Vietnam’s tourism feeling impact of global events

Mauro Gasparotti - Director Savills Hotels Asia-Pacific

An epidemic has a much larger impact to overall global demand as well as tremendous influence on specific destinations in both the short and medium term. At the time of writing this article, several major airlines around the world have reduced or cancelled flights to and from China. Vietnam has also started to respond by suspending all flights to and from relevant areas in China.

On the other hand, outbound restrictions have been placed on Chinese tourists by the Chinese government to contain the spread of the outbreak, causing severe losses in several countries due to China’s status as the world’s largest outbound tourism market.

The virus outbreak has resulted in a wave of tour and hotel room cancellations not only by Chinese tourists but also other global travellers who had travel plans for Asia.

Vietnam is no exception as the country is already experiencing the negative consequences caused by this global crisis. Hotels have started to receive cancellation requests over the last few weeks by not only groups and but also independent travellers.

The emergence of the novel coronavirus has caused three key impacts on Vietnamese tourism, all of which could possibly hurt the hospitality sector this year.

The first and most obvious impact would be the expected drop in Chinese travellers who made up the largest proportion of foreign tourists to Vietnam in 2019, accounting for over 30 per cent.

Coastal destinations would face the same issue with places like Nha Trang in Khanh Hoa expected to be affected as China was the biggest source of arrivals accounting for more than 70 per cent of foreign visitors to the province, according to Khanh Hoa Department of Tourism.

Major cities like Hanoi and Ho Chi Minh City would also be negatively affected by the slowdown of corporate travellers as a series of meetings, conferences, and oversea trips have been postponed or cancelled due to the ongoing spread of coronavirus.

The second impact of the outbreak to Vietnam is the significant expected decline in global demand to Asian countries as a whole, which will likely be perceived to be at higher risks of nCoV compared to other destinations.

After a few years of significant growth in international arrivals to Southeast Asia, with more than 138 million international tourist arrivals in 2019 and an impressive compound annual growth rate of 7.8 per cent in the past nine years, a steep slowdown would be observed in the upcoming time.

Consequently, destinations like Thailand, Indonesia, and Vietnam will be expecting a temporary slowdown in travellers from Europe, Australia, and United States where leisure groups are more likely to cancel or postpone their trips due to the fear of outbreaks.

Based on a survey conducted by market survey provider STR, during the Sars pandemic in 2002 and 2003, all hotels located in Asia witnessed a large decline in revenue per available room of over 4.5 per cent.

As recently reported by the Thai Ministry of Tourism, the large drop in Chinese travellers could lead to a loss of more than $1.5 billion in tourism revenue this year.

The third impact would be on local demand as people are now more hesitant to travel to crowded places like airports, train and bus stations, and even restaurants and entertainment facilities in order to avoid contagious infections.

The local demand would largely depend on the ability of Vietnam’s government to contain the spread of the virus within the country. If it can be well contained, local travellers should be less impacted.

That said, if the outbreak is eventually contained, we are positive of seeing a steady recovery in the second half of the year, and the industry will be also once again a strong one for Vietnam.