Expert claims Vietnam hospitality sector could rebound after virus disaster
  • | | March 25, 2020 01:16 PM
The rapid spread of COVID-19 has caused significant damage to several industries worldwide, among which, tourism is likely to be one of the hardest hit.

Tourists walk on a street in Hoi An City which has become quiet due to the Covid-19 pandemic

According to Mauro Gasparotti, Director of Savills Hotels Asia Pacific, “This is the first time international arrival numbers are expected to drop after ten consecutive years of growth. The initial drop of arrivals to Southeast Asian countries was primarily due to the high reliance on Chinese travellers, who were the first category to be impacted by the situation.

“Vietnam is facing the same situation, with China and South Korea representing the most significant tourism markets, accounting for 56% of international arrivals in Vietnam in 2019," Gasparotti commented. "In addition, in the past two weeks the outbreak has worsened in Europe and the Americas, which together, accounted for 17% of tourist arrivals in Vietnam in 2019. The government has promptly restricted access to foreign visitors as a precautionary measure in order to contain the spread of the virus, and the entire tourism sector has been dramatically impacted.”

Vietnam, like everywhere else in the world, witnessed a significant reduction in tourist numbers during the first two months of the year. Based on the latest report of Vietnam National Administration of Tourism, the number of foreign visitors in February fell 37.7% compared to the previous month and down 21.8% over the same period in 2019. A further decline is expected in the coming months.

Gasparotti added, “Local demand has also been dramatically affected as many are now more hesitant to travel to airports, train and bus stations and even restaurants and entertainment areas”. Local demand largely depends on the ability of the Vietnamese government to contain the spread of the virus and ensure safety across the country. If the outbreak was well contained, local travellers would be the first category to recover.”

According to STR, a global provider of data on hotel performance, all destinations across Asia Pacific reported significant drops in hotel occupancies in February compared to the same period in 2019 and Vietnam experienced one of the largest drops worldwide.

Gasparoti commented, “If we look at recent data, Vietnam experienced an occupancy drop of approximately 26% in February compared to same period last year. Central cities such as HCM City and Hanoi, despite the slowdown, were still able to manage their performance at acceptable occupancy of 48% (HCM City) and even higher, at 60% (Hanoi).

However, due to the new ban on international travellers and rising concerns domestically, occupancy in the first three weeks of March dropped dramatically to single digits in many destinations within Vietnam. Among coastal destinations, Danang and Hoi An were the most affected areas due to a strong reliance on foreign guests as well as a significant number of new hotel openings in 2019. Numerous properties have occupancy below 10% and are considering temporary closures.

In March, central cities received several cancellations, resulting in single-digit occupancy for HCM City and slightly higher levels for Hanoi, as a result of existing corporate contracts with companies such as Samsung, providing some hotels with a stable base of business. On a positive note, resorts that rely on local clientele and are reachable by car from large cities have been less affected and still able to perform better than the market average. By March 21, 145 hotels and resorts in Vietnam have voluntarily registered as quarantine areas for Covid-19, subsequently, not only helping properties retain the operation during this low demand period but also providing meaningful support to local authorities.

Serviced apartments are still running at a higher occupancy compared to Hotels due to the nature of the clientele and a longer-term business model. The outlook for the next couple of months is not positive with a vast number of cancellations already received.

Speaking about possible recovery, Gasparotti said, “Vietnamese hospitality has been affected and this will likely continue into the foreseeable future. However, whilst the expectation is that the entire year of 2020 will be impacted, as previously witnessed, at the first light of recovery, the hospitality industry is likely to see the fastest and strongest turnout when compared to other sectors.

"Vietnam’s high reliance on local travellers (82.5% of arrivals in 2019) and the Chinese and South Korean markets could turn out to be an advantage, as these groups are expected to be some of the first who are able to travel again," he said. "We should all be positive and look to the long term."

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