Tourism Surmounts Hurdles In 2009

Though the performance in 2009 was not as impressive as in previous years, it still attested to the ability of enterprises to survive the economic storm
Tourism companies often say that the challenges in 2009 equaled the combination of those in 1997, when the Asian financial crisis took place, and in 2003, when the SARS epidemic hit. However, many tour operators still posted growth in 2008. While the performance in 2009 was not as impressive as in previous years, it still attested to the ability of enterprises to survive the economic storm.
Anticipate challenges for better response
When taking stock of 2008, which was not as successful as expected, members of Fiditourist’s board of directors started to mull over the possible scenarios for 2009. In the worst case, demand was to fall by over 20%. In the second worst scenario, the number of tourists would decline slightly and the company would neither reap profits nor incur losses. In the most optimistic scenario, revenue would rise by a meager 5-8%.
The company identified measures to slash costs and overcome the obstacles in each scenario. These measures include temporarily halting recruitment and wage increase plans. “We thought that 2009 would be riddled with problems as revenue in 2008 did not rise significantly year-on-year and the market was awash with bad omens,” Nguyen Viet Hung, general director of Fiditourist, says.
The management of the five-star New World Hotel has hammered out contingency plans even earlier, since mid-2008. In early 2008, despite the continued growth in Vietnam’s tourism industry, ominous signs started to emerge in the U.S. economy. Therefore, Marriott Group, which manages New World Hotel, warned of the imminent perils and asked hotels under its wing to prepare plans to tackle these hindrances.
Various aspects of the operation of the hotel were discussed thoroughly. ranging from the power and water bill, and the payroll to wages paid to external human resources and marketing costs. Measures to lure new customers and increase revenue reaped by eating and drinking services to lessen the deleterious impacts of falling foreign arrivals were also offered.
The hotel also set a target of reducing costs by US$1 million. “At that time, we could not predict accurately the fall in revenue and demand. However, the goal was to retain profit. Back-up plans must be in place to handle a challenge when it arises,” Dang Huy Hai, deputy general director of the hotel, says.
Ben Thanh Tourist also promptly reassessed market conditions and analyzed its market share before the crisis struck the industry. “At that time, we focused not on high-end tours but on those that cater to students, who need reality and internship tours at affordable prices,” Nguyen Minh Quyen, vice director of the company, says.
Initiatives
Nguyen Thi Xuan Hong, director of Vien Dong Hotel, recalls the daunting period in May 2009, when a huge number of customers cancelled their booking. Sometimes, as much as 10 groups of tourists did so a day. However, like her counterparts in other tourism enterprises, Hong considers such a challenge a chance for enterprises to adopt a more creative business model.
Situated on Pham Ngu Lao Street, District 1, which is swarming with backpackers, Vien Dong used to pay little attention to MICE (meetings, incentives, conferences and events) tourists. However, during the current downturn, it has decided to focus on this segment.
Hong says that as income dwindles, there will be fewer backpackers. The number of MICE tourists, however, will remain fairly stable. Meetings must still be held, albeit at lower costs. Foreign delegations, therefore, tend to opt for less costly accommodation, offering three-star hotels such as Vien Dong business opportunities, especially if the hotels provide additional services.
Vien Dong has offered free, additional services such as Internet, transport from the airport, provision of overhead projectors for those renting conference rooms, and exemption of parking fees. Moreover, marketing efforts aimed at domestic enterprises and joint ventures have also been bolstered. “Customers have welcomed these programs. Therefore, the MICE tourism segment rose by 20%, playing a considerable role in helping the hotel’s revenue increase by 8% in 2009,” Hong says.
New World Hotel has stepped up direct marketing efforts in important markets such as the U.S., Japan and Singapore instead of simply participating in tourism fairs. The hotel has paid more attention to domestic tourists and overseas Vietnamese. Hai says that the marketing trip in the U.S. in late August and early September 2009 alone increased demand by as much as 1,000 rooms, many of which are booked by overseas Vietnamese.
Besides, the hotel’s partners have also been notified of more affordable MICE tour packages aimed at small groups of customers. “A small group of 10-20 tourists is enough to bring profits. In this period, it makes little sense to cater exclusively to big groups of tourists,” Hai says.
He contends that the hotel has survived the economic storm by turning to the domestic market, which remains resilient. Last year, myriad promotion programs were launched to attract Vietnamese customers. “The share taken by Vietnamese in the customer base of New World’s restaurants, which was insignificant a few years ago, has soared to 80%, which is indeed impressive,” he says.
Moreover, the hotel has also joined forces with its counterparts to enjoy the lowest prices from service providers. For instance, when there is a need for new television sets or food supply, New World has cooperated with hotels with similar demands to be entitled to discounts.
Meanwhile, Asian Trails Co. informs its partners of tour prices every week. Promotion programs are launched almost every month, based on the incentives offered by domestic partners. Previously, the company organized tours for European customers, so prices used to be fixed one year in advance. “At present, it is common for tourists to book tours late, so promotion programs may attract them,” Bui Viet Thuy Tien, managing director of the company, says.
Apart from changing tacks to emerge from the crisis, tourism companies have also placed emphasis on trimming costs such as electricity and water consumption. Tien says that the telephone bill fell by up to 30% in 2009 thanks to cost-cutting measures.
By using energy-saving light bulbs, reducing water consumption, adjusting the time air-conditioners are switched on prior to the arrival of customers and keeping office temperatures at 26 degrees Celsius, New World lowered costs by 8% in 2009. Previously, the hotel had to spend some US$125,000 on monthly water and power bills.
Fiditourist has required its employees to prepare the outline of their talks with customers to reduce the length of each phone call and restricted the use of mobile phones. Unwarranted use of the company’s telephones is deemed inappropriate. Consequently, Fiditourist’s telephone bill has fallen from VND80 million per month to merely VND30 million. If other falls in paper, ink, power and water costs are considered, the amount of money saved is substantial. “The crisis has offered the incentive to reduce costs. We used to wax lyrical about the need to trim costs but did not enforce measures to realize these goals. Owing to the crisis, we have realized shortcomings in the company’s operations,” Hung says.