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Việt Nam hospitality: affordable business hotels offer good opportunities for rebound

Update: June, 05/2020 - 15:44

Insights from Indochina Capital consultants

Wink Hotel Saigon Centre at 75 Nguyễn Bỉnh Khiêm, a new international-standard hotel characterised by its tasteful design, state-of-the-art technology and multifunctional common space. — Photo courtesy of Indochina Capital

HÀ NỘI — The COVID-19 pandemic has been the defining headline of 2020, a humanitarian challenge that will have lasting effects on how people live, work, and play.

While many industries have been negatively impacted by the virus outbreak, the travel and hospitality industries have suffered the greatest setback. With international travel bans, social distancing measures and a significant reduction in the operations of public transportation, hotels and resorts have become deserted and many have been forced to temporarily shut down. According to the Việt Nam National Administration of Tourism, the number of food and beverage and accommodation businesses halting activities in the first quarter of 2020 increased by 29 per cent year-on-year, and the outbreak has caused an estimated US$5.9-7.7 billion in losses for Việt Nam’s tourism sector in the first three months of the year alone.

Nonetheless, the Ministry of Culture, Sports and Tourism (MCST) has announced plans to stimulate the tourism market, with an initial focus on domestic travellers. The stimulus programme, devised alongside local governments, and transportation and travel companies, will offer attractive promotions to encourage domestic consumers to travel. Another focus in this plan is on the business travel segment, both domestic and international. The MCST has correctly identified that the first wave of international travellers will be for business purposes, and has outlined a plan to restart international travel by creating a biosphere between Việt Nam and countries that have excelled in their response to COVID-19, such as South Korea.

With these plans underway, there is a significant opportunity for quality affordable business hotels located in major cities to rebound effectively from the disruption of COVID-19. The hotel supply in Việt Nam is dominated by 1- to 2-star hotels run as family businesses, representing 77 per cent of the total supply. While some business travellers still choose to stay at traditional hotels, many now require fast, flexible, and convenient services. They expect technology to be integrated in the hotel experience and want a setting that promotes productivity and rest. Budget business hotels located in metropolitan areas that are able to integrate these elements will be able to attract domestic and international business travellers and enhance their opportunity to recover faster than their traditional competitors.

The Global Business Travel Association also forecasts business travel spending to grow between 4-6 per cent between 2020 and 2023, and Việt Nam has the potential to be a big winner in this segment. New multilateral trade agreements and the on-going and future relocation of companies and plants from China to ASEAN countries could boost business travel to and from Việt Nam.

According to an Oxford Economics USA Report, corporate travel contributes to higher client retention, benefits business development and presents networking opportunities for a hotel, with the added benefit of being less seasonal and more predictable. In a 2018 survey by booking.com, 51 per cent of business travellers are also happy to extend their business trips for leisure. This segment can be extremely lucrative and can be the driving force for economic recovery.

Việt Nam has earned praise for exemplary measures to fight against COVID-19, despite sharing a 1,100km long border with China. As of the writing of this article, the country has recorded 328 cases, zero deaths and has a recovery rate of 92 per cent. In a study released by Hong Kong’s Deep Knowledge Group, Việt Nam was recognised as one of the 20 safest countries in the world to weather the COVID-19 storm. With great efforts dedicated to containing the virus, the implementation of financial relief policies and a well-thought-out recovery plan to boost travel, there is optimism that Việt Nam’s tourism and hospitality industries can return to its pre-pandemic strength, driven initially by business travel.

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