Hoteliers on the back foot as tourism declines

      With international tourist arrivals plummeting, a global economic downturn and one of the world’s lowest tourist retention rates, hoteliers throughout the country are struggling to fill their hotels, without resorting to slashing room rates.
Bookings have slowed markedly as travelers tighten spending and delay holiday plans as a result of the global economic downturn and the swine flu pandemic.
International arrivals in the first half of 2009 plunged 19 percent to 1.89 million arrivals.
In a bid to offset the rot, hotels and resorts began cutting rates by up to 50 percent, since the start of the year. But that tactic carries risks for revenue generation and brand recognition in particular.
“Reducing room rates is not a good strategy because it will have negative effects on the businesses’ ability to generate profits,” Nguyen Duc Quynh, deputy director of the Furama Resort in central Danang City told Tu Van va Tieu Dung (Consultancy and Consumption) magazine.
“Price reduction can also affect brand names, especially in the case of luxury hotels and resorts.”
That is bad news for an industry that brought in over USD$4 billion in receipts last year and employs about 1.2 million people nationwide.
“Most customers seek the best relaxation program and are willing to pay for the quality and standards of the services,” said Holman Fong, Sales and Marketing Director of Life Resort Group, which operates establishments in Hoi An, Quy Nhon And Phan Thiet.
“We believe offering quality services are more important than reducing the price,” he said.
Nigel Sharman, chief executive officer of Vietnam-based investment consultancy TCK Group, said cutting rates could set a hotel back years.
But Sharman also pointed to potential silver-linings for an industry which had been criticized in the past for housing some of Southeast Asia’s most expensive five-star room tariffs at about $196 per night.
“This is the best time for the hotels to renovate their facilities and improve their operation and services,” he said.
That view was echoed by other hoteliers who are looking to introduce new marketing strategies while reducing operational costs.
“At the moment, we have to cut our spending on advertising,” said Shanna Bright, Sales and Marketing Director of the hospitality segment of Apple Tree Group, which owns the Press Club in Hanoi and La Residence Hotel & Spa in Hue.
Apple Tree’s businesses have recorded a 20 to 30 percent drop in occupancy rates, much higher than the average national reduction of 14.2 percent at high-end hotels last year.
According to The Vietnam Hotel Survey for 2009 released last month by consulting firm Grant Thornton Vietnam, that figure represents the lowest occupancy rate in the last four years.
The firm also expects average room rates in the country to fall again by the end of this year.