Coronavirus outbreak: impacts on Vietnamese tourism industry

Ken Atkinson, founder and senior board adviser, Grant Thornton Vietnam and vice chairman of Vietnam Tourism Advisory Board.

These are the very early days of the coronavirus epidemic and of course, there are differing views on its severity, notwithstanding its very fast pace of spreading, but that is not the topic of this article and neither do I profess to have any medical knowledge.

However, I think it deserves to be put into some context. If we make a simple comparison of influenza, SARS, and the coronavirus we see the following: influenza in the USA kills between 12,000 and 61,000 annually and so far this year there have been over 8,000 fatalities. During the SARS outbreak between November 2002 and July 2003, there were 8,096 cases of infection globally (more than 5,000 of which were in Southern China) and there was a 9.6 per cent fatality rate with 774 deaths in 29 countries. The number of coronavirus infections as of February 10 has been reported at 42,859, with only 454 cases outside China (including the Diamond Princess cruise ship) with 1,015 fatalities (974 in Hubei province alone and only two fatalities outside of China) and 3,958 recoveries (2,222 in Hubei province).

Vietnam has recorded 14 cases with six recoveries and no deaths as of February 10. Thus, the impact of the virus outside China is caused mostly by fear amongst travellers and precautions being taken by governments and airlines, not so much by the number of infections or fatalities.

The impact on the tourism sector is already quite significant, especially against the backdrop of a record 2 million-plus foreign visitors in January, in part due to the fact that over 30 per cent of inbound arrivals are from China and the two other largest markets are South Korea and Japan. In addition, the United Nations World Tourism Organization has just ranked Vietnam as the seventh fastest-growing tourism destination globally (up three places from last year).

As we know, China has banned tour groups travelling from China and airlines have suspended flights, including those of Vietnamese airlines. So the impact is widespread and is having a negative impact on airlines, hotels, tour operators, restaurants, shops, markets, transportation companies, and private homeowners offering shared accommodation via websites such as Airbnb.

Our initial research shows that hotels have suffered a 20-50 per cent decline in occupancy depending on citis (Hanoi and Ho Chi Minh City) or resort destinations (Sapa, Danang, Cam Ranh Nha Trang), while tour operators (Ho Chi Minh City and Ha Long) received about 50 per cent fewer customers.

MICE (meetings, incentives, conferences, and exhibitions) has been a big loser as many major international companies have suspended foreign travel by their employees.

Hotel operators in Cam Ranh/Nha Trang have reported that occupancy at China-focused hotels was down by as much as 98 per cent, whereas mixed-market hotels have experienced an average 50 per cent cancellation and a 70 per cent fall in future bookings.

The strongest performing markets overall are Europe and Australia, where future bookings are only down by 20 per cent.

In contrast, during the SARS outbreak as many as 400,000 foreign tourists (about 15 per cent) cancelled their tours to Vietnam in 2003.

Hotels and tour operators also decided to diversify markets geographically and reach out to Australia, Europe, and Korea instead of concentrating on Japan.

Based on initial levels of cancellations, it looks like the impact of the coronavirus will be much higher.

Local airlines have also been hit hard, with flights suspended or significantly curtailed to China, Hong Kong, and Taiwan, and with an approximately 50 per cent drop in regional bookings.

One brighter spot is long haul markets where demand has only fallen by about 20 per cent, similar to resort hotels, according to local sources.

Tour operators and tour companies are suffering along with hotels and airlines. During Tet and on regular days, Halong Bay was receiving 6,000-8,000 visitors a day but on Sunday February 2, this reduced to 4,300, with the majority of visitors from Europe.

Shopkeepers and market stall holders are reporting falls of 50 per cent in business with no Chinese and only a few Korean or Japanese guests. This is also true for tourist sites but at least the prime minster has ordered them to remain open, which at least provides a lifeline to the sector.

It is likely that this trend will continue until the spread of the virus is reined in and some countries are declared virus-free, which could be several months unless a preventive vaccine is developed and released soon. However, according to some medical experts, this is months away.

There are things Vietnam can do to help the tourism sector. One positive, as was done during SARS, would be to continue marketing at long-haul source markets, which we need anyway to improve average spending and length of stay by foreign visitors and reduce dependence on Chinese group travel.

The government should consider immediately granting 30 day visa exemptions to citizens of Australia and New Zealand, citizens from the countries in developed Europe who do not enjoy exemptions currently, and also citizens from North America.

Other actions that could be taken are scenario planning in case the situation worsens or when it starts to improve, assistance for businesses that are being severely hit (for instance waiving health and social insurance contributions), or bank loans for financially sound businesses suffering temporary cash flow problems, among others.

One of the most important actions will be planning for active marketing and promotion, immediately after Vietnam is declared virus-free and we must remember that Vietnam was declared SARS free three months before the official end of the epidemic in July 2003, so we can steal a big advantage on regional competitors, if we are able to repeat this. The planned launch of Vietnam’s first overseas Tourist Promotion Office in London on February 18 will certainly help.

Stakeholders should not be forced into panic measures such as cutting hotel room rates or further discounting airlines seats, as this will not bring in additional business to the market if people are not allowed to travel or scared to travel. Discounts on hotel rates or airline tickets will not boost the number of arrivals and we have seen in the past: once prices are reduced, it is hard to increase them.