12
that a number of Vietnamese tour agencies would sell package tours during these years
without even having the necessary hotel rooms available (McDowell, 1994). However,
these high occupancy rates apparently applied only to Hanoi and Ho Chi Minh City, as
lack of proper tourism planning allowed over-development of accommodation provisions
in some areas at the same time that Vietnam’s two biggest cities were experiencing a
severe shortage. Haiphong, for example, reported low occupancy rates during the same
period (EIU, 1993, p. 68) and Theuns (1997, p. 308) has written that parts of the country
away from Hanoi and Ho Chi Minh City had average occupancy rates of about 20-50
percent.
Since the Vietnamese government and domestic sector did not possess the
expertise or the finances to drive development in the hospitality sector unassisted, the
State Committee for Cooperation and Investment (SCCI) approved many foreign
investment proposals for hotel development (EIU, 1993, p. 63). According to a Senior
Official of the Foreign Investment Agency (FIA) of the Ministry of Planning and
Investment (MPI), established foreign accommodation chains brought in their own loyal
customers, thus attracting foreign exchange income into the country. Priority was given
the refurbishment of existing hotels to bring them up to international standards. In terms
of funds invested, hotel renovations were among the largest joint venture projects
(Theuns, 1997, p. 314).
During this period, hotel development accounted for between 57.5 and 99.4
percent of the yearly total FDI in tourism (Erramilli, Luu, Gilbert, & Hooi, 1997, p. 280).
Together with oil/gas and industry, hotel development was one of three major investment
13
areas that cumulatively accounted for up to 83 percent of total foreign investment in 1992
(EIU, 1993, p. 63).
Period 3: 1995-1996: reaction of state hotels
The increasing number of joint venture hotels posed a challenge for existing state-owned
hotels, which had to adjust to competitors in the market that they had monopolised before
doi moi. State-owned hotels also had to come to terms with the needs and demands of the
Western tourists who began to make up an increasing proportion of their customer base.
For example, the Dan Chu Hotel in Ho Chi Minh City receives around 75 percent foreign
guests and 25 percent domestic. Many of these hotels previously catered to guests from
Eastern bloc countries: a market with lower expectations but a market that had dwindled
following the collapse of the Soviet Union. Many older urban hotels replaced their
Vietnamese names by restoring the Western-sounding names they had borne in the precommunist
era before 1975 (Travel Business Analyst, 1992 p. 26), in an attempt to
appeal to the foreign market.
Some hotels supplemented their reservation departments with sales or marketing
departments. Around this time, state-owned hotels began to accept credit cards. All of
these changes were undertaken concurrent with the withdrawal of government financial
support for state-owned hotels. The Deputy General Manager of a state-owned hotel in
Hanoi related that guest-oriented thinking was a new concept to her hotel’s management
in 1993. Before that, an undersupply of hotel rooms had virtually assured hotels of
sufficient occupancy, and the government could be counted on to provide subsidies.
14
Increasing competition and the disappearance of government support were among the
factors that inspired the hotel to begin to accept credit cards in 1995 (Respondent, Hotel
A, personal communication, June 30, 2004).
In 1995, the Majestic Hotel in Ho Chi Minh City became the first state-owned
hotel to open a sales department, as a reaction to the burgeoning success of joint-venture
competitors such as the Floating Hotel and Omni Saigon Hotels. Such joint-venture
hotels provided both an imperative and an example for the introduction of more
progressive management thinking by their state-owned competitors. Although in an
interviewed a government official denied that joint-venture hotels have had any effect on
state-owned hotels, the Director of Sales and Marketing of one state-owned hotel has
openly stated that he had learned about pricing and promotion from the hotel’s jointventure
rivals. The discrepancy between these declarations may be indicative of the
degree of autonomy that has been assumed by state-owned hotels, which must deal with
problems of which government may not even be aware.
Also during these years, domestic private entrepreneurs began to do business
serving the independent tourist ‘backpacker’ market, which was disparaged by stateowned
operators, who did not consider independent tourists a significant market sector
and did not see small private operators as a threat or competitor. In contrast, all of the
seven representatives of state-owned hotels interviewed already saw joint venture hotels
as direct threats and competitors within the market sectors to which the state
accommodation sector aspired.
Period 4: 1996-1999: Oversupply and falling demand
15
Accommodation occupancy rates in Vietnam were high in the mid-1990s. Around 1996,
the overall hotel occupancy rate in Hanoi was 85-90 percent (Theuns, 1997, p. 308),
however, several factors contributed to a fall in occupancy during the period following
this peak. The government’s xenophobic ‘social evils’ campaign of 1995, a lack of repeat
visitors, irregularity in visa regulation and enforcement and the Asian Economic Crisis of
1998 all contributed to a drop in tourist arrivals to Vietnam during this period. Many joint
venture hotels, begun in the boom years of the previous period, were opening at the same
time. By 1999, there were seven international foreign joint venture hotels in Hanoi, with
between 224 and 441 rooms each. Ho Chi Minh City also had seven such hotels, with
between 248 and 552 rooms. This led to an oversupply of rooms in Ho Chi Minh City
and Hanoi and a drastic fall in prices and occupancy rates. The greatest fall in prices
came between 1996 and 1998. During these three years, room prices in one small private
domestic-owned hotel with 17 rooms fell from US$ 70 to about US$ 25 a night
(Respondent, Hotel B, personal communication, June 27, 2004). At the Daewoo joint
venture hotel in Hanoi, the average room price fell from US$ 120 to US$ 80 in the same
period. As a result, many small private hotels went bankrupt (Biles, Lloyd, & Logan,
1999, p. 18). Several interviewees stated that during the crisis, many state-owned hotels
adopted pricing policies such as low/high season price differentiation and started
programmes of promotion for the first time, following the example of foreign joint
venture hotels.
In May 1997, for the first time since doi moi, there was a drop in hotel occupancy
rates in Vietnam. Occupancy fell to 52 percent in Hanoi and 48 percent in Ho Chi Minh
16
City (Lamb as cited in Biles, et al, 1999, p. 18). According to the Viet Nam News,
though, the hotel occupancy rate had actually started to decline to a low of 40-45 percent
in state-owned hotels and 25-30 percent in private hotels from January to September
1996 (as cited in Logan, 1997, p. 175). Another source mentions that occupancy rates in
four-star and five-star hotels were only 40 percent in 1997 and fell to 20 percent in 1998
(“Vietnam-Hotel Business,” 1998). The Asian economic crisis, a lack of attractions in the
cities, a low return tourist rate, complicated visa procedures and poor transport all
contributed to this declining trend (Logan, 1997, p. 175).
Domestic private hotels retained their position as primary provider of
accommodation to the “backpacker” market. These hotels also remained the most
informal accommodation niche. A 1997 survey of twelve private hotels in Bai Chay,
Halong Bay, Quang Ninh Province, revealed that seven of the owners were still
employed by state enterprises or were receiving state pensions. Nine of the hotels also
served as the owner’s family’s home but only three of the hotels provided the family’s
primary source of income. The narrow plots of state-owned land on which the hotels are
built – often one storey at a time as funding allowed – were often acquired at below
market prices by state employees, teachers, former soldiers, officials or state company
employees (Nicholson, 1997, p. 30). The owner of one private guest house in Sapa is also
the manager of the state-owned hotel across the street (DiGregorio, Pham, & Minako,
1996, p. 5). Throughout the 1990s, however, operators in this sector remained on a
precarious footing, due to a lack of land titling and unclear land rights laws, encouraging
a rough-and-ready approach to business and a quest for quick profit (DiGregorio et al, p.
iv).
17
In 1998, a policy of seasonal pricing was adopted at the Hoa Binh Hotel in Hanoi
for the first time. Interviewed executives at several state-owned hotels have confirmed
that lower room rates or special offers apply for Vietnamese guests, and that domestic
tourists are targeted more aggressively during the international tourism low season.
Period 5: 1999-present
In 2000, there were 55,760 international standard rooms in hotels in Vietnam compared
to 13,055 in 1992: a major increase of over 320 percent. The growth in accommodation
has kept pace with the increase in tourist arrival numbers, which reached 2,428,735 in
2003. Consequently, according to the VNAT, in 2002, the room occupancy rate still
averaged 45 percent (Vietnam National Administration of Tourism, n.d.). In 2004,
Vietnam had 85,381 rooms (Le, 2005). In that same year, it was forecast that Vietnam
would have 130,000 rooms by 2010 (“Summary of Vietnam,” 2004).
Visitor numbers to Vietnam have continued to increase steadily. Hotel room
prices have also gradually increased, but have not reached pre-1996 levels. Only one big
new joint venture hotel has been built in Ho Chi Minh City in this period, and none in
Hanoi. Asian regional crises such as the SARS outbreak o
12
that a number of Vietnamese tour agencies would sell package tours during these years
without even having the necessary hotel rooms available (McDowell, 1994). However,
these high occupancy rates apparently applied only to Hanoi and Ho Chi Minh City, as
lack of proper tourism planning allowed over-development of accommodation provisions
in some areas at the same time that Vietnam’s two biggest cities were experiencing a
severe shortage. Haiphong, for example, reported low occupancy rates during the same
period (EIU, 1993, p. 68) and Theuns (1997, p. 308) has written that parts of the country
away from Hanoi and Ho Chi Minh City had average occupancy rates of about 20-50
percent.
Since the Vietnamese government and domestic sector did not possess the
expertise or the finances to drive development in the hospitality sector unassisted, the
State Committee for Cooperation and Investment (SCCI) approved many foreign
investment proposals for hotel development (EIU, 1993, p. 63). According to a Senior
Official of the Foreign Investment Agency (FIA) of the Ministry of Planning and
Investment (MPI), established foreign accommodation chains brought in their own loyal
customers, thus attracting foreign exchange income into the country. Priority was given
the refurbishment of existing hotels to bring them up to international standards. In terms
of funds invested, hotel renovations were among the largest joint venture projects
(Theuns, 1997, p. 314).
During this period, hotel development accounted for between 57.5 and 99.4
percent of the yearly total FDI in tourism (Erramilli, Luu, Gilbert, & Hooi, 1997, p. 280).
Together with oil/gas and industry, hotel development was one of three major investment
13
areas that cumulatively accounted for up to 83 percent of total foreign investment in 1992
(EIU, 1993, p. 63).
Period 3: 1995-1996: reaction of state hotels
The increasing number of joint venture hotels posed a challenge for existing state-owned
hotels, which had to adjust to competitors in the market that they had monopolised before
doi moi. State-owned hotels also had to come to terms with the needs and demands of the
Western tourists who began to make up an increasing proportion of their customer base.
For example, the Dan Chu Hotel in Ho Chi Minh City receives around 75 percent foreign
guests and 25 percent domestic. Many of these hotels previously catered to guests from
Eastern bloc countries: a market with lower expectations but a market that had dwindled
following the collapse of the Soviet Union. Many older urban hotels replaced their
Vietnamese names by restoring the Western-sounding names they had borne in the precommunist
era before 1975 (Travel Business Analyst, 1992 p. 26), in an attempt to
appeal to the foreign market.
Some hotels supplemented their reservation departments with sales or marketing
departments. Around this time, state-owned hotels began to accept credit cards. All of
these changes were undertaken concurrent with the withdrawal of government financial
support for state-owned hotels. The Deputy General Manager of a state-owned hotel in
Hanoi related that guest-oriented thinking was a new concept to her hotel’s management
in 1993. Before that, an undersupply of hotel rooms had virtually assured hotels of
sufficient occupancy, and the government could be counted on to provide subsidies.
14
Increasing competition and the disappearance of government support were among the
factors that inspired the hotel to begin to accept credit cards in 1995 (Respondent, Hotel
A, personal communication, June 30, 2004).
In 1995, the Majestic Hotel in Ho Chi Minh City became the first state-owned
hotel to open a sales department, as a reaction to the burgeoning success of joint-venture
competitors such as the Floating Hotel and Omni Saigon Hotels. Such joint-venture
hotels provided both an imperative and an example for the introduction of more
progressive management thinking by their state-owned competitors. Although in an
interviewed a government official denied that joint-venture hotels have had any effect on
state-owned hotels, the Director of Sales and Marketing of one state-owned hotel has
openly stated that he had learned about pricing and promotion from the hotel’s jointventure
rivals. The discrepancy between these declarations may be indicative of the
degree of autonomy that has been assumed by state-owned hotels, which must deal with
problems of which government may not even be aware.
Also during these years, domestic private entrepreneurs began to do business
serving the independent tourist ‘backpacker’ market, which was disparaged by stateowned
operators, who did not consider independent tourists a significant market sector
and did not see small private operators as a threat or competitor. In contrast, all of the
seven representatives of state-owned hotels interviewed already saw joint venture hotels
as direct threats and competitors within the market sectors to which the state
accommodation sector aspired.
Period 4: 1996-1999: Oversupply and falling demand
15
Accommodation occupancy rates in Vietnam were high in the mid-1990s. Around 1996,
the overall hotel occupancy rate in Hanoi was 85-90 percent (Theuns, 1997, p. 308),
however, several factors contributed to a fall in occupancy during the period following
this peak. The government’s xenophobic ‘social evils’ campaign of 1995, a lack of repeat
visitors, irregularity in visa regulation and enforcement and the Asian Economic Crisis of
1998 all contributed to a drop in tourist arrivals to Vietnam during this period. Many joint
venture hotels, begun in the boom years of the previous period, were opening at the same
time. By 1999, there were seven international foreign joint venture hotels in Hanoi, with
between 224 and 441 rooms each. Ho Chi Minh City also had seven such hotels, with
between 248 and 552 rooms. This led to an oversupply of rooms in Ho Chi Minh City
and Hanoi and a drastic fall in prices and occupancy rates. The greatest fall in prices
came between 1996 and 1998. During these three years, room prices in one small private
domestic-owned hotel with 17 rooms fell from US$ 70 to about US$ 25 a night
(Respondent, Hotel B, personal communication, June 27, 2004). At the Daewoo joint
venture hotel in Hanoi, the average room price fell from US$ 120 to US$ 80 in the same
period. As a result, many small private hotels went bankrupt (Biles, Lloyd, & Logan,
1999, p. 18). Several interviewees stated that during the crisis, many state-owned hotels
adopted pricing policies such as low/high season price differentiation and started
programmes of promotion for the first time, following the example of foreign joint
venture hotels.
In May 1997, for the first time since doi moi, there was a drop in hotel occupancy
rates in Vietnam. Occupancy fell to 52 percent in Hanoi and 48 percent in Ho Chi Minh
16
City (Lamb as cited in Biles, et al, 1999, p. 18). According to the Viet Nam News,
though, the hotel occupancy rate had actually started to decline to a low of 40-45 percent
in state-owned hotels and 25-30 percent in private hotels from January to September
1996 (as cited in Logan, 1997, p. 175). Another source mentions that occupancy rates in
four-star and five-star hotels were only 40 percent in 1997 and fell to 20 percent in 1998
(“Vietnam-Hotel Business,” 1998). The Asian economic crisis, a lack of attractions in the
cities, a low return tourist rate, complicated visa procedures and poor transport all
contributed to this declining trend (Logan, 1997, p. 175).
Domestic private hotels retained their position as primary provider of
accommodation to the “backpacker” market. These hotels also remained the most
informal accommodation niche. A 1997 survey of twelve private hotels in Bai Chay,
Halong Bay, Quang Ninh Province, revealed that seven of the owners were still
employed by state enterprises or were receiving state pensions. Nine of the hotels also
served as the owner’s family’s home but only three of the hotels provided the family’s
primary source of income. The narrow plots of state-owned land on which the hotels are
built – often one storey at a time as funding allowed – were often acquired at below
market prices by state employees, teachers, former soldiers, officials or state company
employees (Nicholson, 1997, p. 30). The owner of one private guest house in Sapa is also
the manager of the state-owned hotel across the street (DiGregorio, Pham, & Minako,
1996, p. 5). Throughout the 1990s, however, operators in this sector remained on a
precarious footing, due to a lack of land titling and unclear land rights laws, encouraging
a rough-and-ready approach to business and a quest for quick profit (DiGregorio et al, p.
iv).
17
In 1998, a policy of seasonal pricing was adopted at the Hoa Binh Hotel in Hanoi
for the first time. Interviewed executives at several state-owned hotels have confirmed
that lower room rates or special offers apply for Vietnamese guests, and that domestic
tourists are targeted more aggressively during the international tourism low season.
Period 5: 1999-present
In 2000, there were 55,760 international standard rooms in hotels in Vietnam compared
to 13,055 in 1992: a major increase of over 320 percent. The growth in accommodation
has kept pace with the increase in tourist arrival numbers, which reached 2,428,735 in
2003. Consequently, according to the VNAT, in 2002, the room occupancy rate still
averaged 45 percent (Vietnam National Administration of Tourism, n.d.). In 2004,
Vietnam had 85,381 rooms (Le, 2005). In that same year, it was forecast that Vietnam
would have 130,000 rooms by 2010 (“Summary of Vietnam,” 2004).
Visitor numbers to Vietnam have continued to increase steadily. Hotel room
prices have also gradually increased, but have not reached pre-1996 levels. Only one big
new joint venture hotel has been built in Ho Chi Minh City in this period, and none in
Hanoi. Asian regional crises such as the SARS outbreak o
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