Large room for Vietnam tourism

Hanoi has been aiming to become a leading destination for golf tourism.

>> New products, services needed to reach tourism targets

After an impressive growth performance in 2022, where will Vietnam head to in 2023? While some challenges, particularly trade headwinds, have materialised, there remain pockets of resilience. A main source of growth will be tourism. Following Vietnam’s re-opening last March, its domestic tourism has been roaring, with Vietnam easily surpassing its 2022 target of 60m and recording over 100m tourists. Meanwhile, Vietnam welcomed 3.6m international tourists in 2022, mainly driven by travellers from South Korea (26%) and the US (9%).

However, the rebound of international tourism was only partial, with tourist arrivals reaching 3.6m, only 20% of 2019’s level. This highlights notable room for the services sector to continue to flourish amid a global slowdown of trade in goods demand. For 2023, the government is targeting 102m domestic tourists and 8m international visitors, with tourism receipts expected to rise more than 30%, albeit still lower than 2019 levels. Recall that total tourism receipts were as high as 10% of GDP in 2019.

The informal labour market with greater sensitivity to tourism will see more support as global travel further normalises, but we also need to be mindful of the impact of trade headwinds, weakening global sentiment, and a fading opening recovery on domestic spending. Other employment areas tied to manufacturing have continued to see pressure, with the Labour federation recently stepping in to provide a stipend for some furloughed workers. As domestic spending historically made up around 40% of tourism receipts, it will be important to see how well this part of the equation holds up in 2023.

In addition to China’s re-opening, what other possible boosts are there? HSBC said, for one, expansion into new markets will be an area of focus, with various initiatives such as tourism roadshows being conducted to make headway into emerging markets like India, a country with a rising presence in Vietnam’s international tourism.

Just last September, VietJet commenced operating flight routes between Vietnam’s resort island Phu Quoc and India’s New Delhi and Mumbai. Other routes have also been launched to connect the two countries’ major cities. Indeed, easier travel has also planted the seeds to deeper tourism connections: Indian tourists accounted for 4% of Vietnam’s total tourists in 2022, from just 1% in 2019.

What are some of the options to increase Vietnam’s attractiveness as a tourist destination? In HSBC’s view, further easing of visa policy, which the government has been stressing, is under consideration. For now, Vietnam does not have visa exemptions for major markets including mainland China, the US and Australia, while visa exemptions for some European markets allow travellers to stay up to only 15 days. Indeed, compared to peers, visa-free access remains relatively tight in Vietnam. Fortunately, this may change. Officials are considering the extension of the visa waiver period to 30 days and the issuance of electronic visas for citizens from all markets.

>> Tourism firms upbeat about Vietnam's 2023 outlook

Another way to facilitate tourism is not just by improving its traditional infrastructure, but also diversifying tourism products. Sports tourism, a subset of tourism included in the tourism industry vision from the Vietnam National Administration of Tourism (VNAT), could also help attract high-spending travellers.

La Festa Phu Quoc

For example, Hanoi has been aiming to become a leading destination for golf tourism. Granted, the relatively nascent market means that there is significant room to improve in terms of the package tour arrangements and coordination among service providers. This, however, provides a good opportunity, with expectations that the number of golf courses in Vietnam likely to double to 200 by 2025. Alongside other subareas identified such as medical and agricultural tourism, related development projects will be key in supporting the world’s interest to travel to Vietnam.

HSBC said general tourism facility developments are also encouraging. In particular, the supply of high-end accommodation continues to grow, with the number of 4-5 star accommodations rising 12% per annum on average pre-pandemic, according to VNAT. Post-pandemic, a number of global chains have been public looking to actively expand their portfolios in Vietnam, reflecting the country’s attractiveness in areas beyond manufacturing.

For example, La Festa Phu Quoc, Curio Collection by Hilton is expected to open in mid-2023, and Marriott International is also expecting to add up to 9k rooms to its current capacity of c3.3k rooms. With government ambitions and various development projects in play, the structural outlook for international tourism in Vietnam remains positive.