Vietnam has worked hard to build a reputation as an inexpensive, yet exotic destination. For many years, elegant four-star hotel rooms in downtown Hanoi or along Vietnam’s white sandy beaches could be had for less than $50 a night.
However, travel agents now claim that accommodation prices have risen by as much as 50 per cent against late last year.
Tour operators have also reported that certain key properties have failed to honour existing contracts, and rates are being increased to levels described as ‘shortsighted’ and ‘a grab for cash,’ with new prices ‘short lived’ in the ever-changing Asian travel marketplace.
By substantially increasing contract room rates and limiting the allotment granted to preferred operators, these hoteliers threaten the marketability of Vietnam as an affordable destination which could drive travelers to reliable competitors such as Thailand.
According to Patrick Gaveau, Focus Asia’s sales and marketing director, a destination’s attractiveness was a complex issue involving various components among which image and branding play a large part.
“Vietnam has been successful at attracting tourists. It is a safe, exotic and a price competitive destination,” Gaveau said.
“I think for sure that this increase in rates could discourage visitors and customers,” said Phoenix Voyages Groups president, Edouard George.
George told Vietnam Investment Review that foreign visitors had a wide choice of destinations. Vietnam is not only competing with neighbouring countries like Thailand, but with other destinations such as Brazil, South Africa, the Dominican Republic, Mexico and Kenya.
“We have recently lost two groups of 120 people as the clients could not accept the increase in Hanoi hotel rates and finally the two groups are going to South Africa instead. You can easily assess the huge loss not only for our company, but also for Vietnam itself he added.
Will it destroy the image of Vietnam?
George said the room rate increases may not destroy Vietnam’s image as a peaceful destination. However, potential visitors would look carefully at proposed prices and may choose another destination if value for money was better somewhere else.
“The Vietnamese Government and the private sector must put a lot of efforts into developing destinations without mentioning the efforts to develop the infrastructure. We have started to harvest the efforts and the figures were encouraging. Now, we are a bit more pessimistic, not for the short-term but for the mid and long-term. Not only because of the sharp increase in hotel rates, but also because of the lack of trained staff, the fast rise in pollution at main tourism sites, the fast destruction of the patrimony especially in the main cities,” George said.
Gaveau said immediate attention should be given to the emerging problems.
“Nowadays, we wonder if hotels’ outrageous price hikes and the declining appeal of the damaged environment combined with the poor maintenance of landmarks and sites may damage Vietnam’s credibility in the long run. We believe that if correct measures are not taken rapidly, the cost of these errors will be higher than any short-sighted gains,” he said.
The majority of hoteliers contacted by VIR admitted that rates had been increasing and the country should carefully manage this issue.
Jean Luc Bonneau, general manager of the four-star Sunway Hotel, said hotel operators in Vietnam must be more careful with the price and services provided to tourists.
“The increasing rates will impact the image of Vietnam in the international tourism market and decrease the attractiveness of Vietnam in the eyes of foreign tourists if the quality and prices are not matching,” Bonneau said.
However, Frederic Arul, general manager of Melia Hanoi, said: “You will have to cope with a drop in tourists, but I think they will still come if they want and the problem is that you must consider the type of customers which you want to focus and promote it accordingly.”
Gilles Cretallaz, general manager of Sofitel Metrople Hanoi, said the rate increases were reasonable and they would not impact on tourists.
Cretallaz said increasing demand and a need to mobilise investment for renovations was behind his hotel’s decision to increase rates.
Moreover, he believed that there was still room for increasing rates when his hotel was upgraded. “I think this is reasonable. Customers will have to pay more when the quality is upgraded and I do not think they will go away because of this rise,” he added.
The way ahead
Vietnam National Administration for Tourism’s Promotion Department director Pham Huu Minh admitted that the country would face difficulties in attracting tourists if room rates remained pricey.
Minh said the tourism sector should think carefully about the increases.
Richard Leech, executive director of the CB Richard Ellis, blamed the increases on increasing demand, especially from business and corporate customers and the lack of rooms.
“It is possible they [the rate rises] will discourage travellers,” he said.
However, he also believed that this would not drive tourists away from Vietnam. “We can understand why, because it is difficult sometimes to get a hotel room and that is possibly negative that people would say all the hotel rooms are so expensive in Hanoi,” Leech said.
The rate could be increased more taking into account the level of new supply within the next few years.
“I am for sure that the rate could be more increased slightly. Before new hotels come in the next three years we still see the upward room rates,” he added.