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Temporary travails

Released at: 08:58, 27/10/2014 Hospitality Sector

Temporary travails

Regional issues have affected hotels and resorts in Vietnam to some degree but resilience will remain in the longer term.

by Linh San

Hoteliers throughout Vietnam started 2014 with good business results in the first four months but a number of challenges arose during the second quarter. “The hotel was running well in terms of both occupancy and room rate through the first four months, but was then affected by the political circumstances in the region, such as the East Sea dispute and the Bangkok protests,” Mr Phuoc Dang, Director of Sales and Marketing at La Residence Hotel and Spa in Hue, told VET. “Year to date, the hotel’s performance has not quite met expectations due to these issues, but we are still doing better compared to the same period last year.”

Mr Nguyen Duc Quynh, Executive Assistant Manager of Furama Resort Danang, tells a similar tale. “Our business performance in the first four months was good, but due to the suspension of some direct flights from cities in China to Da Nang, over the last three months our business volume has fallen 10-15 per cent,” he said. He added, however, that as May to July is the holiday season in Vietnam the occupancy of hotels in Da Nang was still high, at 75-80 per cent, but it may be lower after the season finishes in September. “I forecast our business performance for 2014 will be around 10 to 15 per cent lower than in 2013,” he said.

Business in Nha Trang, meanwhile, remains strong despite the new competition in the market, according to Ms Catherine Racsko, General Manager of the Sheraton Nha Trang. But business has fallen slightly year-on-year, as a result of the Korean ferry disaster and the recent tensions in the East Sea. 

While the recent political and social tensions affected the country’s tourism sector in the second quarter, the year as a whole may still be positive, according to hoteliers. “There are more direct international flights coming to major hubs like Ho Chi Minh City, Hanoi and Da Nang,” said Mr Dang. “Vietnam also has more UNESCO-recognised sites and as such we believe more visitors will come our way.” He added that La Residence Hotel & Spa will strive over the remainder of 2014 to reach its revenue target. “We have launched and will be launching many sales and marketing campaigns until the end of the year, both at the hotel and at the group’s regional level,” he said. “We plan to introduce a number of attractive packages to encourage spending among in-house guests.” The hotel is also focusing on and pushing more aggressively in the domestic market, since the number of high-spending Vietnamese travellers is increasing dramatically every year. 

Mr Quynh from Furama doesn’t believe it can achieve the occupancy rate recorded in 2013 but he hopes to achieve the same revenue as in 2013, as the average room rate is higher than last year. “Besides traditional markets such as Australia, Europe and the US, we have focused many marketing efforts on South Korea and Japan, where airlines have opened direct flights to Da Nang,” he said. “The domestic market is always the market that hotels and resorts should rely on, as it isn’t so sensitive to events.”

“With a stable political and economic system, a profound history and beautiful landscapes, as well as an increasing number of ASEAN travellers, Vietnam will remain an attractive destination for hotel developers.”

Mr Phuoc Dang, Director of Sales & Marketing, La Residence Hotel & Spa in Hue

Sentiments shared at the “Hotel Investment & Management in Vietnam - Lessons from Across Asia” event held in Ho Chi Minh City by CBRE in June indicate that hotel occupancy throughout the country had generally been stronger over the last three years. Rates in Ho Chi Minh City and Hanoi are now inching closer to other major regional cities such as Jakarta and Kuala Lumpur. While there is an increase in hotel supply predicted for Hanoi and Ho Chi Minh City over the next three years - around 8 per cent in total - this is less than the number of projects proposed for Jakarta and Kuala Lumpur, where supply may grow by 20 per cent if all proposed projects actually proceed. Da Nang has performed particularly well over the last few years but its exposure to the Chinese market may present challenges in the very short term. “The longer-term outlook appears positive at present,” said Mr Robert McIntosh, Executive Director of CBRE Hotels, Asia Pacific. “The quality of infrastructure and hotels has improved considerably over recent years and this has led, and will continue to lead, to a more stable and resilient tourism market. Hotel performance is expected to improve in the medium term and foreign investors are increasingly attracted to the opportunities and returns Vietnam offers.”

Potential holds

Ho Chi Minh City now has approximately 140 three-, four- and five-star hotels, which supply a total of 15,685 rooms. There will be at least ten three- to five-star hotels with a total of 1,900 rooms coming onto the market over the course of the next three years. Hanoi, meanwhile, currently has 127 hotels of three-, four- and five-star rating, supplying a total of 11,993 rooms. From Quarter 2, 2014 to 2016 Vietnam’s capital will see three new five-star hotels open, with 1,100 rooms.

“Vietnam will continue to have potential for hotel developers, but it is important that developers research the destination and market so that they are aware of the length of return on investment.”

Ms Catherine Racsko, General Manager of Sheraton Nha Trang

The can be no doubt that Vietnam will continue to have potential for hotel developers and many famous brands in the sector have already arrived. Accor, the French hotel group, continued to expand its market share in Vietnam by launching three hotels. Life Resort Danang was officially rebranded as the Pullman Danang Beach Resort on April 5, 2013. In October 2013,

Accor also opened the five-star Pullman Saigon Center and have announced the opening of the Novotel Danang Premier Han River Hotel. In November 2013 the Marriot International Hotel Group officially introduced the first JW Marriott in Hanoi, which was the second Marriot International hotel in the country. A second Hilton hotel, Hilton Garden Inn Hanoi, ranked four-star, joined the market in early April 2013. In March 2013, the InterContinental Hotel Group opened the InterContinental Nha Trang - a five-star hotel with 279 rooms. “More international brands entering the market will assist the average daily rate to grow, but this will take time as Vietnam is still a very affordable destination and hotels cannot command the same rates as other destinations,” said Ms Racsko. 

“Vietnam is attractive to hotel developers because its culture is interesting, its beaches are beautiful, its food is outstanding and its location is great, in that its proximity to China - a growing tourism market for Vietnam - is ideal. It also helps that labour costs and construction costs are lower than in many other Asian countries.”

Mr Anthony Gill, General Manager, The Nam Hai resort in Da Nang

Compared to other countries, according to hoteliers, the number of hotels and resorts in Vietnam remains modest and there is still a lot of room for hotel developers to step in. “There are many hotel groups already in Vietnam but other famous brands are yet to arrive, such as Shangri-la and Ritz Carlton, to name just two,” said Mr Quynh. “In the future Vietnam will need more hotels and resorts. Every year Singapore welcomes around 16 million visitors and Vietnam welcomes just a third of that, but many direct flights are opening and we hope that if the Vietnam National Administration of Tourism pushes more marketing and promotional activities then there will be a need for more accommodation.” 

Mr Dang added that Vietnam will welcome an estimated 6 million visitors this year, which is still far behind other countries in Southeast Asia such as Thailand and Malaysia. “With a stable political and economic system, a profound history and beautiful landscapes, as well as increasing numbers of ASEAN travellers, Vietnam will remain an attractive destination for hotel developers,” he believes.

Mr Paul Stoll, CEO, Celadon International

In late July the Ministry of Industry and Trade released a report on “Exporting Potential” which contained a comment on Vietnam’s tourism industry that “the tourism industry is one of the most highly-growing sectors but it’s time to change from quantity to quality.” Do you agree? Why?

There is only “quality” tourism in which quality is according to travellers’ expectations that the tourism trade must satisfy with an appropriate tourism product. There is a need for different quality standards in hospitality, transport, and entertainment. It’s all about a diversified tourism product attracting the right people. Marketing creates and distributes the product. Hence there is a need for destination marketing to drive tourism growth in tune with Vietnam’s development needs.

The World Economic Forum ranked Vietnam 80th among 140 countries in its tourism competitive index in 2013. What are the weaknesses in Vietnam’s tourism development and what should it do to increase its ranking?

To be 80th among 140 countries, of whom the majority are further economically developed than Vietnam, shows the growth potential Vietnam’s tourism has. Remember that Vietnam’s modern tourism was only allowed to develop after the devastating liberation wars from 1946 to 1975, destroying the tourism infrastructure of the country. Only the economic reforms from 1986 allowed tourism to develop, despite various limitations such as economic depressions, global terrorism, natural disasters, and health scares. What Vietnam needs is to further open up to destination development and setup an effective marketing office.

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