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Foreign groups are major players in high-end Vietnam property management market

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VietNamNet Bridge – Luxury real estate projects can be developed by either Vietnamese or foreign investors, but most of them are managed by international management groups.

The chair of a conglomerate which is building a resort in Ba Ria – Vung Tau province said that managing high-end hotels, especially resorts, is a ‘privilege’ given to foreign groups.

“Investors are always on the defensive when working with management companies,” he said. “You can sign contracts with them at any time, but you will have to pay a deposit as soon as the contract is signed.”

The amount of deposit depends on the negotiations between investors and the management service providers.

However, the average amount is $200,000. Investors will lose the money if they break the contracts.

A survey conducted in 2009-2014 by Jones Lang LaSalle, a company that provides real estate and finance management services, of the most of the 37 surveyed contracts on hotel management in SE Asia, investors had to bear many different kinds of fees.

Of these, the basic fee was about 1-1.9 percent of total annual revenue, which could be raised to 2-2.9 percent in the following years.

Meanwhile, the encouragement fee was calculated based on the percentage of total profits, which could be up to 10 percent.

Luxury real estate projects can be developed by either Vietnamese or foreign investors, but most of them are managed by international management groups.

Sales and marketing fees were based on the net or gross revenue after considering the number of rooms, about 2-4 percent of room revenue. The central reservation fee was calculated in three ways, but it was mostly is $7.5-9.9/night/room. Besides, investors also have to pay other types of fees, including royalties and technical services.

The businesses complained that the fees ate into their profits.

Self-management to reduce cost?

Chair of the HCMC Hotel Association Tao Van Nghe said that some large Vietnamese conglomerates do good business in resort tourism, but do not make appropriate investments in management to improve competitiveness. Only a few of them try to manage real estate projects themselves.

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