Tourism boom fuels upscale hotel supply

In 2017 global travel industry gross bookings reached US$1.6 trillion, 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.

Vietnam’s hospitality sector has also experienced strong growth in recent years. According to a report by UNWTO, Vietnam is the fastest growing country in Asia as a tourist destination.

In 2017 Vietnam recorded approx.13 million foreign visitor arrivals and over 80 million domestic tourists.  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 investment in the hotel sector.

In the past, a large number of luxury hotels in Vietnam were managed by private developers, and some of them did not have experience in hotel management. By integrating with international operators, the hospitality sector can now 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. For instance, IHG owns 13 hotel brands including InterContinential, Crowne Plaza, Holiday Inn, etc. which allows them to target different customer segments.

The upward trend in luxury hotel room supply for travelers, especially in new tourist areas such as Sa Pa, Cát Bà, and Vân Đồn, is a move to capture the opportunities from rising demand.

Nevertheless, some hotel operators in the four- and five-star segments report losing regular guests to sharing accommodation platforms like Airbnb, Hostels and Poshtels. The main reason is that these properties can offer accommodation with good quality, but with better prices than hotels. Regarding Airbnb, it competes directly with not only upscale hotel providers but also OTA platforms like Agoda and Booking.com owing to its intermediary role between hosts and guests. However, their competitiveness predominantly depends on the quality of listings.

Inbound foreign visitors continue to grow in 2018 and it is widely expected that they will exceed 15 million in 2018.

Extract from Tourism boom fuels upscale hotel supply: Grant Thornton chief [interview] in Vietnam News, on 24^th September 2018.