Vietnam’s hospitality market has seen positive signs in regard to demand over the closing months of 2023, along with the country’s new visa policy, which is expected to be a driving force for growth in 2024, experts said at the 14th Meet The Experts (MTE) conference, with the theme “Market Re-energizing”, held by WeHub, Savills Hotels, Dulux Professional, and Vasta Stone on November 1.

Experts said the hotel business in Southeast Asia in general is on a road to recovery in the context of countries having fully opened up to international tourism, including the recovery of flights to China and increasing flight frequencies overall.

However, challenges like a competitive labor market, rising energy costs, geopolitical tensions, costly travel, and economic uncertainties continue to impact hospitality demand.

Vietnam is challenged by a surplus of available rooms and the slow return of key markets such as China and Russia.

Between 2013 and 2023, Nha Trang, Phu Quoc Island, Da Nang, Ha Long Bay, and Hoi An held a 54 per cent share of new room supply. Beach destinations have grown 16 per cent each year over the past decade, significantly higher than the 6 per cent annual growth recorded in Ho Chi Minh City and Hanoi.

Several destinations welcomed significant properties in a single category. In Mui Ne, Nha Trang, and Ha Long Bay, more than 80 per cent of properties fall into the midscale - upper midscale segment, which often engage in aggressive pricing. These properties face competition from second-home products, which offer flexible room pricing strategies to capture market share.

Mr. Mauro Gasparotti, Director of Savills Hotels, commented that excessive development is not the sole issue. Rather, the issue lies in the creation of inappropriate products.

“Rapid tourism growth prior to the pandemic drove a surge in hospitality properties,” he went on. “However, some developers hastily entered into the market without proper planning, leading to properties that lack identity and contribute to oversupply in certain areas. Although there are some well-built properties with the right positioning, there are many that prioritize quantity over quality. Modern guests prioritize experiences more than ever before, and travelers, including local people, now have numerous options to explore.”

Demand has not yet recovered fully. Asian source markets are 33 per cent below pre-pandemic 2019 levels. South Korea led the market in the first nine months of this year, with 2.6 million arrivals, or 18 per cent lower than in the first nine months of 2019. China reached only 28 per cent of its nine-month 2019 arrivals. In contrast, the Americas and Oceania markets are recovering, with 1.1 million arrivals, just 7 per cent below 2019 figures.

In Vietnam, recovery in hotel performance has been fragmented. In Ho Chi Minh City, occupancy and average daily rate (ADR) have fast approached 2019 levels. However, properties in leisure markets like Nha Trang - Cam Ranh, Da Nang, and Phu Quoc Island are struggling to improve occupancies.

During the discussion session on activities in the resort real estate industry, representatives from Accor Hotels Group, Vinpearl, Booking.com, VinHMS, Sovico Hospitality Group, and Hoiana Resort & Golf said Vietnam boasts many beautiful destinations and its tourism industry also holds many competitive advantages. However, the country has not properly promoted its potential. Most tourists who come to Vietnam leave with no intention of returning.

Mr. Varun Grover, Country Director for Vietnam and Southern Thailand at Booking.com, explained that tourists in other places have many activities to enjoy, but when they come to Hanoi, Ho Chi Minh City, or elsewhere in Vietnam, there are no entertainment options after 10pm. “To improve the tourism market, Vietnam needs to create amusement and entertainment areas and have connections between destinations,” he said.

Other representatives proposed implementing solutions related to issuing APEC cards and e-visas, and applying culinary and experiential elements in developing complex projects to increase attractiveness and meet market demand.

“The hospitality industry needs to adapt to changes in tourist consumption behavior and after the pandemic,” Mr. Gasparotti said. “To increase competitiveness on the international map as well as retain potential domestic customers, Vietnam needs to develop a variety of products to meet the needs of many different customer profiles and customer segments.”

Ms. Thu Le, CEO of the Sovico Hospitality Group, said there needs to be a mechanism to encourage sustainable tourism development, focusing on creating sustainable, environmentally-friendly projects. “This is also an inexorable trend in the world,” she added. “In addition, many of Vietnam’s destinations are not attractive enough, so to attract more tourists it is necessary to have more activities and expand destination locations, while connecting international tourists with destinations.”

Ms. Nguyen My Lan, General Director of AkzoNobel Vietnam. affirmed that the real estate and hospitality markets are entering an important stage of recovery. “This is a time when businesses and investors need to make a lot of effort to offer new experiences and products that approach the actual needs of customers,” she added.

In general, representatives believe that the industry should adapt to changing tourist preferences to succeed. Vietnam must diversify its appeal, catering to different age groups and customer segments. Modern guests seek unique experiences, and developers should integrate local culture and natural features to meet growing demand. Different actors must cooperate for success to be achieved, including the private sector and specialized organizations.