Foreign investors operating hotel services in Vietnam

Foreign investors operating hotel services in Vietnam
Foreign investors operating hotel services in Vietnam

Along with the Government’s tourism development strategy, the number of foreign tourists visiting Vietnam is increasing to 18.1 million international visitors in the pre-Covid-19 period. This has spurred Vietnam’s tourism industry to boom, leading to the development of tourism infrastructure and especially resort hotels. A series of famous names in the international hotel industry are present in Vietnam, such as Marriott International, InterContinental Hotels Group, Hilton Hotels & Resorts, etc. This article will provide general conditions for foreign investors to do business in hotel services in Vietnam.

Market access conditions

According to WTO commitments, Vietnam does not limit the capital contribution of foreign investors when providing hotel and restaurant services, including hotel accommodation (CPC 64110). This is similarly committed in the Free Trade Agreement between the European Union and Vietnam (EVFTA).

With this commitment of Vietnam, investors can:

  • Establishing an enterprise with 100% foreign capital; or
  • Acquisitions 100% capital contribution/share for Vietnamese enterprises.

Scope of operation and regulations of Vietnamese Law

According to tourism law, a tourist accommodation establishment means an establishment that provides accommodation services for tourists.

Hotel is a type of tourist accommodation establishment and is classified as follows:

(i) Resort hotels: Built-in blocks or into a complex of villas, low-rise buildings, and apartments, in areas with beautiful natural landscapes;

(ii) Roadside hotels: Hotels near roadswith parking lots to serve the accommodation needs of guests using road transport (motorcycles, cars) traveling or resting between long distances;

(iii) Floating Hotels: The hotel is anchored on the water and can be moved when necessary;

(iv) City hotels: Built in urban areas to serve tourists.

Business in accommodation services (hotels) is regulated as a conditional business sector (200), according to which:

(i) Having business registration as prescribed by law;

(ii) Meeting the conditions for security, order, and safety in terms of fire prevention, environmental protection, and food safety as prescribed by law;

(iii) Meeting the minimum requirements for technical facilities and services to serve tourists, including:

    • Having at least 10 bedrooms a reception desk, and a shared restroom;
    • Having a parking space for guests at resort hotels and roadside hotels;
    • Having a kitchen, dining room, and catering services for resort hotels, floating hotels, and roadside hotels;
    • Having beds, mattresses, blankets, pillows, face towels, bath towels; changing mattress covers, blanket covers, pillow covers, face towels, bath towels when there are new guests.
    • Having staff on duty 24 hours a day.

Hotels are voluntarily registered to rank according to the following national standards:

  • The 01-star, 02-star, and 3-star hotels are appraised and recognized by the specialized tourism agency of the province;
  • The 4-star and 5-star hotels are appraised and recognized by the Vietnam National Administration of Tourism.

Steps to set up a company

Operating in the field of hotel service business in Vietnam is usually done through the following options:

Option 1: Acquisitions shares and capital contributions from available hotels and projects.

Option 2: Receiving existing hotels for management and business (hotel management service).

Option 3: Establishing a new project/company.

In fact, foreign investors often choose option 1 to own hotels, because of restrictions on renting and using land for foreign investors, investors may face many difficulties in the process of obtaining permits for projects in option 3. In addition, option 2 is often used by major hotel management service providers in the world when entering the high-end hotel market in Vietnam to expand its network without having to spend a lot of money on property ownership, and land and avoid complicated licensing procedures.

Points to note

  • Publicly post the selling prices of goods and services and the rules of tourist accommodation establishments.
  • Notify in writing the specialized tourism agency of the province where the tourist accommodation establishment is located when there is a change in the establishment’s name, size, address, or legal representative.
  • Only use the word “star” or star image to advertise the tourist accommodation establishment class after it has been recognized by the competent state agency.
  • Implement reporting, statistical and accounting regimes in accordance with law.

The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.