Vietnam was recently named the third fastest-growing tourism destination in the world by the United Nations World Tourism Organization, after recording a 29% increase in visitors year-over-year.
Vietnam is the easternmost country on the Indochina Peninsula, sharing land borders with China, Laos, and Cambodia. Its 3,400 kilometers of coastline along the South China Sea, lush tropical forests and rich heritage of food and culture have no doubt caught the eyes of travelers, aided by the country’s decision in 2015 to lift visa requirements for many visitors, who can now stay up to fifteen days.
With the country’s tourism growing at a rapid pace for the last several years, hotels are at full capacity. And although Vietnam plans to add 40% hotel supply this year, the surge in visitors, lag in new hotel construction, and relaxation of internet regulations means that tourists are turning to alternative sources of accommodation, creating the perfect environment for a home sharing boom.
Discerning Vietnamese entrepreneurs have been quick to seize the opportunities of entering the home sharing sector. Over the last two years, the number of entire homes listed on Airbnb and HomeAway has increased by 452%—far outpacing the global average of 140% growth.
Sustainable Tourism in Southeast Asia
Although Thailand is likely the first place to pop into your mind when you think of Southeast Asia vacations, Vietnam has actually grown at twice the rate, sprinting to 15 million annual visitors within just seven years.
In many ways, Thailand has paved the road for the homestay economy across developing parts of Asia. Despite some growing pains, it has ultimately found a way for homestays to support local sustainable tourism and spread income across Thai communities.
AirDNA‘s CEO and Co-founder, Scott Shatford, got his inspiration for the company while spending time in Southeast Asia and shares this insight:
There are certainly lessons to be learned from countries like Thailand, who experienced explosive growth in tourism and home sharing. As we’ve seen, it can be difficult to balance environmental and cultural stewardship with business.
It’s critical that governments understand the potential negative impacts and leverage localized home sharing trends to proactively manage growth to benefit both guests and citizens.
Currently, there are 50,000 active homestay listings in Vietnam, in the form of entire homes, private rooms (also called homestays), or shared rooms.
Can Phuong Ha, of Vietnam’s Luxstay, offers this as part of the reason for the recent growth:
Vietnam has a young population, and the increasing popularity of technology has allowed businesses to reach customers more easily.
We estimate that home sharing will be worth $2-4 billion in 2025, accounting for 10-20% accommodation market in Vietnam. This represents a huge opportunity for tourism professionals to expand into the home sharing industry.
Both global vacation rental companies like Airbnb and local businesses like Luxstay are growing fast to meet the demand for home sharing in Vietnam, becoming an integral part of the tourism industry and allowing travelers to visit all regions of the country.
Let’s explore Vietnam’s home sharing economy in depth; starting with an overview of its supply and performance, then moving into opportunities and potential impact from the impending flood of new hotel supply.
Breaking Down Vietnam’s Homestay Supply
Not surprisingly, most of Vietnam’s short-term rentals are located in urban areas. In fact, capital Ho Chi Minh City alone accounts for 37% of the country’s supply.
If you zoom in to the map below, you might be surprised to see an even distribution between entire home rentals and private room rentals. Typically with mature markets, we see an overwhelming majority of entire home rentals and fewer private and shared room listings.
In fact, entire homes and private rooms make up 96% of Vietnam’s total homestay supply, with entire homes representing just over half.
Let’s take a closer look at the performance of entire home and private room rentals.
Globally, there is a premium for renting an entire home as opposed to a private room in a host’s house. In Vietnam, entire home rentals earned an average daily rate of $69, a deal even for many budget-minded visitors.
Entire home rentals earned an average Revenue Per Available Rental (RevPAR) of $33, representing three times the RevPAR for private rooms.
Additionally, they have followed a linear growth trend, with noticeable upticks in supply coinciding with Vietnam’s high seasons—the biggest of which being December.
When and Where Vietnam’s Entire Homestay Revenue Comes From
Unlike destinations that have singular or highly seasonal attractions, such as mountain ski towns, Vietnam is a hugely diverse place to visit. Travelers can discover the country’s rich cultural history in the cities, hike through verdant rice paddies in the northern highlands and explore by boat the mangrove forests and floating markets on the Mekong Delta.
Vietnam’s warm sandy beaches along the eastern coast offer a dependable year-round option for those looking for a tropical getaway. Add in its relatively low cost of living, and Vietnam becomes an ideal holiday location.
Vietnam has three main tourism seasons: Spring (March and April), Summer (July and August) and Winter (December and January), where demand is at the highest.
In 2018, the largest monthly jump in demand occurred from November to December. Demand then spiked again in springtime, between February and March. March 2019 saw the highest monthly demand ever recorded for entire home shares in Vietnam, with a record-breaking 170,000 booked nights.
Where are all of these guests coming from? The word cloud below represents the most common origin cities of visitors. The larger the city name, the larger share it represents.
Sixty-six per cent of all Vietnam’s homestay guests are international. The main home bases of international guests are Singapore, Seoul, Melbourne, Hong Kong, Sydney, London, and New York respectively. The largest single source of visitors, however, is Vietnam’s own Ho Chi Minh City.
And where are homestay guests spending the most?
Forty-two per cent of total revenue generated from entire home shares in Vietnam comes from one city: Ho Chi Minh City. Despite bringing in USD 41.6 million over the last twelve months, it ties for seventh place in terms of Average Daily Rate (ADR) within Vietnam’s top ten cities.
Vietnam’s Top Ten Homestay Markets
Together, Vietnam’s top ten largest homestay markets account for 93% of all homestay listings and 98% of total annual revenue. They also happen to be some of Vietnam’s largest urban hubs, although a few are primarily considered leisure destinations.
How do they compare against each other?
The bars represent entire home Average Daily Rate (ADR), and the light blue dots represent entire home Revenue Per Available Rental (RevPAR).
Beach town Da Nang had the highest ADR for entire place rentals over the last twelve months (April 2018 – March 2019). It also had the highest RevPAR, $61, which was higher than the ADR of three of the other cities (Ho Chi Minh City, Hanoi, and Thua Thien Hue).
The cities that stand out the most for having the highest ADR are Da Nang, Quang Nam, and Vung Tau City. In addition to garnering the highest average rates across the country, these cities also have a leisure focus and plenty of waterfront home share options in common.
Da Nang, Quang Nam and Vung Tau City offer larger entire home rental options, averaging two bedrooms per rental while the other cities combined average 1.5 bedrooms. This suggests further that they have a stronger focus on leisure as opposed to business-friendly hotel comparable options (studio and one-bedroom rentals).
Urban vs. Rural: Disparate Economic Impacts
As the charts above demonstrate, there is a lot of money to be earned in Vietnam’s urban areas. Currently, they represent the overwhelming majority of supply, demand and revenue, but demand for homestays “off the beaten path” across Vietnam has grown 111%.
It has long been known that home sharing provides tourists with an opportunity to explore remote areas, where hotel supply is limited or nonexistent. But how often do rural home shares get booked? How much do they earn? And what is their economic impact, compared with urban rentals?
To put things into perspective, just 2% of total country revenue came from rural areas over the past twelve months. Two per cent might not sound like much, but it represents just over USD 3 million. This much money has a disproportionately greater economic impact for homeowners in rural, developing regions.
To analyze the potential entrepreneurial revenue impact of hosting a homestay in urban and rural regions, we’re going to compare the median individual annual revenue earned to average salaries.
Although there are many variables, we’re using $1,800 as the average annual rural salary, and $5,400 as the average annual urban salary in Vietnam.
For this next analysis, we’re defining urban as those included in Vietnam’s top ten list, and rural as the remaining areas. We are also only including “full time” home shares; those that were available at least 180 days during the year.
|Urban Entire Home||Rural Entire Home||Rural Private Room|
|Median Annual Revenue||$6,649||$4,980||$1,551|
|% of Avg. Annual Salary||1.2%||2.8%||0.9%|
Even for those making the average $5,400 salary in urban areas, renting out an entire home could generate enough to live on, plus extra. Entire home rentals in rural locations earned a higher average daily rate, but less overall median annual revenue.
A recent study of Airbnb hosts in urban and rural locations across the United States came to the surprising conclusion that rural hosts actually earn more than their urban counterparts. One explanation for the higher ADR for rural entire home rentals in Vietnam is that in many areas, home shares may be the only source of bookable accommodations. So even though demand is less than urban areas, their scarcity in remote parts of Vietnam emboldens them to push rates higher.
Home shares in rural Vietnamese locations present the most lucrative options, relative to average salary. Those renting entire homes have the potential of earning nearly three times the average annual income—enough to live on and even launch a lodging business with.
Perhaps most encouraging, is that folks living in rural areas can potentially earn the equivalent of an annual salary simply by renting a private room in their home. This creates a meaningful option for additional income, without the added financial risk of purchasing a second home.
One major opportunity for entire home hosts in urban and rural locations is the utilization of channel management, which essentially optimizes a listing across multiple home sharing platforms in order to increase revenue.
Currently, in leisure-friendly Da Nang, only 2% of entire home rentals are listed on both Airbnb and HomeAway. As rentals that are listed on both platforms have been found to earn more revenue than those listed on just one, this represents a lucrative option for hosts looking to optimize and grow their rental operations.
In Vietnam there are dozens of home sharing distribution channels to choose from—many specializing in specific locations and types of properties. It’s important to understand the value each one offers when developing a channel management strategy in order to maximize visibility for prospective guests.
Power to Vietnam’s Homestay Entrepreneurs
The largest home sharing platform, Airbnb, got its start with a couple of roommates looking to earn money while providing much-needed accommodation for travelers. Websites like Airbnb, HomeAway, and Booking.com provide a simple way for people around the world to do the same, and get wider visibility from guests looking to stay in their cities.
The percentage of hosts with just one entire home rental grew from 69% in 2017 to 74% in 2019. This means a growing number of individuals in Vietnam are becoming first-time home sharing entrepreneurs.
The professionalization of home sharing—defined by hosts growing their business from just one rental to multiple rentals, and the growth of professional services like bookings management and cleaning—is growing in Vietnam.
Over time, professionalization of the home sharing industry will bring increased quality and consistency for guests, and in turn, help vacation rental hosts and managers to get more bookings.
An Evolving Lodging Landscape
So where do hotels fit into this lodging boom in Vietnam? As mentioned above, Vietnam is set to increase its existing number of hotel rooms by 40%, beginning this year. The flood of home shares over the past few years into the market was largely the result of a void caused by growing demand and stagnant, increasingly insufficient supply of traditional accommodations.
Even in relatively hotel supply-dense cities like Hanoi, which has over 17,000 hotel rooms, hotel-comparable home shares (entire home studio and one-bedroom rentals) equal 15% of that supply. As new hotel supply is added this year in tandem with new hotel comparable rental supply, it will be interesting to see whether guests stay loyal to home sharing, trade in for a hotel room, or vice versa.
Ultimately, the ability of homestays to scale faster than the development of new hotels, and provide lodging in dispersed locations in a way that is cost prohibitive for hotels makes it a key, diversified part of Vietnam’s overall strategy to support increasing tourism. Not to mention the many benefits of connecting locals with tourists and immersing visitors into the country’s rich culture in a way that is unique to home sharing.
Whether you’re a hotelier, homestay host, property manager, destination marketing organization, or local municipality, there’s one thing that can help plan for the evolving landscape: data.
Can Phuong Ha, of Luxstay, explains:
Vacation rental platforms like Airbnb, HomeAway and Luxstay are an integral tool for quality control, consolidating customer trust in the industry and helping the entrepreneurial ecosystem developing around vacation rentals to grow.
With qualitative and sufficient data from AirDNA, Luxstay can discover customers’ needs and gain a deeper understanding about competitors.