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How Vietnam can accelerate travel recovery

in PrimeZone, Travel
- how vietnam can accelerate travel recovery
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While domestic travel has kept the Vietnamese travel sector afloat, the industry needs to reinvent itself until international tourism resumes, say analysts from McKinsey.

For most players in the travel industry, the idea of vacationers lounging on a beach thousands of miles from home or sailing the high seas seems like a distant memory. Globally, countries experienced a decline of 35 to 48 percent in tourism expenditures last year compared with 2019. Vietnam, with its ten-month international border closure, has not been exempted.

Tourism contributes a significant share to Vietnam’s GDP, and the economy has relied on domestic travel to buoy the sector. Local tourism resumed shortly after the country ended its relatively brief lockdown—just in time for 2020’s summer holiday season. Our analysis shows that demand for domestic travel in Vietnam will continue to grow and will recover relatively fast because of growing domestic spending: vacationers who cannot yet travel abroad are redirecting their money locally, at a higher level than in 2019.

As Vietnam’s travel sector continues to evolve and as prospects of international travel become increasingly feasible with vaccination rollouts, travel and tourism players have to adapt to survive. This article gives an overview of the state of Vietnam’s tourism sector, looks ahead at how the industry is likely to recover, and maps out a way forward for the country’s travel and tourism companies.

The state of travel in Vietnam today: Staying afloat

Vietnam’s tourism sector relies heavily on international travel, which plunged last year. International flights dropped 80 percent in October 2020 from the same time period a year earlier. Hotels, in turn, filled only 30 percent of their rooms.

The sharp drop in foreign travelers has had an outsize impact on tourism expenditures—and Vietnam’s overall economy—because they spend significantly more than their local counterparts. In 2019, a year in which the tourism industry accounted for 12 percent of the country’s GDP, international travelers made up only 17 percent of overall tourists in Vietnam, yet accounted for more than half of all tourism spending—averaging $673 per traveler compared with $61 spent on average by domestic travelers. The tourism sector created 660,000 jobs between 2014 and 2019, and this sharp expenditure dive has also stunted the country’s food and beverage and retail industries.

As a return to pre-COVID-19 levels of international tourism may be far off, the travel sector’s short-term revival could depend on local tourism. In 2019, Vietnamese tourists spent $15.5 billion, of which $5.9 billion flowed overseas. The majority of tourists are unable to leave the country, so they are looking domestically to scratch their travel itch. Travel companies should therefore rise to the occasion and capture value from this opportunity.

Looking ahead: Vietnam’s tourism industry can recover by 2024 if it implements a zero-case-first approach

Even with favorable tailwinds driven by domestic tourism, Vietnam will be dependent on international markets, which represent around $12 billion in spending. The majority of Vietnam’s international tourists come from Asian countries, with those from China, Japan, South Korea, and Taiwan accounting for around 80 percent of Vietnam’s foreign tourism spending. Vietnam’s strong economic ties with these countries could lead to a relatively fast tourism-industry recovery compared with other key tourist destinations in Europe and North America.

By Margaux Constantin, Matthieu Francois, and Thao Le

Read the full article here. 

Tags: Vietnam

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