Travel in Vietnam

EXECUTIVE SUMMARY

Robust Growth for Vietnam Travel Industry in 2018

Inbound tourism flows to Vietnam continued rising at a double-digit growth rate in 2018. Domestic and outbound flow also recorded strong growth, marking another highly profitable year for industry players. Air travel was the most notable category, with the outstanding success of low-cost carriers, especially local player Vietjet Air. Many new routes were launched to cater to the increasing travel demand. For example, Vietnam Airlines launched new direct flights between Nha Trang and Seoul, as South Korea is an important source market.

Lodging and intermediaries also recorded robust growth in 2018, especially online sales. It has become a habit for travellers to compare prices by going to websites before making a purchase decision. To counter the decreasing brand loyalty, industry players have used different tactics to retain customers. For example, local online agency Ivivu collaborated with many local hotel chains to give special discounts for Vietnamese nationals, while Agoda gives vouchers that customers can use for their next booking, or Vietnam Airlines miles.

Online Travel Sales Grow Strongly in 2018

Online sales of all travel products continued growing strongly in 2018, including air, hotels, and intermediaries. It has become the industry standard for all players to have a strong online presence, including mobile-friendly websites with an online purchase function, and social media accounts on leading sites such as Facebook and Instagram. Urbanisation has led to more people having busy and hectic lifestyles in major cities such as Hanoi and Ho Chi Minh City. As such, searching for information and booking online has become the preferred choice for travellers who are too busy to visit bricks-and-mortar outlets.

The development of consumer payment systems, especially with the rising popularity of mobile payment applications, such as Momo and Zalopay, has made it easier for customers to purchase their travel products through online channels. These mobile payment channels allow customers to pay for their air tickets, hotel bookings and tour packages. Therefore, even customers who do not own bank cards can still make online payments with their deposit bank accounts.

Vietjet Air and Vinpearl Jsc Are the Two Most Notable Competitors

In 2017 and 2018, low-cost carriers continued recording exceptional growth rates. This was largely attributable to the success of local player Vietjet Air. Instead of competing with existing players in the market, Vietjet Air’s strategy has been to create new market opportunities and attract travellers who have never flown. To carry out its strategy, the low-cost carrier constantly runs price promotions to attract customers. It is popular for its “12 noon promotion”, through which customers can hunt for free tickets between 12:00hrs and 14:00hrs on specific days. It has also pioneered many new routes that have not been served by other competitors. For example, in 2017 and 2018, the airline launched direct flights on the routes Ho Chi Minh City – Chiang Mai, Ho Chi Minh City – Phuket, and Da Lat – Bangkok. Through such strategies, Vietjet Air was able to overtake the flag carrier Vietnam Airlines in the domestic air market in terms of passengers carried, and has maintained robust growth on international routes.

Vinpearl JSC, another notable local player, is the leader in lodging. Vinpearl belongs to VinGroup, a conglomerate that operates in a wide range of businesses, including real estate, manufacturing, retail, healthcare, education, and travel and tourism. With very strong capital and extensive business portfolio, the group has been able to invest in rapid outlet expansion, to easily become the leading hotel player. Its strategy is based on providing a leisure destination for the whole family. As such, many of its hotels and resorts are adjacent to its own golf courses and theme parks.

Premium Niche Has Growth Opportunities

In the latter part of the review period, Vietnam’s average disposable income continued to rise. At the same time, the number of wealthy individuals also grew strongly. To cater to this expanding market niche, many industry players have focused on providing better services. In air travel, for example, flag carrier Vietnam Airlines collaborated with celebrity chef Luke Nguyen to create a special food menu, and with Vo Tan Si – chairman of the Saigon Bartenders Association – to create 11 new cocktail recipes for its business class passengers. The airline also launched QR code payment, which allowed customers to scan a QR code using their bank’s mobile app to make a payment. This offers greater convenience for busy middle- and high-income customers.

In lodging, Luxstay is a new local player in the short-term rental segment. Operating as an intermediary, similar to Airbnb, Luxstay only features premium and luxury rentals on its web booking engine. This positioning helps it to differentiate itself among the increasing competition within the lodging industry, by directly targeting the high-margin premium market.

Robust Development Expected in the Near Future

Over the forecast period, Vietnam’s travel industry is expected to see new developments that will boost growth rates in many categories. In air travel, the appearance of new local brand Bamboo Airlines, which is scheduled to operate its inaugural flight by the end of 2018, will bring more options and growth opportunities. Industry players believe that the new player will focus on a new format – a hybrid between the low-cost and scheduled models – in order to capture middle-income consumers who want to travel frequently, do not want to spend too much on air fares but dislike the low service level of the low-cost carriers. Swiss-based Edelweiss has announced plans to launch a direct service between Ho Chi Minh City and Zurich by the end of 2018. The entrance of these new local and international players will bring new growth opportunities in all aspects: inbound, outbound and domestic tourism.

Realising the potential of Vietnam’s travel industry, many players will focus on this market in the near future. For example, international hotel players such as Accor, InterContinental, Hilton and Melia have announced plans to open many new outlets in various price segments.