Outlook Vietnam

Vietnam hopes to pique interest and spark demand in the U.S. market

By: By Fred Gebhart

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Read about the ASEAN forum.

During the ASEAN Tourism Forum (ATF) 2009, held in Hanoi earlier this year, much of the talk was on the dubious subject of hotel development. Some wholesalers and tour operators complained that leisure travel to Vietnam was limited primarily because there are too few hotel rooms in the primary ports of entry — Hanoi and Ho Chi Minh City, Saigon — and too many rooms along the central coast in Da Nang and Hoi An.


 Halong Bay’s Emeraude is having a successful year. // © Emeraude Cruises

“International air service requires visitors to enter Vietnam in the south, tour to the north and exit via Hanoi or vice versa,” explained George Erlich-Adam, general manager for Exotissimo Travel, one of the largest wholesalers in Vietnam. “One hundred percent of our clients pass through these two cities, and it can be quite difficult to find rooms at any price.”

The growing supply shortage has boosted gateway city hotel rates by 20 to 25 percent annually over the past few years, he added. In 2008, Exotissimo resorted to trimming city stays with flights departing in the evening and overnight excursions.

The current decline in travel to Vietnam, especially from the U.S., has temporarily reversed price trends. But the long-term problem remains.

Saigon has just one international hotel under construction, the InterContinental Asiana Saigon. The 306-room property will do little to ease demand when it opens in September. General manager Phil Riley said he expected no difficulty in filling rooms.

Existing properties across the country are cutting rates up to 15 percent, but that comes after a 100 percent increase over the previous three years, according to John Gardner, the general manager of Caravelle hotel in Ho Chi Minh City.

The 154-room Movenpick Hotel Hanoi has just finished a $9 million makeover. Rates are falling as international travel slows, said Knuth Kiefer, the general manager of the Movenpick Hotel Hanoi. He added that Hanoi was at least 40 percent overpriced before the slump began last fall.

Hanoi hotel prices are unlikely to recover soon. Accor Hotels and Best Western will add 150 rooms later this year, and Accor’s 389-room Novotel is scheduled for a 2010 debut.

Tour operators and wholesalers worry because Vietnam doesn’t get much repeat business. Erlich-Adam blamed poor infrastructure. Halong Bay, for example, is a must-do side trip from Hanoi, but the 100-mile drive takes more than three hours each way.

Difficult access hasn’t slowed the Emeraude, a faux sternwheeler that cruises the towering limestone islands dotting Halong Bay. The modern steel vessel mimics luxury steamboats that plied Halong Bay in the late 19th and early 20th centuries, right down to polished teak rails and gleaming brass bathroom fixtures. Occupancy for the 39 cabins runs at 70 percent, said general manager Kurt Walter. Growing demand has prompted owners to build a second period vessel as well as a luxury wooden cruise vessel.

Central Vietnam hopes to grow demand as well. There is very little international service to Da Nang, and domestic flights are consistently full.

“We could improve occupancy by 15 percent overnight with regular service from gateways like Hong Kong, Singapore, Bangkok and Kuala Lumpur,” said Herbert Laubichler-Pichler, general manager of The Nam Hai in Hoi An. “I can’t wait for these new properties to open. None of them are direct competition to our luxury market, but they will all stimulate demand. We need new hotels to spur the airlines to add service.”