Staying in the lap of luxury

September 14, 2012 | 14:49
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How is luxury defined in Vietnam’s hotel industry, how has the luxury hotel market been evolving, and what are the trends ahead? Paul Stoll, chief development officer of Celadon International investigates

Vietnam’s first Ritz-Carlton Hotel will open in 2015 within The One Ho Chi Minh City Complex

I believe the hotel industry requires an overhaul to meet the ever-changing expectations of customers. Hotels have existed for thousands of years and our modern hotel industry commenced with the Ritz Hotel, Paris, in 1898. That’s at least how it seems and obviously Monsieur Cesar Ritz, the patron left an impression.

Just as Henry Ford revolutionized the automobile insudtry with the conveyor belt, the Ritz style of hospitality has been replicated by companies such as Starwood, Bass, Hilton, Accor, and others, with institutional hospitality creating soulless monsters in line with the globalisation of our time.

Obviously, some of the international management companies have realised this and are trying to come up with more personalized boutique hotel brands, for example the W brand from Starwood.

"Vietnam’s hotel industry needs to be shaken and stirred and hotels repositioned to meet with the expectations of existing and new travellers "

Brand mania has taken hold in Vietnam in recent years. I am a great fan of brands however and  they do not have to be well established ones. If you brand a property with a well marketed name for lots of money, be sure of the real value it provides for your property, which changes according to the development stage of a destination. Owners decide on foreign brands to increase the value of their assets, often without understanding that nothing can replace performance in terms of providing cash flow for a positive return of investment.

In Vietnam a new tourism quality standard has yet to be set as a benchmark to leverage the positioning of hotels. Middle class tourism is ruling global tourism as well as Vietnam’s, but  adequate tourism facilities and services do not really exist. This means Vietnam needs to create an international standard four-star tourism product and make use of it as a benchmark to reposition facilities and services.

Vietnam’s hotel industry needs to be shaken and stirred and hotels repositioned to meet with the expectations of existing and new travellers. Real five-star hotels have only started to develop in Vietnam since 2000, with Intercontinental, Park Hyatt Hotel, Sheraton Hotel, Grand Metropole Hotel, Daewoo Hotel, The Nam Hai, The Furama Resort and the Best Western Premier Hotels.

Most of the other five-star hotels can be considered four-star hotels, existing 4 star hotels are really three-star hotels on an international measure, and so forth. There is limited demand for real five-star hotels, medium demand for “boutique” hotels and four-star hotels and a high demand for quality three-star hotels - so called ‘budget hotels’.

One can choose from management, franchise and branded distribution to operate a property. All of them are the result of an evolutionary process which started developing chain hotels in the 1970s. Prior to this, a typical hotel was an independently owned and fully operated service property, catering to the out-of-town traveller and particularly in food and beverage, to the local community. Because of their uniformity, chain hotels became less desirable for travellers who prefer local flavour - something I understand in the age of globalization. What once provided comfort became boring as travellers began to look for distinct touches.

The marketing advantages brands provide have been limited by the e-marketing support of globally operating reservation companies such as World Hotels, Utell, and others. A great effort was made by the Vietnamese Chamber of Commerce to introduce an e-marketing program in Vietnam for independently operated hotels and resorts. The program was launched in co-operation with Yahoo in Vung Tau in July 2008.

The budget hotel sector is a key segment in Vietnam, which I believe has an extremely high growth potential in terms of domestic- and inbound travel demand. Although the development of five-star luxury hotel properties was initially important for Vietnam to create the image for the destination and to capture inbound travellers, the time has come to focus on middle-class tourism. This will require the provision of quality accommodation of a threeand four-star standard.

This will primarily meet the needs of the growing domestic market, but will also stimulate growth from a new, less up-market international travel market sector. Having predicted demand for middle class travel, there are developers which see an opportunity for cheap development. In their minds are low construction standards, cookie cutter developments, 12sqm guest rooms, limited facilities and services, and less staff that are less trained, ignoring safety standards, and scavenging from the human resources development and destination promotion efforts of more responsible hotel operators and the government.

Travellers are misled by adopted names of brands which have created a good image for their category of business in the international markets. They call these developments ‘boutique hotels’ and give other pleasing names to attract travellers. Do you really want to stay in a 12sqm room? I had the experience in London when booking an airline package. The small sized room only added to my stress of travelling.

It is a fact that the hospitality industry has changed over the years, from proprietor ownership and management to chain management. There has also been a change from franchise management to branded distribution with a focus on marketing, and from uniformity to consideration of culture in architecture, design and service.

Although chain hotels make efforts to adjust their standards to what Vietnam requires, the country’s own management companies, with their own brands, have to be part of the tourism image development strategy. These Vietnamese brands have to be exported and serve as an image campaign abroad. Brands underwrite various business models which have to be introduced in Vietnam. Vacation ownerships and timeshares, along with wholly owned condo hotels, have become the fastest growing segment of the hospitality industry; contributing factors are almost innumerable, with the traditional timeshare industry harvesting the fruits of its public image makeover and putting laws in place to protect investors.

It’s very difficult to make Vietnamese developers understand and develop a home grown hospitality brand as the international brands seem so much better when it comes to bringing travellers to Vietnam, which promises higher profits. However, the profits will be lower as the costs are higher and travellers all come from the same source - the travel agents, making bookings via a Global Reservation Systems. The property is not increasing in value because of a foreign brand however, it is increasing in value because of smart, quality development and good business performance which will be assessed by specialist companies before a sale.

Vietnam is a rising star among the Asian destinations. To catch up with more advanced nations, Vietnam’s hospitality industry needs to improve quality standards. Only recently I attended a Board of Directors meeting and was told by one of the local directors that “cheap and low quality makes people happy”. As long as such thinking prevails it will be difficult to implement quality standards.

Access to the internet and travelling for market research has made standards easily available.

This makes owners cut short on proper development and the result is a local development which can’t meet expected standards. To meet travellers’ expectations, investment has to be made in international quality standards, as is done in neighbouring countries  such as Thailand, where it has contributed to huge  tourism success.

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