Vietnam Observed

What Kind of Tourist does Vietnam want?

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According to a report from the General Statistics Office this week, foreign arrivals to Vietnam have continued to recover this month with a year-on-year increase of 16.1%. Approximately 650,000 foreign visitors arrived this month, an increase of 3.6% from September.

But the year-to-date figure of more than 6.3 million foreign visitors was still 4.1% lower than the same period last year, due to sharp declines in earlier months. Increases in visitors came from China, the USA and the UK, while other markets remain stagnant.

While this is good news for the travel industry and is partially a result of visa waiver policies and promotional activities enacted by the government, coupled with lower airline and hotel rates, the Vietnamese travel industry will remain fragile for the foreseeable future until the government answers one fundamental question:

What kind of visitors does Vietnam want?

This is a fundamental question since visitors who stay in hostels and 2 or 3-star hotels in the “backpackers” areas of Hanoi or Ho Chi Minh City are not equal in revenue generation as business travelers, families and long-stay cultural tourists.

A clear example is the difference between visitors who spend $15 a night for their accommodations and business visitors spending $100 a night for their rooms. The increased revenue from visitors who stay in 3-star, 4-star and 5-star hotels generate more jobs and tax revenue across the board.

I’m from Hawaii and in the 1980’s the Hawaii state government had to answer the same question … what kind of visitors did it want? At that time there were two distinct market segments … visitors from the mainland (USA) who generated an average of $100 per day / per person and Japanese and South Korean visitors who generated $350 per day.

Hawaii wanted to double its tourism revenue and was faced with a very simple dilemma … if they doubled the number of tourists from the mainland they would have to dramatically expand infrastructure – the airport, highways, government personnel and services to support the visitor increases. The alternative was to seek a drop in mainland tourism visitors in favor of increases from Japan and South Korea.

What was the outcome? A shift of promotional dollars from the mainland to Japan and South Korea and the result was an increase in visitors and revenues from those countries.

But in an unanticipated twist, airlines that flew to Hawaii from the mainland and the travel agencies that supported those markets increased their advertising spending since they didn’t want to see their revenue decrease. As a result, the mainland numbers remained the same while the Asian numbers increased and revenue to the Hawaii tourism industry and government increased.

So coming back to Vietnam we again come to the fundamental question … what kind of tourist does Vietnam want?

My personal opinion is that the government should focus on upscale visitors such as business travelers, families and long-stay cultural tourists. This sounds like an easy answer but then we need to ask these questions:

  • What can the government and private sector do to stimulate the business travel market through the development of conventions and exhibitions and other activities? And the next questions is … what is the infrastructure needed to support the business travel market?
    Hong Kong and Singapore with similar or smaller populations than Hanoi and Ho Chi Minh City have built fantastic convention centers capable of hosting large-scale conferences, conventions and exhibitions and as a result have built major portions of their economies around business travelers.
  • If Vietnam wants to attract families then the two most basic questions are … what kind of attractions will appeal to families and what is the infrastructure needed to support this market segment? Families with children and teenagers need to have more reasons to visit Vietnam than visiting government monuments and places that remain from Vietnam’s wars with America.
    Singapore, as an example, has great family attractions such as the Botanical Gardens, the Singapore Zoo and Sentosa Island with Universal Studios. The city also has other attractions like the Marina Bay Sands Hotel and renovated local areas such as Chinatown and Little India.
  • Another interesting segment are long-stay cultural tourists, who are often retirees from Japan and South Korea who want to stay for 1 - 6 months in a country in order to experience its “culture”. As far back as 2005, more than 6 million Japanese were traveling overseas each year for extended vacations and the main destinations that were receiving them were the Philippines, Malaysia and Thailand.
    This is an untapped market for Vietnam and is a market segment that Vietnam should develop through visa policies and private sector partnerships. While long-stay cultural tourists and retirees spend less each day than business travelers they still significantly outspend backpackers at the lower end of the market.

While I hope that the tourism market will see continued growth, the prospects remain shaky. Future political problems with China will again see decreases from that market and destinations such as Singapore, Malaysia and Thailand will continue to significantly outspend Vietnam in advertising and marketing.

The government is now talking about working with designated travel agents in other countries and that consumers that book through these agents can have visa-free travel to Vietnam but this system can lead to greater confusion rather than clarity and it puts the government in a position of endorsing certain companies at the expense of others.

Vietnam needs to be competitive with its ASEAN neighbors by upgrading infrastructure and attractions but to do that it first needs to answer the question … what kind of tourists does it want?

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