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Chairman's Insights

Vietnam Tourism Update

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In the first six months of 2016, Vietnam experienced a significant increase in foreign visitor arrivals, up over 21% on the corresponding period in 2015. China continued to dominate as the largest inbound market with a 43% increase to over 1.2 million, and Korea the second major inbound market with a 34% increase and Thailand with a 35% increase, but starting from a low base.

The 5 European countries granted visa exemptions in July 2015 also showed significant growth since the exemptions were granted with an average increase over 20%. The very late renewal of these exemptions on June 30th 2016 were welcomed by the industry. Similarly the recent announcement of a 400% increase in the amount of the budget allocated by the Government for destination marketing and promotion, increasing from the equivalent of just over 1 million US$ to 5.3 million US$.

Whilst there is always a focus on international visitors, the number of domestic tourists is often overlooked. The number in 2015 was over 57 million and this number has continued to rise in 2016.

Grant Thornton’s 13th annual Hotel Survey, released last week showed an 8.6 decrease in in RevPAR[1] (4-Star hotels’ decreased by 15.1% whereas 5-Star hotels’ increased by 4.3%)

In 2015, 4-star hotels experienced a reduction in average room rate of 17.1%, from USD87.2 to USD72.3, whilst, 5-star hotels had a better performance with 1.2% growth, with an average rate of USD111.4,

Compared to the year 2014, the overall annual occupancy rate in 2015 went up slightly by 1.2%, from 60.7% to 61.9%, and has remained relatively stable over the last 3 years. In terms of star ranking, average occupancy rate increased 1.2% and 1.6%, to 61.5% and 62.7% for 4-star and 5-star hotels respectively.

The overall annual average room rate of upscale hotels has fallen from USD98 in 2014 to USD87 in 2015, marking a substantial downturn of 11.3%. For the first 6 months of 2015, the number of foreign visitors decreased significantly, while the number of new hotels opening increased, therefore, hoteliers had to provide promotion programs to attract visitors, which led to the decrease in average room rates.

As a result BITDAdecreased to 29.7% (2014: 34%)

Costs also increased with Average employee costs reaching US$ 368 for 4 star hotels and US$ 490 for 5 star hotels, with corresponding revenue per employee at US$ 1532 and 2262 respectively.

We look forward to further facilitation by the Government to help Vietnam reach its full potential as a tourist destination.

Kenneth Atkinson
Chairman of British Business Group in Vietnam

[1] Revenue per Available room