HCM City may need to build more hotels to accommodate an expected tourist rise, a city official has said. Sai Gon Tourist Company spent VND40bil (US$2.56mil) expanding the five-star Majestic Hotel.

Nguyen Thi Lap Quoc, Director of the HCM City Tourism Department, said the city was concerned about the accommodation problem it may face in coming years.

Fully booked hotels in Hanoi and HCM City during the 22nd SEA Games were a possible harbinger of things to come, she said.
By 2005, tourist arrivals in Vietnam are estimated to be between 3.5mil to 4mil, creating a need for more 17,000 hotel rooms, the Vietnam General Administration for Tourism (VNAT) said. Some 1.3mil people visited HCM City in 2003 and 1.5mil are expected next year.

The city has eight five-star hotels with 2,700 rooms, five four-stars with 1,090 rooms, 14 three-stars with 1,400 rooms and some 2,100 rooms at other hotels.

In central Vietnam, several new hotel and resort projects have been licensed in the past few years. Five luxury hotels and resorts will be completed in the next two years in the historic town of Hoi An. They include the Golden Sand, Indochina, River Park, Faifo and a project of the Hoi An Tourist Service Company.

In the former royal city of Hue, four luxury hotels will be built in the next two years. The 120-room hotels Hoang De and Hung Vuong are being developed by the travel agency Exotissimo and the Thuan An Resort.

Other tourist destinations such as Quang Ninh, Hai Phong, Nha Trang and Phan Thiet have all seen ground-breaking ceremonies for many tourist projects this year. Ms Quoc said HCM City needs more luxury hotels instead of more small hotels and guest-houses.

City hotel occupancy is 85-90% at luxury hotels and 48% for other hotels.

VNAT said in the first 11 months of 2003, Vietnam licensed 19 tourism projects with a combined investment of US$109mil.
Some investors are concerned the hotel industry could face an oversupply of rooms if the city faces another economic crisis.
Prior to the 1997-98 Asian economic crisis, hotel construction had boomed in Hanoi and HCM City. Occupancy rates dropped to 50% and many hotel projects stalled.

Hanoi hoteliers said, however, the country's tourism industry is now much better developed and is a more popular destination for foreign tourists.

"We are encouraging investors to build luxury hotels. As no land is available in inner districts, investors can turn to new urban areas in districts 2 and 7," Ms Quoc said.

"Vietnam is one of the favourite tourist destinations in Asia, and it has emerged as a safe and friendly destinations," said a Hanoi hotelier who declined to be named.

Through more hotels will be needed in the next three years, investors are uncertain about earning profits and gaining back their loan principal. To generate capital, the State has issued policies on infrastructure development for tourism.

VNAT Deputy General Director Pham Tu said a hotel boom would not mean harsher competition among facilities if hoteliers together promote the country's tourism industry. He said hotels and other tourism-related sectors must co-operate to promote tourism and the image of Vietnam.