URBAN PLANNING & REAL ESTATE

MARKETS

Class assignment:

GRAND HOTEL EXPANSION

Address: 08 Dong Khoi, Ben Nghe Ward, District 1, Ho Chi Minh City

VIETNAMESE GERMAN UNIVERSITY

Advisor: Prof. Dr. Karl Kluegel

Student: Doan Ngoc Anh Vu

Class: UDP2010

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CONTENTS

I. INTRODUCTION ......................................................................................................................... 3

II. METHODOLOGY .................................................................................................................... 3

III. BUILDING OVERVIEW/DESCRIPTION ............................................................................... 4

IV. EVALUATION .......................................................................................................................... 6

1. Design and Image ....................................................................................................................... 6

2. Technical Feasibility .................................................................................................................. 7

3. Traffic ......................................................................................................................................... 7

4. Market Analysis ......................................................................................................................... 7

5. Economic Analysis ..................................................................................................................... 8

6. Social impact .............................................................................................................................. 8

7. Environmental friendly .............................................................................................................. 8

V. CONCLUSION .............................................................................................................................. 9

REFERENCES ...................................................................................................................................... 10

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I. INTRODUCTION

Nowadays, Vietnam is one of the development countries that have high speed of the real estate.

However, the average number of tourist come to Ho Chi Minh City is more than 2 million per

year. To satisfy the demand of tourism, competition with the current real estate and increase the

effect of business, in 2010 the Sai Gon Tourist Company made a decision to expand the Grand

Hotel such as: install the restaurant at the top floor (equivalent the 20th floor) with the name of

project is “Grand Hotel expansion”, the existing Grand Hotel was executing up to the 17th floor.

To evaluate the effect of the project, the investor has to do more research about the criteria that

affect directly to their project because this is the big project has many elements impact to the

society as well as the real estate such as: land use, budget, transportation, employment, etc.

II. METHODOLOGY

To evaluation a real estate project exactly is required the knowledge of many fields of vision and

request gather adequate information from many sources such as: Ho Chi Minh City Department

of Architecture, Ho Chi Minh City Department of Construction and some concern institutions

especially from the investor. To be able to finish research, all economic parameter such as

vacancy rate, rental cost, etc. were retrieved from report of market overview Q1/2011 from CB

Richard Ellis Vietnam Company. And every cost to construct building, project period is assumed

as every building which is the same capacity was done.

There are two main parts of assignment; the first one is individual analysis to chosen project

about technical feasibility and economic feasibility, the second one is class analysis. By

collecting fifteen estimating projects, macro economy impacts to Ho Chi Minh City and to

Vietnam are analyzed by creating criteria. The selected criteria to assess all projects are flexible.

Literature reviews, current market reviews for critical comments is mostly used for all criteria.

Field observation is also applied for criteria: Design, Traffic, and Social Impact. For criteria

Parking capacity and economic analysis, the paper uses some technical calculation for

assessment. And finally, each criteria will be ranked from Good to Bad which is represented

from 1 to 5.

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III. BUILDING OVERVIEW/DESCRIPTION

Grand Hotel is one of the oldest hotels in Ho Chi Minh City since 1930 and completely restored

in 1997, nestled in Saigon's scene riverside area and within walking distance to major

commercial and entertainment addresses, and still retained its French colonial style, provides a

perfect base for conducting business or for having completely relaxed vacation.

Grand Hotel Saigon will be a five-star hotel in 2011 with 233 rooms categories totally combined

between new and old style, Western and Asian restaurants, conference rooms with capacity of up

to 700 persons, and the best diversified quality services so as to satisfy every single guest.

The Sai Gon Tourist Company got the construction licenses from the Department of

Construction in 2007 (No.59/GPXD issue 30, March, 2007); the Grand Hotel is located on No.

08 Dong Khoi Street, Ben Nghe Ward, District 1, Ho Chi Minh City with 2780m2 and designed

by Archetype Co., Ltd.

The construction includes these items:

• Parking: for 31 cars

• Bed room: 133 rooms

• High: 20 stories (include 1 mezzanine and 19 floors), 2 underground floors, 1 technical

underground floor and 1 technical top floor, the high from ground floor to the peak is

74m.

• Total area slab of floor is 17.764 m2

+ Technical underground floor 376m2

+ Underground floor 1, 2: technical and parking 2x1050m2

+ 1st floor: reception and services 897m

2

+ Mezzanine: services 720m2

+ 2nd floor: restaurant and services 867m

2

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+ 3rd floor: restaurant and services 856m

2

+ 4th floor: restaurant, services and office management 968m

2

+ 5th floor: office for lease, services and office management 646m

2

+ 6th floor: bedrooms 766m

2

+ 7th, 9

th, 11

th, 13

th, to 19

th floor: bedroom 682m

2

+ 8th, 10

th, 12

th, floor: bedroom 686m

2

+ Top floor: restaurant 968m2

• The construction density is 85% and follow to the standard of TCVN

According to the forecast, Grand Hotel Saigon will be a five-star hotel in 2011 with 233 rooms

categories totally combined between new and old style, Western and Asian restaurants,

conference rooms with capacity of up to 700 persons, and the best diversified quality services so

as to satisfy every single guest.

Figure: Grand Hotel Expansion

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Figure: Location of Grand Hotel

IV. EVALUATION

1. Design and Image

The table A below describes obviously detailed information of land area and design of building.

B. Land use feasibility

Gross building area

2,780.00 m2

Open space 897.00 m2

Number of story (available for rent) 20.00 stories

Total area of floor

17,764.00 m

2

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Parking number 31.00 units

By observation from the outside, the building was built by brick wall with the colonial

architecture. The structure and constructing material is modern tendency to attractive the foreign

visitors. Every room has adequate facilities so most of visitors are also satisfied (from the

statistic opinion of visitors in the internet). The Grand Hotel is located at the Sai Gon riverside so

the visitors can enjoy their sightseeing or walk along the pavement of the river to enjoy the

atmosphere from the river

Score: 2

2. Technical Feasibility

From visual observation and drawings retrieved from the construction company, the building is

designed with 2 technical floors, it definitely serve and supply mechanic and electricity for the

whole building. On the other hand, the elevation of the Grand Hotel stand directly in front of Sai

Gon river so that it is easy to use the wind for ventilation.

On the contrary, the capacity of parking is only for 31 cars but the total room is 233 so the owner

has to extra more parking in the future because it almost certainly lacks of the parking within the

next 5 year. Generally, most of hotel in Ho Chi Minh City are also lack of parking

Score: 3

3. Traffic

The building is placed on two way street in center of Ho Chi Minh City. The name of street is

Dong Khoi and there are high density of traffic and vehicle in this street. However, the wide of

street is only 7 meter with two ways so it is very difficult for car go out from the building to

outside.

Score: 4

4. Market Analysis

According to the situation of current market in Vietnam, the price of gold increases rapidly up to

49.000.000VND per tael in the middle of August so the price of construction materials is also

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increase together and it is probably affect to the investors and employment. Moreover, the

interest rate of the banks has gone up to 24% per year so this is the main cause why the investor

can not invest to the real estate projects. In addition, the slow development of business is one of

the main reasons why many companies stop operation and the investors will lose benefit from

the office for lease. Furthermore, the situation is also effect to the tourists coming to Vietnam

and the profit from room for rent at the Grand Hotel goes down.

In generally, more and more construction site is now interruption by plenty of reasons. The

investors have to look around the previous project to learn experience from them before make a

decision to invest this project. In addition, all most of building include hotel and office for lease

has just built only exploit more than 25% capacity so the stock market of real estate in Vietnam

continue go down ( the VN Index is always about from 400 to 475)

Score: 4

5. Economic Analysis

The table B shows theoretically economic calculation about project profit.

B. Economic Feasibility

Construction cost for 1 m2 floor 550.00 USD

Construction cost for 1 m2 basement 800.00 USD

Total Construction Cost 10,389,200.00 USD

Purchase Price for lot 7,000,000.00 USD

Project cost 17,389,200.00 USD

Rental for room 65.00 USD

Gross Rental Revenue

at 100% Occupancy for one year 5,452,200.00 USD

Vacancy Rate 25.00 % 1,336,050.00

Operating cost 40.00 % 2,180,880.00

Net Operating Income

1,908,270.00

Break Even ROR

0.109

� Project is economically feasibility if investors require ROR =<0.109%

� Project is economically not feasibility at 0.12% since

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Score: 3

6. Social impact

When the Grand Hotel executes the work, it will create the large market for employee such as

workers, engineers, etc within 3 years. Furthermore, when the project finish, it will definitely

create more than 200 permanent jobs in this building and a lot of employees work at the offices

for lease.

On the contrary, the negative impact for society now is supplying too many office and hotel to

real estate market will make unbalance in economy. This is over supply while demand is still

lower than the line. This easily leads to rental price or real estate trading price goes down

dramatically.

Score: 3

7. Environmental friendly

According to the project, the designer only focus on the architectural, functional and technical of

the building because most of stories is used for bedrooms and restaurants so the building

probably use more energy for air conditioners, lights, ect.

Score: 4

V. CONCLUSION

This paper is only analyzed some fields concern to the building by seven criteria. The table

below presents the summary results of the analysis.

No. Criteria

Mark

Score 1 2 3 4 5

Good Bad

1 Design & Image X 2

2 Parking Capacity X 3

3 Traffic X 4

4 Market Analysis X 4

5 Economic Analysis X 3

6 Social Impact X 3

7 Environment friendly X 4

TOTAL SCORE 23

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In conclusion, The Grand Hotel is one of the oldest and famous hotels in Ho Chi Minh City and

has been known by foreign tourists around over the world. As a result, it has to rebuild to

continue the operation of this famous hotel.

From the period the investor invest to the project “The Grand Hotel Expansion” to finish; it

creates a lot of benefit for society and positive impact Ho Chi Minh City. According to this

project, the investor has to subsidies from the local government and some concern institutions

because of the important range of the project.

On the other hand, the building has to concentrate on the environment friendly by change the

material and structure that was used in the other successful projects.

REFERENCES

Document:

- CBRE Ho Chi Minh City Market View in quarter 2/2011

- The Department of Architecture and Planning

- Townsend, M. (2011) Vietnam Real Estate Update and Market Overview; Indigestion in the

Property Market. April 4, 2011.

- Karl Kluegel (2011), Real Estate Markets and Development handout