Recently, Vietnam’s tourism industry has developed strongly, having a spillover effect on many related industries and fields. Accommodation establishments are one of the most benefited and value-added services, especially tourism products in large tourist centers.
Accommodation services provide excellent resources for short-term and long-term accommodation establishments, moreover entertainment and dining amenities to serve the temporary residence process of students, employees, travelers, etc…
Significant shift in the structure of accommodation services in Vietnam.
According to Grant Thornton Vietnam, individual tourists are decreasing in comparison to the increase of business travelers. While Vietnam stimulated foreign investment and trade agreements came into force, more and more business travelers traveled for market research, finding suppliers, selecting partners, and signing contracts.
Also, the number of business activities accommodation services grew every year. In the period 2013 – 2019, the number of enterprises operating in accommodation services grew 5% annually compounded. In 2019 more than 11 thousand enterprises working in the service sector stayed up to 14.46% compared to 2018.
Source: VIRAC
The most significant contributor to the accommodation industry’s total revenue in recent years is room revenue, with the highest proportion of 59.6% in 2019. Vietnam’s key tourist areas are often big cities like Hanoi. Ho Chi Minh City, Da Nang, or Nha Trang – where hotel services are developed with the combination of entertainment associated with the stay.
The second highest contributor in the hospitality industry’s revenue is F&B revenue (revenue from restaurants and bars), with the proportion in 2019 reaching 31.8%. This is the department that provides food and drinks for the guests of the hotel. Revenue from other services accounted for a small proportion of only 8.7% in the year.
Source: VIRAC
In 2019, travel companies continued to be the most extensive channel for booking, with 30.4%, particularly popular with the 4-star hotel segment. Online travel agencies (OTAs) also maintain the second position with 25.6% and tend to expand, albeit only slowly. With the increasing development of information technology and the smartphone market’s coverage, the online travel agency is developing in number and incentives.
The decline of Vietnamese tourism seriously affects accommodation services
Most Tourists who came to Vietnam are from China, Korea, Japan – countries enduring massive epidemic outbreaks. Therefore, international tourist arrivals to Vietnam in 2020 decrease by 78.7% compared with 2019.
Although China continues to lead in the number of international visitors to Vietnam in 2020 with 871.8 thousand visitors, this number has decreased by 31.9% over the previous year. The most significant drop came from March and the following months when the epidemic broke out strongly.
There are two countries with a sudden boost in visitors to Vietnam in the context of limited movement, namely two neighboring countries Cambodia and Laos. Specifically, the number of Cambodian visitors to Vietnam reached more than 120 thousand people, an increase of 254.3%; for Laos, it was 36.8 thousand, 38.5% over the previous year.
Source: VIRAC General
The locality most heavily influenced by Covid is Da Nang; although this is a potential tourist destination, it still cannot recover from 2 blockades in April and July. The number of tourists only reached 2.13 million, a decrease of 75.5%, of which international tourists reached only 702 thousand arrivals.
In contrast, Phu Quoc is the only bright spot in tourism activities. Moreover, big offers in ticket discounts are one prominent factor that boosts tourism in Phu Quoc island.
The supply market
The Hanoi market in Q4 / 2020 did not record any new supply from the previous quarter. By the end of 2020, this segment totaled only 9,360 rooms, a decrease of 4.5% compared to the same period last year. The hotel market continued to experience a far-reaching influence from the Covid-19 translation. Currently, about 200 rooms are still temporarily closed due to disease and repairs.
Because of the decrease in both international and domestic arrivals, hotels’ operating capacity fell to a superficial level. Many small hotels have had to close temporarily to save costs of maintaining operations. Since the beginning of March, many hotels have closed because of no guest situation, except for some hotels that voluntarily act as isolation places for people suspected of being infected.
For the Ho Chi Minh market, hotel supply in Q4 / 2020 recorded growth of nearly 8% compared to the previous quarter to 15,200 rooms, but compared to the end of 2019 has decreased by 4.4%.
Source: VIRAC
Like Hanoi and Ho Chi Minh City, room capacity in key tourist areas of Vietnam also decreased significantly, reaching less than 40% by 2020. In which, Da Nang is the area most heavily affected. The average occupancy in Danang City is only 18 percent. In particular, there are times when the hotel capacity has not reached 1%.
More than 650 rooms from six hotels are expecting to enter the market in 2021. From 2022 onwards, the supply will grow more dramatically, reaching more than 8,000 rooms.
Development trend forecast
In general, by 2021, accommodation services and related economic sectors are still exposed to many risks and challenges, mainly due to unpredictable fluctuations from epidemics. The business activity will probably have to change frequently, including the hotel industry is still defensive when the situation of international visitors to Vietnam is not satisfactory.
The Covid-19 translation forced the tourism industry to shift its focus on domestic tourism development. Tourism must simultaneously perform “dual tasks”: ensuring safety for people’s lives and health while maintaining production and business. Furthermore, domestic tourism is the only solution to help companies to step up and support operations.
After a prolonged interruption due to the pandemic, the General Department of Tourism has launched the program “Vietnam Tourism safe, attractive” to stimulate domestic tourism in the last months of 2020. One of the program’s special activities is the deployment of the app “Safe Vietnam Tourism.” Many localities and enterprises in the country responded positively, bringing an exciting atmosphere and positive initial results. The re-start to stimulate domestic tourism demand is a practical solution to revive the tourism industry in the last months of 2020.
