Vietnam is endowed with abundant natural resources, long beautiful coastal line, and crystal-clear beaches, hence tourism and hospitality are the two most growing sectors bringing 6% for the country’s GDP in 2019. Thanks to a large number of domestic and international tourists, the demand for accommodation also increases, which creates opportunities for investors to invest in this sector. The article will guide you on how to open a hotel or hostel in Vietnam.
Why should you choose Vietnam to open a hotel?
Four main reasons should be pointed out to persuade investors to pour capital in the Vietnamese accommodation sector. First of all, impressive demand growth for hotels. Outbound travelers come from a variety of countries in Asian and European countries, in which Chinese tourists account for more than 5.2 million. Second, Vietnam is a good place for MICE and event organization. Hanoi was chosen as a destination to support the Trump-Kim summit 2019. Hotel demand at that time accelerated considerably. Third, Vietnam has favorable geography and low-cost air tickets. Last but not least, government support is another advantage of investing in Vietnamese hospitality.
You can find key information about hospitality outlook in Vietnam at Vietonkin’s blog.
Which requirements should you meet to open a hotel or hostel in Vietnam?
The minimum capital requirement in Vietnam
In fact, there is no official minimum capital requirement in Vietnam for business to enter the Vietnamese market. Merely businesses opened on a large scale, for instance, factories need to meet the compulsory minimum capital. In spite of having no requirement for minimum capital, investors should bear in mind that the procedure of running a hotel should cover all expenses, then you should prepare for that. For example, to open a hotel or hostel in Vietnam, investors should account in advance operation and miscellaneous costs.
Besides, it is suggested that the paid-up capital for foreign companies is $10,000. This number can be varied, but the average minimum capital is suggested at around $10,000.
The approval of foreign-owned hospitality businesses in Vietnam
Vietnamese law allows investors to set up 100% foreign-owned hotels, guesthouses or any types of businesses related to offering accommodation service.
Nevertheless, in case you would like to integrate other tourism services, you need the involvement of a local company. Therefore, the allowed foreign ownership of tourism companies is 99, 99%.
If you have the intention of establishing hotels and tourism-related service, you had better open two different legal entities which are a 100% foreign-owned hotel and a tourism company.
Open a hotel or hostel in Vietnam
According to the Law of Tourism 2017, certain conditions to open lodging service that investors should keep in mind are:
– Hotels that will be opened in Vietnam must have the local representative firm (it means that investors have to choose a representative law firm that has Vietnamese nationality). The first condition is important because only a resident of that country can represent the company in most business lines.
– Certificate of fire prevention and fighting
– Security and order guarantee plan
– Suitable infrastructure
The two last requirements will be inspected by the latest relevant authority.
Huge potential when opening a hotel in Vietnam.
Providing accommodation service in Vietnam
You have to obtain an international travel license if you would like to offer any tourism service to customers. To get this license, you must enter into a joint-venture with a 100% Vietnamese-owned company.
Additionally, the owner of the company has to make a deposit at least VND 250,000,000 (around USD 11,000) to the bank account of the tourism company. This number, frankly, is a handful compared to the total investment capital. One point you should keep in mind that the mentioned deposit does not belong to the operating expenses of the company.
Another requirement for tourism companies is that the person in charge of travel service should have a higher degree majoring in tourism. In case his or her major is not related to tourism, a certificate of training in domestic tourism operation is accepted.
Providing food and beverage service in a hotel in Vietnam
It is essential for a hotel to provide restaurants or bars for customers because it will improve the customer experience when tourists come to your hotel. There is no requirement about minimum capital for investors to open a hotel or a bar in lodging facilities.
Besides, you can also offer more services such as spa and transportation and you can earn a share of profit.
Requirements of land acquisition in Vietnam
According to Vietnamese regulations, foreign businesses with foreign direct investment have no right to purchase land in Vietnam. Nevertheless, they can lease the land up to 50 years and even extend the lease after the period mentioned in the contract. In fact, it is a likelihood that you can buy land through a lease agreement.
Foreign-own companies can hold the lease agreements in Vietnam until the end of the license. The Department of Planning and Investment grants the agreement for 10 years and the license can be renewable. The most significant thing is to keep your company legal and report your tax in Vietnam on time.
Register a hotel in Vietnam
The procedure for registering a hotel or hostel in Vietnam may take place around 3 – 4 months with three stages: investment registration certificate, business registration certificate, and additional licenses for tourism.
1. Investment registration certificate
The very first step of any foreign organization which wants to enter the Vietnamese market is the approval of an investment registration certificate issued by the Department of Planning and Investment. This certificate allows you to conduct business in Vietnam and it takes one month to get the certificate.
2. Business registration certificate
The second license for all foreign companies is the business registration certificate which may take one week. Furthermore, you should notice that after the grant from the Department of Planning and Investment, you have 90 days to make the initial capital contribution.
3. Additional licenses
After obtaining successfully two compulsory certificates, hospitality enterprises need additional licenses to provide lodging services for a variety of travelers. In case you would like to combine other services like a restaurant, a bar, or a spa, you also need sub-license. These licenses are pieces of evidence that show your hotel qualified and legal.
To sum up, investing in the hotel sector in Vietnam promises you a lot of profits thanks to the higher demand for traveling and a large number of tourists. There is no requirement for minimum investment capital but investors should prepare in advance to cover all the operation costs including costs to get licenses. We hope that this article is helpful for investors who are willing to investing in Vietnam. Let’s contact us in case you need help.