Commitment to profit condotel: Where is the truth?

While business representatives have argued that the condotel’s earnings commitment was “carefully” and “thorough”, the representatives of the research units said the condotel was “unlikely to be reached.” attractive rate of return “and contains much less risk

Commitment to profit is a calculated problem?

In response to the baseline of profitability at condotel projects, Mr. Trinh Van Quyet, Chairman of FLC Group, said that profit commitments are often calculated on the basis of overall solutions. The development strategy, exploiting capacity, profitability of each project.

Commitment to profit condotel: Where is the truth?

“According to the preliminary assessment, at high-end condominium projects of reputable investors, only 40- 50% occupancy rate, investors can ensure profit of 8- 10% for customers. Each year, if the rate is 60% or more, the investor will be profitable, “he said.

According to the president of FLC Group, FLC’s population chain is always at the prime location of strong tourism growth such as Sam Son (Thanh Hoa), Quy Nhon (Binh Dinh), Bay Ha Long (Quang Ninh) … In the peak season, the occupancy rate of the hotel system is often more than 90%, the low season is lower but the average capacity of the operation a year, the filling of 40-50 % and more is not difficult.

Le Minh Dung, deputy general director of BIM Group, said, for example, that a 1-bedroom apartment in Phu Quoc cost about VND 3 billion, with a commitment 10% profit, each year will earn 300 million committed profits.

Meanwhile, about the actual operating, the price of one bedroom in Phu Quoc is 4.5 million per night, the number of days for lease is 345 days (because of minus 20 days of the owner), the capacity is temporarily calculated is 50%. Thus, total revenue will be VND780 million / room / year.

By dividing the profit by 40% of room revenue, the profit divided to the owner is VND312 million, higher than the committed profit from the investor (VND300 million). “The commitment of 10% is completely reasonable,” Dung said.

The risk of the condotel model lies in the operation rather than sales

According to Mauro Gasparotti, director of Savills Hotels Asia Pacific, the pledged profit of condotel from 8-10% in Vietnam is significantly higher than other countries in the region such as Thailand or Indonesia.

The fierce competition has led investors to promote advertising as well as apply a policy of commitment to profit to attract buyers. “We have seen more and more projects being announced, many investors who have not planned the project well have tried to overcome the projects launched earlier by running on the scale and commitment levels “said Mauro Gasparotti.

According to Savills’ director of hotel operations, a high profit commitment policy will make the project more dependent on future performance in order to be able to fulfill its obligations to buyers.

“Although many developers have begun to focus on running the project through hiring professional operators, in most cases, we recognize that developers, especially Investors do not have much experience developing resort products, only focus on sales but little attention to management and operation when the project goes into operation, “said Mauro Gasparotti.

Mauro Gasparotti emphasized that condotel (as well as second home products) would be unlikely to achieve attractive yields. The fact that condotel requires projects to have the conveniences and capabilities to operate as a conventional hotel or resort can compete with other hotels and resorts in the market. In addition, the condotel rate of return will depend on the market conditions and the capacity of the management.

“The risk of the condotel model is mainly at the stage of operation, not in the sales stage.” If the profit from project operation is not enough to pay the committed profit, then the investor Additional funds must be added to ensure proper fulfillment of obligations to buyers, “he said.

Although affirming the condotel model can be very attractive to both buyers and investors, Mauro Gasparotti recommends that if the option to develop this model, the investor should make good planning as well as conduct feasibility study. From the very beginning it is possible to have a product that is suitable for market conditions, financial capability as well as good future operation.

On the buyer’s side, he also noted that when choosing real estate products for investment, customers should consider the selection of quality products from reputable investors and learn about products and sales policies.

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