ACCOMMODATION SERVICE BUSINESS GUIDE BOOK

The Vietnamese hospitality industry stands at the crossroads of unprecedented growth and transformative potential, embodying a compelling narrative of economic evolution and cultural dynamism. Against the backdrop of Vietnam's economic liberalization and rapid urbanization, the hospitality industry has become a linchpin in the nation's development trajectory. The intersection of traditional Vietnamese warmth and modern service excellence has set the stage for a unique hospitality experience, positioning the country as an increasingly attractive destination for tourists, business travelers, and investors. 

This legal guide aims to explore the intricate legal landscape, uncovering the key opportunities and legal aspects for entrepreneurs seeking to enter this exciting market.

1. A closer look at opportunity in hospitality industry 

The number speaks for themselves:

In the year 2023, the tourism sector in Vietnam has witnessed a comprehensive resurgence, culminating in the reception of 12.6 million international visitors, a notable augmentation of 3.4 times compared to the previous year and significantly surpassing the initial annual target of 8 million visitors. This resurgence has engendered novel prospects for foreign investment within the burgeoning hospitality and tourism domain. Following the resumption of international flight routes, discernible indications of prosperity have manifested within the hospitality and tourism sector. Particularly noteworthy is the discernible escalation in the search volume of international tourists for accommodations and flights offered by Vietnam's aviation and hospitality establishments.

It is also reported that by 2025, Vietnam is projected to welcome 18 million international and 130 million domestic tourists. These figures paint a compelling picture for aspiring hospitality entrepreneurs: a supportive government, a thriving market, and immense potential for revitalization.

New visa policy: 

A pivotal facet amplifying the opportunities for hospitality businesses lies in the affirmative governmental measures designed to stimulate and facilitate foreign investments. Officially from 15 August 2023, the visa exemption period is extended from 15 days to 45 days for people coming from 13 nationalities (England, Italy, France, Germany, Spain, Korea, Denmark, Norway, Finland, Sweden, Russia, Japan, Belarus). The extension has been poised to accommodate travelers hailing from countries enjoying visa-exempt status, thereby providing them with an extended timeframe to explore Vietnam's attractions and contribute substantively to the nation's tourism revenue. Addtionally, e-visa, which is a type of visa applied for many countries and various purposes, is approved to be extended from 30 days to maximum 90 days, offering foreigners increased flexibility and longer stays.

International marketing enhancement:

Complementing this, the Vietnam National Administration of Tourism (VNAT) has undertaken strategic initiatives to fortify the global perception of Vietnam as a secure and enticing destination. This has been executed through the implementation of an international marketing enhancement strategy, involving targeted promotions on digital platforms directed at key markets. VNAT's active participation in prominent international travel fairs has further reinforced the narrative that Vietnam stands as a safe and appealing destination, fully prepared to welcome back tourists following the abatement of the Covid-19 pandemic.

2. A deep dive into Vietnam regulations on accommodation industry 

The hospitality industry comprises diverse services including accommodation, food and beverage, travel, tourism, and related sectors. In the context of Vietnam, specific conditions and regulatory constraints dictate the establishment and operation of each service category, as stipulated by the country's market open commitments and regulatory framework. This article is particularly dedicated to a nuanced exploration of the regulatory landscape governing accommodation services, predominantly manifesting as hotels or entities engaged in the provision of lodging facilities. 

Classification of Accommodation Services in Vietnam

1. Hotel: This category encompasses hotel resorts, motels, floating hotels, and city hotels, which must meet specified criteria for infrastructure, equipment, and services.

a) Hotel Resort: Constructed in the form of blocks, complexes of villas, or low-rise buildings in areas with picturesque natural landscapes.

b) Motel: Strategically positioned near roads, equipped with parking facilities to cater to the accommodation needs of road-traveling tourists.

c) Floating Hotel: A waterborne facility capable of movement as required.

d) City Hotel: Situated in urban areas.

2. Tourist Villa: Purpose-built for lease, fully furnished with essential amenities to facilitate self-service during tourists' stays.

3. Tourist Apartment: Furnished with all necessary equipment and amenities for tourists to independently manage their stay.

4. Cruise Ship: A waterway vessel equipped with sleeping accommodations to fulfill tourists' lodging requirements.

5. Tourist Guest House: Equipped with all essential amenities to cater to the needs of tourists.

6. Homestay: A residence with designated areas furnished to meet tourists' accommodation requirements, involving cohabitation with the host family.

7. Tourist Campsite: Planned in scenic natural locations, providing necessary infrastructure and services for campers.

8. Other Tourist Accommodation Establishments: Encompasses diverse accommodation entities beyond the aforementioned categories.

Conditions governing accommodation service business 

Broadly speaking, the accommodation service sector in Vietnam is fully accessible to foreign investors, permitting them to make 100% investments in companies engaged in accommodation service operations. Nevertheless, given the conditional nature of accommodation services as a business, registered entities are obligated to adhere to the following stipulations:

Compliance with legal procedures: Investors intending to offer accommodation services are obligated to execute such business through a registered company. The registration process must strictly conform to the prevailing legal frameworks that regulate accommodation services within the jurisdiction.

Qualifications of legal representative: The appointed legal representative of the company must be either Vietnamese or a foreign national possessing Vietnamese residency, which can be recognized through visa, Temporary Residence Card (TRC), or Permanent Residence Card (PRC). 

Fulfillment of security and social order requirements: Adherence to standards related to security, social order, fire prevention and fighting, environmental protection, and food safety is imperative.

Infrastructure and service adequacy: Entities providing accommodation services must meet specified minimum criteria pertaining to infrastructure and service provisions.

Security and social order planning: A comprehensive security and social order plan must be in place and ready in the company record, demonstrating the commitment to maintaining a secure environment.

Acquisition of sub-licenses and mandatory notifications: Entities are required to obtain relevant sub-licenses and ensure mandatory notifications to competent authorities, thereby affirming compliance with regulatory protocols.

Setting up an FDI company in accommodation service business

Establishing a Foreign Direct Investment (FDI) company in the accommodation service sector involves a structured process comprising two indispensable stages. Initially, prospective entities must secure the Investment Registration Certificate (IRC), a prerequisite for all newly established FDI companies. Subsequently, they proceed to obtain the Enterprise Registration Certificate (ERC). Alternatively, investors have the option to acquire an existing local company in Vietnam engaged in the provision of accommodation services (referred to as the target company). The latter approach may be particularly advantageous for those seeking to leverage existing infrastructure, sub-licenses, and customer databases. However, it is crucial for investors to exercise meticulous due diligence during the acquisition process, given the conditional nature of this service, necessitating rigorous compliance with licensing, internal records, management protocols, and reporting obligations.

Estimated Timeline for Setting Up FDI Company in Accomodation Service

Key considerations when registering an FDI company include:

Business Scope:

The company must expressly register accommodation services as its primary business line. Additionally, if the company offers ancillary services such as catering, bars, and cafes, these must be duly registered, with strict adherence to relevant regulatory frameworks, as they also fall under conditional businesses.

Accommodation Location:

Given the substantial space requirements for infrastructure development in the accommodation business, investors should meticulously evaluate the business scale and area considerations. Competent authorities are likely to scrutinize and express concerns regarding these aspects. Furthermore, if the location involves land granted by the Government for infrastructure development, the size of the land may necessitate pre-approval from higher authorities, including People’s Committees, the Prime Ministers, and the National Assembly.

Investment Capital:

While there is no explicitly mandated minimum capital requirement for the accommodation service business in legal documents, the investment capital of the company must be substantial enough to facilitate the practical operation of the business.

Prescribed standards for infrastructure and service provision in the accommodation service sector

Hotel

1. It is mandated to possess a minimum of 10 bedrooms, a reception area, and shared toilet facilities.

2. Hotel resorts and motels are obligated to provide designated parking spaces.

3. Hotel resorts, floating hotels, and motels are required to be equipped with kitchens, dining rooms, and offer food services.

4. Essential amenities, including beds, mattresses, duvets, pillows, face towels, and regular replacement of mattress, duvet, and pillow covers for each new guest, must be provided.

5. Continuous staff availability is imperative, ensuring 24-hour service coverage.

Tourist villa

1. Essential amenities, including beds, mattresses, duvets, pillows, face towels, and regular replacement of mattress, duvet, and pillow covers for each new guest, must be provided.

2. Continuous staff availability is imperative, ensuring 24-hour service coverage.

3. Seating area, bedrooms, kitchens, bathrooms and toilets must be available.

Tourist apartment

1. Essential amenities, including beds, mattresses, duvets, pillows, face towels, and regular replacement of mattress, duvet, and pillow covers for each new guest, must be provided.

2. Seating area, bedrooms, kitchens, bathrooms and toilets must be available.

Cruise ship

1. Seating area, cabins, bathrooms, toilets, kitchens, dining rooms and food services must be available.

2. Essential amenities, including beds, mattresses, duvets, pillows, face towels, and regular replacement of mattress, duvet, and pillow covers for each new guest, must be provided.

Tourist guest house

1. Seating area, bedrooms, bathrooms and toilets must be available.

2. Essential amenities, including beds, mattresses, duvets, pillows, face towels, and regular replacement of mattress, duvet, and pillow covers for each new guest, must be provided.

3. Continuous staff availability is imperative, ensuring 24-hour service coverage.

Homestay

1. Accommodation area, kitchen, bathrooms, toilets must be available.

2. The accommodation facility is obligated to provide beds, mattresses or mats, duvets, pillows, mosquito nets, face towels, and towels. Regular replacement of mattress covers or mats is required, and duvet and pillow covers, along with face towels and towels, must be changed for each new guest. 

Campsite

1. A guest reception area, an area for setting up tents, camps, shared bathrooms and toilets must be available.

2. A comprehensive first-aid kit must be provided.

3. There must be security guards upon arrival of tourists.

Acquisition of sub-licenses

Following the establishment phase, the company is compelled to fulfill all requisite sub-licenses to actually and legally commence operational activities. Given the conditional nature of accommodation services, as reiterated throughout this article, the acquisition and maintenance of various sub-licenses are imperative for daily business operations.

Fire Safety Compliance License

The type of license mandated for fire safety compliance depends on the scale and characteristics of the premises. Accordingly, the company is fundamentally required to obtain Written Records attesting to the inspection and satisfaction of fire safety conditions. However, in instances where the premises' capacity exceeds 5000m3 or the building comprises at least 7 floors, the company is obligated to secure Written Approval for the acceptance of fire safety conditions. For the purposes of this article, these two forms of documentation will be collectively referred to as the Fire Safety Compliance License. This license serves to ensure that the premises are structurally sound, equipped with convenient emergency exit routes, and furnished with adequate tools for immediate fire control measures.

Certificate of Compliance with Security and Social Order Conditions

Following the acquisition of the License of Fire Safety Condition Satisfaction for accommodation services, the subsequent step entails obtaining the Certificate of satisfying security and social order conditions. This mandatory license involves a comprehensive application process, necessitating the submission of the following documentation: 

• Application form

• Business registration certificate (IRC and ERC)

• Fire Safety Compliance License

• Curriculum vitae enclosed by the Criminal record statement or Individual declaration of the individual responsible for the security and social order of the operational premises. This person is the legal representative of the company or another who has been authorized by the legal representative to represent in the Certificate of satisfying security and social order conditions.

The submission of the application is to be directed to the pertinent authorities responsible for issuing the certificate, as delineated below:

• The Police Department for Administrative Management of Social Order directly under the Ministry of Public Security, for accommodation providers rated at 05 stars or above.

• Police Offices for Administrative Management of Social Order directly under Police authorities of central-affiliated cities, for accommodation providers featuring more than 20 rooms.

• Police Offices at the provincial level of central-affiliated cities, for accommodation providers featuring 10 to 20 rooms.

• Communal police authorities, for accommodation providers featuring fewer than 10 rooms.

Security and Social Order Planning 

For corporate accommodation service providers, it is stipulated that the development of a compulsory Security and Social Order Guarantee Plan is mandatory, stored in the company records for subsequent assessment and/or audit by competent authorities. The plan should encompass the following essential components:

a) Identification of specific regions/subjects necessitating intensive security and order measures.

b) Security and order measures.

c) Regular security and order forces.

d) Facilities.

e) Organizational and instructional measures.

f) Collaboration with local competent authorities where business activities are conducted.

g) Contingency plans for events related to security and order, involving the mobilization of personnel and facilities, and the subsequent implementation of handling measures.

Mandatory notifications to competent authorities 

Notification to the Department of Tourism or the Department of Culture, Sports, and Tourism

A written notice must be dispatched to the Department of Tourism or the Department of Culture, Sports, and Tourism of the respective area at least 15 days prior to the commencement of operations by the accommodation service providers. The notice shall consist of:

a) Name, type, and scope of the tourist accommodation provider;

b) Address of the provider, along with information about the legal representative;

c) A commitment to meeting the conditions stipulated by law for the provision of tourist accommodation services.

Notification to Communal Police Offices

The company is mandated to send a written notice, accompanied by the Certificate of Compliance with Security and Social Order Conditions, to the competent police authority at the communal level where business activities are conducted within five days from the initiation date of business operations.

Application of Ratings for Tourist Accommodation Providers

Accommodation providers have the option to voluntarily seek a rating for their establishment from a competent authority. While not mandated by previous provisions, this step becomes consequential as only accommodations receiving an official star rating from authorities are permitted to display such stars at their premises.

Operation Compliance Post-Establishment and Responsibilities of Accommodation Service Providers

1. The company is mandated to submit quarterly reports on its adherence to security requirements, utilizing a template specified by regulations, to its direct-reporting police authority. These reports must be dispatched within the final week of each quarter. 

2. Internal regulations pertaining to the assurance of security, order, combating social ills, and fire prevention and fighting must be conspicuously displayed in a noticeable and legible manner.

3. Verification of customers' personal identification papers, such as ID cards, citizen identity cards, passports, permanent resident cards, or temporary resident cards (for foreigners), is obligatory. In the event of a customer's failure to present such identification, the accommodation service provider is required to report to the local police authority or police station after completing the accommodation transaction.

4. Prior to providing rooms to customers, the accommodation service provider must meticulously record all customer information in a monitoring book or computer database, adhering to the template stipulated by laws.

5. Reporting the stay of Vietnamese nationals or registering the temporary residence of foreigners (overnight or hourly stays) with the communal police authority or local police station is mandatory before 11:00 PM daily. If a customer arrives after 11:00 PM, the report must be submitted before 08:00 AM the following day. Reporting may be conducted through various means:

a) For Vietnamese nationals, if internet connectivity is available, reporting is to be done online; in the absence of internet, direct reporting at the police authority or via phone is acceptable.

b) For foreigners, completion and submission of Declarations of Temporary Residence are obligatory.

6. Scrutinizing and managing the personal identification papers of individuals visiting customers at the accommodation facility, recording pertinent information, and returning the papers upon departure are requisite practices.

7. The retention of customer information and details of visiting individuals at their rooms is mandatory for a minimum duration of 36 months.

8. In instances where a customer possesses weapons or combat gear, the accommodation service provider must request the presentation of a valid permit issued by the police authority or military force. Failure to provide such a permit warrants prompt reporting to the competent police authority.