The Lowe Down
March 2008
'THE MICE MARKET'
As host to the APEC summit in November 2006, this key international conference boasted attendees like the US President, and was the largest event held in Vietnam since the Francophone summit in 1997. Helping to kick off the MICE concept in Vietnam, APEC 2006 paved the way for this lucrative segment of the tourism industry to develop into a cornerstone for strong revenue, and has the potential to lift Vietnam into a higher image bracket for overseas investors.
While the country’s infrastructure has been able to handle conferences and events up till now, a crisis looms from the lack of new international standard business hotels and conference facilities being built to meet the burgeoning demand. Combined with increasing competition from Thailand and China, and increasing hotel rates, what does the future hold for Vietnam’s MICE industry?
High Growth for MICE Market
With 15% recorded growth for tourism arrivals in Vietnam in 2007, the industry is expanding at twice the speed of the country’s economy. At peak periods, such as the October to March high season, urban hotels and beach resorts run at 95% occupancy. Even during the slower summer months, occupancy rates of 70% are not uncommon.
While most industry insiders are pleased with the strong profits and phenomenal growth from the current tourism business in Vietnam, most see the MICE market as a coveted sector to develop.
‘Though the MICE business accounts for just a small percentage of our business, in terms of importance, it is a 50/50 split between the leisure and MICE markets,’ explains Ms. Hoang Loc Pham, the MICE Manager for SaigonTourist’s Inbound Department. ‘We attend all the major MICE trade events to promote and build Vietnam’s MICE market.’
SaigonTourist primarily handles groups from the Asian region, and Southeast Asia in particular, with the average length of stay between three and four days. Many groups embark on leisure trips around Vietnam after their conferences, choosing beach breaks in Phan Thiet and overnight voyages on Halong Bay.
Having recently handled a conference for nearly 900 guests, SaigonTourist is eager to handle even larger groups, yet sees problems for the industry: soaring hotel rates.
‘Hotels, in response to the tight market, are holding off on releasing room rates beyond the end of 2008, and we are particularly worried about the rates for 2009,’ adds Ms. Hoang Loc.’ Inquiries are for larger groups are put off by the high cost of hotel rates in Vietnam’s cities. They are choosing China, Thailand and Singapore over Vietnam, because the hotel rates are higher in Vietnam, and currently, the selection is limited. We are particularly concerned about the 2009 season, as very few international standard business hotels will be brought online.’
George Ehrlich-Adam, Exotissimo’s General Manager, agrees. ‘Particularly for larger groups of 200 and more, the hotel issue is not just rates, it is capacity. While conference attendees are commonly divided among city hotels, for incentive groups, this is not acceptable. Confirming hotel rooms for a large group can be difficult at any time of the year, but almost impossible during the winter high season.’
Returning to the issue of hotel rates, Mr. Ehrlich-Adam says, ‘Vietnam is considered by many MICE organizers to be an expensive destination. Still, our MICE business grew by 40% last year,’ he adds that ‘the MICE business is cyclical, so this is not indicative of long term trend, in fact, we expect the numbers to slow in response to the hotel situation.’
With business for Exotissimo split 80/20 leisure/MICE, incentives and conferences will always remain an important sector. Mr. Ehrlich-Adam goes on to say, ‘We generally find the lack of event planning companies with international standard services the biggest issue for the MICE market, so much so that we do not outsource this business, preferring to control the process ourselves, to ensure quality and creativity for our clients.’
No ‘Wow’ Factor
It is the lack of creativity and ‘wow’ factor at hotels in Vietnam that concerns Caroline Beraux, a member of the Travel Management team at Ormes, an event management company based in Paris. ‘The hotels, and particularly the beach resorts, rarely have a culturally unique design and feel that is so special in places like Bali. And the welcome programs from hotels across Vietnam leave a lot to be desired.’
The fact that international flights do not exist to beach resort destinations means an extra flight for incentive participants, made all the more irritating with enhanced security and compounded by frequent delays. ‘No one wants to have to board yet another plane after flying for 15 hours,’ Ms. Beraux explains, saying that without airports capable of handling long haul flights within short drives of key tourist destinations, developing MICE could be slowed.’
She adds that while the hotel rates are higher in Vietnam compared to other countries, services for gala dinners and other add-on items popular with incentives cancelled out this price pressure for her clients. ‘Being a Euro currency country, this is not such a concern. Rates for hotels in India are even higher.’
While Vietnam is popular, South America is proving a strong pull for incentive groups from Europe, where weak economies, strong value for the Euro and a wide variety of culture, sights and infrastructure to handle large groups. Still, with a close history to the country, Vietnam remains popular in France.
‘We recently proposed Vietnam to several clients and there has been a positive response,’ Ms. Beraux reports, and agrees with George Ehrlich-Adam, ‘Though it is the capacity that is more an issue than price, we are very positive about Vietnam as a MICE destination.’
Hotels Boost Capacity
Even more bullish are the top business hotels in Vietnam. Saigon’s Sheraton Hotel and Towers is upgrading its property to meet the expected surge in demand from business travel after Vietnam’s accession to the World Trade Organization (WTO).
After extensive renovations, in April 2008 it opened the 25-storey Grand Tower, adding 112 rooms to the Hotel’s existing 371. With almost 500 rooms, it is now the largest hotel in Ho Chi Minh City, well situated in District 1, and eager to take a larger slice of the MICE market.
Guests of the Grand Tower will check-in and take breakfast separate from the main building. The new rooms are equipped with 42 inch LCD televisions and a Bose surround sound system, with suite bathrooms featuring a 19 inch LCD television.
‘27% of guest volume is from the MICE market,’ says the Sheraton General Manager Mr. Dietmar Kielnhofer. ‘It is an important market segment for our hotel, and comes mainly from Australia, Singapore and Hong Kong. With the opening of these 112 rooms, we will be better capable of serving the business traveler, be they individual or attending a conference.’
Additional conference facilities have also been built with the completion of the Nha Trang room, complementing the existing 16 function rooms.
The Sheraton’s management is aware of the opinions among tour operators regarding their displeasure at increasing rates, and insisted flexibility is the key to accommodating large groups.
‘Many tour operators complain that there isn’t enough capacity to handle their groups,’ explains Mr. Kielnhofer, ‘but if they are able to schedule incentive events on the weekend, we can usually accommodate their needs.’
The Future
With no end in sight to the growth in Vietnam’s tourism industry at large, the MICE will continue to expand in tandem as a much coveted sector.
However, with no major hotels coming on line in Hanoi and Ho Chi Minh City through 2008 and soaring room rates, it remains to be seen whether these will strangle the industry’s ability to meet the future MICE demand, losing business to cheaper destinations.
While Hanoi has an operational conference center, Ho Chi Minh City’s International Exhibition & Convention Center (HIECC) is under construction and is not expected to open until 2009. Built to handle up to 4,000 attendees, it will be several years more before the facility has constructed Phase 2 that includes business hotels directly connected to the center.
‘There is already a feeling amongst MICE organizers to not look for quotations from Vietnam because of the perceptions that it is an expensive market,’ laments Ms. Hoang Loc Pham. ‘It will be a difficult in a year or so for MICE business.’
Facilities:
HANOI
International Convention Center Hanoi
Sheraton Hanoi
Sofitel Plaza
Intercontinental West Lake Hotel
Daewoo Hotel
Sol Melia Hotel
DANANG/HUE
Celadon Palace Hotel (Hue)
NHA TRANG
VinPearl Resort
SAIGON
Ho Chi Minh City International Convention Center (HIECC) 2009
Sheraton Saigon Hotel and Towers
New World Hotel
Renaissance Hotel
Hyatt Hotel