In 1989, when I first arrived in Vietnam, foreign visitor arrivals were around 200,000 per year and tourism revenues of less than US$ 100 million. The exchange rate was approximately 4700 VND per 1 US$.
There were three flights a week to Saigon and two to Hanoi—all from Bangkok—plus one or two flights per week from the former USSR. There were two domestic flights per day between Hanoi and Saigon on old Russian Tupolev aircraft.
To get our entry visas, we had to overnight in Bangkok. There were no cars available apart from government cars so all travel was either arranged by host organisations or by cyclo once in the city.
Travel permits were required to visit Vung Tau or Ha Long Bay and poverty was ubiquitous. More than 75% of the population were living below the World Bank’s poverty line. According to IndexMundi, per capita GDP was less than US $100 per annum.
The first international standard hotel was towed into Saigon in late ‘89 from the Barrier Reef. It was owned by the Japanese and operated by Southern Pacific Hotels.
In spite of the above, the people were friendly and there was an energetic and vibrant spirit, particularly in Saigon, which still boasted places like Maxim’s on Dong Khoi. In Hanoi, discussions were just taking place for the renovation of the iconic Metropole hotel.
Vietnam’s Hospitality Surge
By 2019, pre-COVID Vietnam recorded more than 18 million foreign visitors and more than 80 million domestic travellers. Tourism revenues had soared over US$ 30 billion. The currency, however, had depreciated to 23,000 VND per 1 US$.
There were international flights to over 28 countries with up to three or more flights a day to some regional destinations as well as flights every 30 minutes between Hanoi and Ho Chi Minh City and vice versa–most on modern wide-bodied aircraft. This route was the second most travelled air route in the world.
The surge in tourism was bolstered by the eight UNESCO-listed World Heritage sites along with the amazing coastline, golf courses and casino developments. Vietnam had the largest pipeline of hotels and resorts in Asia Pacific–more than 40% of the total–and a fast-growing number of tourist destinations.
So where are we now and what lessons have we learnt because of COVID?
From March 2020, after a record start to the year, foreign arrivals fell to almost zero because of border closures. In addition, domestic travel plummeted to around 50 million. The former had a much larger impact on tourism revenues because foreign visitors accounted for about 60% of total revenues.
The lack of international visitors from March 2020 to April 2022 highlighted the resilience of the domestic market but it also accentuated the lack of focus on this market–in particular the one million Vietnamese who’d been travelling overseas prior to border closures.
Borders reopened on March 15th, 2022, but there was no mad rush from overseas visitors, a market whose numbers reached approximately 600,000 in the first six months whilst the domestic market rebounded to unimaginable heights, with over 60 million travellers. This surge should ensure that the 2019 record of 85 million travellers will be exceeded by a significant degree. However, one must also look at these statistics from a revenue perspective. In 2019, when Vietnam had 18 million foreign visitors and 85 million domestic, the spending split was 2/3 foreign versus 1/3 local.
The above numbers really highlight the resilience of the domestic market, which was boosted by the rapid vaccine rollout. Between April and December 2021, almost 90% of the population over the age of 18 were fully vaccinated.
Post-COVID Recovery Presents Opportunities to Change the Hospitality Industry’s Focus
Bearing in mind that the Chinese outbound market (Vietnam’s largest inbound market pre-COVID at just over 30%) and the Russian market (important to Nha Trang, Cam Ranh and Phu Quoc) are still non-existent, Vietnam can choose to focus on new target markets.
A newfound aim to entice Indian travellers to Vietnam has seen a significant opening of air routes between locations in Vietnam and India. Vietjet is currently the carrier with the most routes between the two countries. In the months that follow, hotels also need to research what these new target markets require in terms of service and offerings.
The state of the tourism industry post-COVID provides an opportunity for hospitality professionals to target higher spending markets and to focus on quality rather than quantity, with the caveat that urgent action on the part of the government is needed. For example, in terms of visa facilitation, it would be beneficial to grant more visa exemptions and extend visa exemptions from 15 to 30 days. Several countries that would boost inbound visitors are Canada, America, Australia, New Zealand, and European countries that are not already exempt.
Attention should also be paid to improving the regulatory environment for foreign buyers of second homes, which would boost return visitors and also help with moving some of the inventory at resort properties. One example of a change that could be enacted is that in order to buy property foreign buyers need three-month visas, but there is no guarantee of renewal or visa issuance for them to return to the property at a later date.
Another potential market to target is retirees. Aged care facilities need careful regulation but there is strong potential if marketed properly, particularly in places like Australia, the UK, the USA and Europe.
The Challenge of Knowing What to Expect in Terms of Recovery
The strong recovery in domestic travel will likely continue unless inflation spirals out of control and/or the GDP growth rate falls below the target of 6 to 6.5%. Both of the scenarios are currently unlikely considering the economic forecasts. It is more probable that we can expect to see a surge in overseas visitors as pent-up business travel kicks in. This will benefit 5-star city hotels in particular. One city hotel in Ho Chi Minh reported more than one night of 90%+ occupancy in June.
Opinions differ but my personal view is that it will be some time before business travel stabilises to match pre-COVID levels. Most companies will likely look to reduce travel and build on the communication platforms that proved so effective whilst recognising the fact that some level of face-to-face contact is necessary and required. I tend to share the view that it will be 2024 before we get back to pre-COVID levels on all tourism fronts. I hope I’m being over-conservative.
