Insights

Domestic Tourism and the Tourism Sector

Most countries, that have a major Tourism and hospitality sectors, are looking more to the domestic market than their traditional international markets, to spare the sector from further and continuing pain. This is particularly true in Asia, where travel bubbles or bridges looked likely to reboot tourism before the new spikes were seen in Korea and China and even New Zealand reported new cases. Australia has had a spike in cases in Victoria and even interstate travel is still heavily restricted.

In Vietnam we have seen an uptick in domestic travel, since the easing of social distancing regulations, in late April. Vietnam Airlines and Vietjet have reported that their flight schedules have significantly increased to more than 60% of pre-covid levels, with high load factors, averaging 90% plus, however at significantly reduced prices. Hotels are also seeing the benefit of increased arrivals, because of the significant discounts being offered and whilst this helps operations and cash flow, profitability is another question and unless hotels can achieve average occupancy levels, of probably close to 50% (at current ADR’s being offered)[1], then they will be unable to operate profitably.

High end city hotels, in Vietnam and around Asia (with the exception of China, where the market for domestic travel was reopened earlier) are suffering more than most, with many of the major international branded city properties, in Vietnam,   operating with single digit occupancy and much reduced food and beverage options. Resort hotels close to major cities like Hanoi and HCMC are experiencing good occupancy over weekends, with average occupancy of over 60% for Friday, Saturday and Sunday but with very low levels in midweek. Resort destinations which are not easily reached by road transport from Hanoi and HCMC are not faring so well. We will see some improvement in July and August, in Vietnam, because of school holidays and the peak vacation season for families. However, we must keep in mind that last year Vietnam’s 85 million domestic tourists spent less than the 18 million foreign visitors. One bright light is the 9 million plus Vietnamese, who ventured overseas for holidays last year, who will more likely be holidaying at home this year and probably looking for the bargains at the mid to higher end hotels. The other is the resident expat community and families who are unlikely to be vacationing overseas this year and instead likely to be taking advantage at bargain proce4d luxury accommodation, here in Vietnam

So what is the outlook for the recovery, which will certainly happen at some stage, but with a new normal one suspects. To be honest a recovery in international tourism, which we need badly to support the sector, seems some way off, not much consolation for massive number of staff laid off or put on temporary leave, with as many as 75 million jobs at risk globally [2]. Most major airlines are looking at  years not months, before they are back to pre-covid levels and we saw an example of this with Quantas laying off or furloughing 20% of their workforce and grounding100 planes for at least one year and this I would expect to be the tip of the iceberg.

The question of opening borders without quarantine is a highly sensitive issue, especially in Vietnam where we have been so successful in containing and preventing the spread of Covid 19. Many European countries seem to be taking the view that the economy is more important by re-opening borders, in time for the main holiday season and removing quarantine restrictions for citizens of many countries but the wisdom of this remains to be seen. It does not look Vietnam will be open for normal international travel for some months and certainly not before September or October, which will not help the battered tourism and hospitality sector.

As a long-time resident of Vietnam I fully support the Governments cautious approach to re-opening the borders, but wish that all foreigners living and working here and family members, from whom many are currently separated, could be repatriated to Vietnam as soon as possible for humanitarian reasons as well as economic.

Kenneth M Atkinson

Founder and Senior Board Adviser

 

[1] This is the personal estimate of the writer

[2] World Travel and Tourism Council March 2020.

Founder and Senior Board Adviser
Kenneth Atkinson Contact
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