaza Saigon complex will open this September, offering another five-star facility for guests.

Meanwhile, some existing hotels are also making improvements. A good example is Mövenpick, a hospitality management group from Switzerland. Last July, Mövenpick Hotels & Resorts assumed management of the 15-year-old, seven-story, 251-room property in Phu Nhuan District, HCM City, previously known as the Omni Saigon Hotel. The renovation project, which includes all guestrooms and public areas, will cost US$20-25 million and is scheduled to be completed by the end of 2010. The company has doubled their management portfolio in Vietnam with a new five-star property in downtown Hanoi, the Mövenpick Hotel Hanoi, which used to be called the Gouman Hotel. The hotel will be officially launched on December 10.

There are also some big projects in other localities under construction such as Ho Tram Sanctuary, Laguna Long Hai, Evason Hideway Con Dao and Long Thanh Golf.

Baron Ah. Moo, from Indochina Land said that tourism real estate is normally valued for its potential capital appreciation. Unlike residential or commercial assets, where the owner/investor often either exits prior to the increase in value of the real estate or sees a limited upside, hotels are seen as long term appreciating investments. “But, the disadvantage is that hotel projects are complicated to develop and manage, and hotels are also more cyclical in nature and are more sensitive to market conditions,” he added.

In the past, hoteliers have worried about the prevailing visa restriction issue, as well as the fact that resort areas lack the proper tourism infrastructure that is required to build sustainable hospitality projects. First and foremost is direct or convenient air access to resort destinations from major metropolitan areas outside of Vietnam, including Bangkok, Singapore and Hong Kong. Next is the expedited implementation of the WTO open skies requirement, which will allow more transparent access to airports in Vietnam to foreign air carriers.

Finally, public transportation, highway and road upgrades and improvements in the enforcement and the certification of tourism services available in the country will allow Vietnam to stay competitive with other destinations.(Saigon Times)

Phan Huu Thang thinks Vietnam’s tourism real estate market will see a boom in five years if investors can realize its potentials and have reasonable market development strategy. That’s why he’s setting up an industry association.

In an interview given to Thoi bao Kinh te Vietnam (VNEconomy), Phan Huu Thang, currently the head of the Ministry of Planning and Investment’s Foreign Investment Department, said that real estate developers should promote investment in resorts, because this will be a key segment of the market in the time to come.

Just how interested are foreign investors in Vietnam’s tourism real estate?

Investment in real estate has been increasing significantly in the last two years, responding to many changes in the land laws.

Real estate is the second biggest magnet for foreign direct investment (FDI). Nearly 300 projects are licensed and total registered capital is $33.9 billion. That’s over 20 percent of the total number of projects and 16 percent of total registered capital. Foreign investors have shown special interest in real estate projects that will serve the tourism sector.

A lot of big resorts were licensed in 2008, including the $4.23 billion Ho Tram complex project by Asiana Coast Development, a Canadian investor, in Ba Ria-Vung Tau. Prior to that, the same province allowed a US investor, Good Choices, to a license to build a $1.3 billion five-star hotel, entertainment and restaurant area. Starbay Holdings was licenced to build the $1.65 billion Bai Dai tourism complex on Phu Quoc island.

We haven’t yet developed resorts of international scope. . . .

Other countries in the world have been stressing seacoast development strategy. Our beautiful and unpolluted sea is an ideal setting for luxury resorts. Tourism always is capable of making big contribution to the national income of other countries. If we can effectively exploit our 3,260 kilometres of coast, 125 beaches, beautiful landscape and cultural heritage, we will be able to build up a tourism real estate market of international scope.

But ‘tourism real estate’ doesn’t mean just seaside resorts. . . .

Yes, you are right. In the immediate time, however, we should concentrate on developing projects along the central coast, all our beautiful beaches from Quang Binh south to Ninh Thuan.

Looking further, we can exploit the big potential in other areas such as the Red River Delta, Mekong Delta, the mountains of northwest Vietnam and the Central Highlands area. All these places can be ideal areas for resort development.

Which investment model for tourism real estate can bring the highest returns?

The chains of villas, resort apartments and villas associated with golf courses have become the favourite models. Villas have been designed with features that allow people to relax while staying close to nature. Hill slope, forest and mountain areas, lake or coastal areas are the top choice for resorts.

This sector includes lots of facilities that serve tourist visitors – hotels, villas, vacation apartments, recreation and sports areas, casinos, natural or artificial landscapes, restaurant zones, cultural and historical sites, and, of course, service industries and training activities.

Domestic real estate developers have a big advantage in that they are able to access almost unlimited tracts. Why do they have an inferiority complex vis-à-vis foreign developers?

You are right that Vietnamese corporations have a big advantage that foreign investors do not have: lots of suitable land. Most of the best tracts have fallen into the hands of domestic investors. They have pushed land prices up. Meanwhile, foreign investors do not have land to carry out projects and encounter difficulties in site clearance.

The problem is that many Vietnamese investors do not follow long term investment plans. They just wait to see the land price escalating and then sell the right to develop a project to foreign investors. I think that our businesses should get together to settle the problem.

Is that why you have taken the lead in organizing an industry association, the ‘Vietnam tourism real estate branch’?

Domestic real estate corporations are still weak in financial capability and management technology. We still do not have an overall plan to develop the market.

Therefore, domestic developers need to work together to make suggestions to the State about reasonable policies which can help develop the market. It is necessary to settle the existing problems, including high land prices, complicated procedures and poor infrastructure.

On August 29, we will establish an executive board, and in October, we will organize a conference on tourism real estate. We hope that we will have 300 members by the next year.

We are also seeking foreign partners, especially from US, Japan or Asia.

The management board of the Northern Cam Ranh Peninsula Tourist Resort and Cam Lam District People’s Committee has just announced a detailed plan (scale: 1/2.000) of the Khanh Hoa Northern Cam Ranh Peninsula Tourist Resort (Sites 5, 6, 7). The plan provides a legal basis for investment projects, facilitating comprehensive technical infrastructure development and the management of architecture space and scenery.

Nguyen Phuong Nga, Institute of Architecture, Urban & Rural Planning says the locations is the last sites of Khanh Hoa Northern Cam Ranh Peninsula Tourist Resort to be mapped out. Located west of Nguyen Tat Thanh Avenue, the location of the Sites 5, 6 and 7 is very advantageous with a 7.5-km lagoon shore. This is an outstanding lagoon feature that needs promoting with typical tourism services.

The water surface space can also become a great location for a variety of water-oriented recreational activities. Balis ecological salt-mash forest, a famous tourist attraction, is a good example for the idea. Besides, white sand hills and Thuy Trieu Lagoon situated next to Hon Troc Mountain also add to natural gifts offered to Cam Ranh Peninsula to become a typical lagoon resort.

The common principle for the construction of the tourist site is to promote natural values by adding some features to enrich the natural beauty without negative aspects on the environment. Nguyen Phuong Nga said, “Favorable conditions will be created for local residents to join hands to promote tourism. Besides planting a salt-mash forest, some prawn ponds will be kept to form an ecological salt-mash park.”

Nguyen Xuan Ha, Chairman of Cam Lam District People’s Committee says after the project announcement as a legal procedure and favorable condition for local residents to access the project, Cam Lam District People’s Committee has directed local authorities and relevant agencies to enhance its management over the land use of households, organizations and individuals to prevent illegal construction, land occupy and land use for wrong purposes. Besides supervision enhancement, local authorities are responsible for encouraging residents to carry out the policy to appeal investment into the region.