Viet Nam has experienced unprecedented growth in the hospitality sector. Most hotels and resorts have high occupancy rates and construction of many new ones is underway. Viet Nam News reporter Thu Hang asks Ken Atkinson, executive chairman of Grant Thornton Vietnam Ltd. and vice chairman of the Viet Nam Tourism Advisory Board, about how hotel and real estate developers can grab the opportunities arising in the hospitality and travel markets.
Can you give us an overview of the global and Vietnamese hospitality markets and their likely future trends, and how hotel and resort developers can capitalise on these opportunities?
In 2017 the global hospitality industry had a solid year in that it achieved a positive growth rate for the ninth consecutive year. Global travel industry gross bookings reached US$1.6 trillion in 2017, making it one of the largest and fastest growing sectors in the world. The developing trend is expected to continue in 2018 thanks to increasing disposable incomes of citizens and a newfound ability to experience the world.
Viet Nam’s hospitality sector has also experienced strong growth in recent years. According to a report by UNWTO, Viet Nam is the fastest growing country in Asia as a tourist destination. According to statistics from the Ministry of Culture, Sport and Tourism, 79 new upscale accommodation facilities were brought into operation in 2017, which illustrates the increasing investments in the hotel sector.
In order to capture the opportunities from rising demand, hotel and real estate developers can increase luxury hotel room supply for travellers, especially in new tourist areas such as Sa Pa, Cat Ba, and Van Don. In long-established destinations such as Nha Trang and Phan Thiet, developers should carefully consider hotel and resort positioning and appeal and how to add value to the area itself rather than simply planning high-rise buildings with limited value for the destination.
More and more upscale hotels and resorts are now managed by well-known international brands, and hotel and resort operators themselves are launching new brands to target new types of clients. What is your opinion about this trend?
In the past a large number of luxury hotels in Viet Nam were managed by private developers and some of them did not have experience of hotel management. By integrating with international operators, the hospitality sector can benefit from the professional expertise of these operators.
Recently, hotel operators have been urged to diversify their offering to satisfy the growing needs of customers. Brand diversification is a good solution, which could help hotel operators attract potential client types such as millennials, health-conscious people, and different cultural groups. This strategy is not uncommon in the world. For instance, IHG owns 13 hotel brands including InterContinential, Crowne Plaza, Holidays Inn, Candlewood suites, etc. which allows them to offer more services to various customer groups.
By 2020 the millennial traveler market is expected to see at least a two-fold growth over 2018. What are the challenges for hotels in adapting their existing products to capture this segment?
There are several challenges for hotels in managing their products to seize the opportunities from the rising millennial traveller market, including the ability to adapt to technology changes and digitisation, lack of product diversification, and visa policies.
Electronic devices have changed the way we communicate and it is a favorite gadget among the millennial generation. Guest services applications, mobile bookings and payments, social media interactions are examples of technology factors that are developing rapidly. Hotel developers need to understand the importance of changes to their business, and adapt themselves to those developments.
Nowadays, millennials often spend money on experiences rather than on material goods. Instead of expanding current product lines, developers are only replicating what already exists.
International visitors contribute a large portion of the total revenues of the hospitality sector. Therefore, openness to foreign tourists is crucial for the sector. In Viet Nam, border openness is still somewhat restricted. Lots of travellers are discouraged from coming to Viet Nam because of the need for and the cost of visas and hence they choose other destinations instead of Viet Nam.
The number of listings on sharing accommodation platforms like Airbnb, Hostels and Poshtels has increased. What do you think about this new trend?
AirBnB has developed fast in the past years. The number of listings rose from over 6,500 across the country in 2016 to over 16,000 in 2017 for just Ha Noi and HCM City, according to statistics by AirDNA.
AirBnB will affect the lower-end hotels more than it would higher-end hotels, although some hotel operators in the four- and five-star segments also report losing regular guests to AirBnB. The reason is that AirBnB often offers accommodation with good quality, but still offers better prices than one- to three-star hotels. Therefore, the platform is better for budget-conscious tourists.
Since AirBnB plays the role of intermediary between hosts and guests, it competes directly with OTA platforms like Agoda and Booking.com. However, its competitiveness depends on the quality of listings. — VNS