The Lowe Down
July 2007
Boom Time for Vietnam Beach Resorts
Vietnam’s tourist industry is experiencing double digit growth and beach getaways are becoming more and more popular. So what do the movers and shakers in the hospitality industry think about the rapid development? Words by Dave Lowe.
Con Dao: One of the seaside destinations about to undergo large-scale development
Just a few years ago, travellers were coming to Vietnam for adventure and were more likely to be carrying a backpack than a Louis Vuitton suitcase. Though still far from being an international jet set hub, nowadays, increasing numbers of mainstream tourists are heading to Vietnam for the sole purpose of a beach holiday. Andy Vu is the Director of the Tourism Information Center located at the corner of Le Loi and Nguyen Hue. It receives a steady stream of visitors asking about beach resorts in Vietnam, mostly in three and four-star categories, with rates of about US$60 per night.
“They are looking for an exotic vacation, with special attention to service and detail,” he explains. “We are very careful which resorts we work with, because service is not always up to international standards here in Vietnam, and we want our guests to be happy.”
Approximately 500 people a day pass through the TIC during the winter high season, and around 250 during summer. Currently, about 10% of visitors book resort vacations through the TIC. Andy believes this number will reach 30% very quickly and sell more five-star resorts once the service standards are assured.
A Variety Of Attractions
Most of the development is focused between Vung Tau and Hue, where the most beautiful scenery, tastiest seafood, and best weather can be found all year round. While resorts that have opened to date have typically cost under US$7 million, a raft of properties have inked deals in Vietnam, some upwards of US$1 billion in value. An example is the Raffles Danang, a US$65 million investment slated to open in 2011. The property extends the hotel chain’s presence to Vietnam, a country it believes has extremely strong long-term revenue potential. Kerstin Poetzcsh and Thomas Ruepke of Chic Resorts specialise in managing the development of luxury resort hotels. They chose to set up shop in Vietnam, believing in the country’s tremendous potential. “It is the variety of attractions that makes Vietnam so special,” says Kerstin.
“There is definitely an under capacity in this market,” adds Thomas, who was involved in several hotel projects in the United Arab Emirates. “Prices will remain high and for investors, it is quite easy to recover their investment in less than two years, which is unheard of in other countries, even in Dubai.” Dave Hodkinson of Noor is involved in designing many of these soon-to-be-opened luxury resorts and has seen a sharp spike in demands for international resort design. He believes this is nowhere near slowing down. Like Kerstin and Thomas, David believes the current situation with resort development in Vietnam has only just begun. The hotel situation is so strong that even people from non-resort projects are watching closely.
Kamal Dasainke is project manager of Baboo, a beachfront restaurant and bar currently under construction in Mui Ne. Opening in early 2008, Baboo will feature international standard DJs and fine dining in a format yet to be seen in the country.
“Due to the high average room rates there, we are considering adding rooms for rent available for guests.” says Kamal.
Training & Infrastructure
While these properties open up unspoiled areas of Vietnam and provide jobs to locals, it remains to be seen what pressures the rapid growth will have on pricing and the environment. The glut of luxury hotels in Thailand, built during the boom years of the 1980’s, has left the industry there with an oversupply that has crippled the strength of room rates. Quite a number of five-star resorts in Phuket and Pattaya sell for the price of three-star properties in Vietnam. The same situation is felt in Bali.
With feverish growth expected in Vietnam, particularly in places like Phu Quoc, Vung Tau and Hoi An, the industry will eventually reach the same level of saturation. However, the bigger issues of cramped infrastructure and limited availability of solid staff training could well dampen all this rapid construction. Infrastructure is already at breaking point in many areas, with little information on projects for new roads, airports and ports that are the very foundation of a stable and robust tourist industry. Perhaps the biggest problem today is the continued delay in the construction of international airports in beach resort areas, which would facilitate long haul charter flights from Japan, Germany and beyond. Major resort developers interested in opening properties on Phu Quoc are caught in a Catch 22: with no airport, they won’t commit to building their properties, but without the properties, there is no airport. The other big issue is training. While there are scattered university programs around Vietnam, like in Phan Thiet, there is no local university where young students can study hospitality.
Thomas says, “Vietnam has yet to address nationally available, international standard training that supports the needs of luxury travellers, which creates strong room rates and therefore staff salaries seen in other countries.”
The Raffles Group has its own internal training plans – applied and fine-tuned from its experience in Cambodia and China – to ensure that high service standards are kept intact. Vivian Koh, Public Relations Manger for Raffles hotels, says, “Training doesn’t stop when the hotels open. On average, each Raffles Hotels & Resorts staff undergo 60 hours of on-the-job and classroom training a year.” Language abilities are also lacking, and will continue to suffer unless a more accessible program is put in place.
“Training does not just mean serving food and drinks,” says Andy. “Communication is key to serving guests, and to do so requires strong training that is not often available for the majority of people who want to work in the hotel industry.”
Best Bookings
Even though the Internet is often touted as a money saving device for making bookings, there might be cheaper ways of getting that ideal hotel room.
Direct
A quick call to the hotel’s reservations department can reveal whether there is a conference, what rooms are available, but with no discount; or, that they have a special rate not available to travel agents or on the internet. It also pays to find out if the hotel is a business or leisure hotel. Generally, business hotels offer cheaper rooms on weekends, while resorts during midweek. Staying during off periods can earn you up to a 40% reduction in room rates.
Through Travel Agents
A travel agent is most likely to offer you a net rate agreed with the hotel’s sales manager. Depending on their volume, this rate may or may not be better than what’s available online. Booking through a larger travel agent is usually better, because higher volumes mean deeper discounts. However, if you are dissatisfied with the hotel and need a refund, booking through agents can complicate matters more.
Via The Internet
Buyers beware. Hotel revenue managers know people expect the cheapest price to be online, and pad the rates to increase profits. Also, unattractive rooms are often allocated cheaply for online bookings. This isn’t usually a problem with the larger chains, but caution is always important with smaller, independent properties. Despite this, booking rooms via the Internet can save up to 40%, especially during off peak or low season periods.