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Story: Tuan Hung
Photos: Shutterstock
The positive effects of “revenge travel” in 2022 did not last, leaving Vietnam’s tourism industry struggling.
Since the beginning of the year, Ms. Pham Ngoc has not taken any trips. Living in Hanoi, Ms. Ngoc usually travels both domestically and abroad about three times a year. However, with a lower income since the beginning of 2023, travel is no longer her main priority.
“Last year, I went to Phu Quoc, Bangkok, and Taipei, but now, with the economy struggling, I must put travel aside,” said Ms. Ngoc. She admited to having been swept up in the “revenge travel” trend last year. With a relatively good economy, spending money on travel was not a big issue for Ms. Ngoc, but this year has been different.
This is not just the story of one female traveler from Hanoi. Reports indicate that the “revenge travel” trend has ended worldwide following a short surge.
2022 was not as good as imagined
The 2023 travel outlook report by travel market intelligence company The Outbox Company assessed 2022 as “a year of enthusiastic and cautious travel restart”. Full of excitement and optimism after the pandemic, 2022 also brought concerns about threats to the tourism industry, including political tensions, inflation, and high fuel prices.
In 2022, Vietnamese tourism witnessed a strong recovery after a “disastrous” year in 2021 due to lockdowns and social distancing. There were some reported 101 million domestic tourists, up 19.2% compared to 2019. International guests reached about 3.66 million, equivalent to 33% of 2019.
Mr. Phan Dinh Hue, an expert on destination development in the Mekong Delta region, explained that around 101 million domestic tourists is “not entirely good news for the tourism industry”. Total revenue from the tourism industry in 2022 reached VND 495 trillion, much lower than the figure of over VND 700 trillion in 2019. “If we consider tourism as an industry, success must be measured by revenue. Actually, 2022’s revenue is only better when compared to 2020 and 2021,” said Mr. Hue.
Besides revenue, Mr. Hue also pointed out that the “optimistic” numbers in 2022 could lead to misjudgments; he said Vietnam does not have an effective “filter” to quantify tourists.
For example, a guest who goes to a province but visits five destinations will be counted as five tourists! Or business and diplomatic travelers from Korea and Japan who travel to Vietnam “as regularly as meals” are lumped together with tourists. According to Mr. Hue, overcounting tourists leads travel agencies to misjudge the market, thereby strategizing incorrectly for the future.
When “revenge travel” ends
The mid-year 2023 tourism report by The Outbox Company revealed that by May, room capacity in Vietnam’s four major hotel markets of Hanoi, Danang, and Nha Trang/Cam Ranh (Khanh Hoa) were all below 70%. Since mid-year, the media has reflected the reality of many hotels in Danang and Nha Trang being put up for sale during the peak summer tourism season.
Mr. Nguyen Cong Hoan, General Manager of Flamingo Redtours, observed that the signals from 2022 made the tourism market in 2023 “more unpredictable”. Looking at the explosion of domestic guests the previous year, he had assumed that domestic tourism would be the mainstay of Vietnam’s tourism industry in 2023, and that guests might not travel en masse during major holidays but would spread out their trips throughout the year.
In reality, guests did spread out their travels. The number of tourists significantly decreased and spending on travel declined. Mr. Hoan noted that at the end of 2022, the number of guests booking tours abroad rose sharply. However, this trend did not continue into 2023.
“We have passed the period of “revenge travel”. Vietnam’s economy has not really recovered, especially in certain sectors like real estate, securities, and construction. These are all sectors that typically provide high incomes and create a good customer market for tourism,” shared Mr. Hoan.
Negative factors such as the Covid-19 pandemic, the conflict between Russia and Ukraine, and a global decrease in demand have led to a reduction in orders, thereby decreasing employment. The unemployment rate in the working-age population in the second quarter of 2023 was 2.3%, an increase of 0.05% compared to the previous quarter.
Mr. Hoan said that although Vietnam’s tourism situation in 2022 was relatively good, the company was also “quite cautious” in 2023 because it recognized many “unpredictable issues”. Travel firms introduced programs targeting a relatively broad customer base to gauge the market without pouring all of their efforts into any one product. With this approach, if some markets suddenly improved, the company risked being unprepared. However, the upside is that they avoided the risk of “holding places” too far in advance and being fined for not selling the inventory.
Not every company was cautious when considering the “revenge” wave of 2022. Ms. Hoang Anh, a sales employee at Top One Travel, had a lifelong lesson for “holding” the Phu Quoc travel combo on April 30. She believed that Phu Quoc was the number one domestic destination because it offers many new entertainment areas, resorts, and luxury hotels. However, from an initial selling price of VND 8 million per person, Ms. Hoang Anh had to sharply discount this package to VND 5.5 million per person due to lack of customers.
“The spending power for tourism this year is quite weak. The demand is also not as great as last year,” reported Ms. Hoang Anh.
Globally, the situation is similar. A report by global decision intelligence company Morning Consult indicated that the period of “revenge travel” is coming to an end. Inflation is causing incomes to drop in many places, and although the desire to travel always exists, people will not travel as extensively as last year, especially in European and American markets.
Vietnamese tourism enterprises in dire straits
Exhausted after three years of Covid-19, with a glimmer of hope in 2022, then collapsing again in 2023, Vietnamese tourism enterprises are facing extreme difficulties. During the pandemic, many businesses had to sell off assets to survive. Others were forced to close down because they could not withstand the pressure. Now, many travel companies admit that the little capital they have left is not enough to operate their apparatus, let alone promote and market their products.
“Many banks have invited me to borrow capital. Everything sounds quite smooth until they mention collateral,” said a representative from Vietcircle Travel Services Company – specializing in inbound travel in Ho Chi Minh City.
This is the “common sorrow” of most Vietnamese tourism companies: banks have surplus capital, but travel companies can’t borrow. Mr. Phan Dinh Hue explained that a characteristic of travel businesses is that they have few assets; they live on selling tours. When borrowing from banks, travel enterprises don’t typically have tangible assets like vehicles or real estate to secure loans.
Requesting anonymity, the owner of a major travel bus company in the North said that even with assets, accessing bank funds is very challenging. According to him, to get a loan, a business must go through many procedures such as checking bad debts, business performance, etc.
“Interest rates are down, there’s surplus capital, but it’s hard to access. They are struggling, and then you ask about turnover, what can they use to answer?” he said.
This bus company owner hopes to invest more and has considered borrowing from banks. The business’s collateral is about 50 tourist buses with 24 – 45 seats, models from 2015-2016, which are already fully paid off. However, many banks stipulate that vehicles can only be mortaged within four to seven years of their manufacturing date. Thus, despite having 50 buses, he cannot borrow funds. He says the current regulations are really “hampering the development of the tourism industry”.
Mr. Hue pointed out that banks see a risk when a business has no guaranteed assets. He hoped for changes in state policy if there is a wish to quickly revive the tourism industry.
“There are very few specific policies for the tourism industry. We need to see tourism as a tool to bring guests to localities and create jobs for other economic sectors. That’s why every country wants to develop tourism,” emphasized Mr. Hue.
