By Bruce Musick is Group CEO of Vanguard Hotels Pte.
They spent 10 years fighting the Americans, 100 years in a fracas with the French, and 1,000 years defending themselves from the various invasions, incursions and cultural assimilations at the hands of giant neighbour China. Despite this, the Vietnamese are an industrious, cheerful, peace-loving and hard-working people, fiercely proud of their national identity yet quick to forgive and embrace their old enemies, with a legendary work ethic described by the French thus: “The Vietnamese plant the rice, the Cambodians watch it grow and the Lao listen to it grow.”
One study reported by AFP in 2006, if it is to be taken seriously, had the Vietnamese as Asia’s happiest race. If they were happy then, they will be positively beaming with bliss as 2016 unfolds, as the good times get set to roll for the nation of perpetually rolled-up sleeves.
For the Communist-ruled (but no longer centrally-planned) nation is set to enjoy GDP growth in excess of 6.5 percent this year, having weathered recent external storms and with further recovery in domestic demand expected. Robust private consumption and investment growth, strong exports, low inflation and growing confidence all contributed to Vietnam being tipped to be South East Asia’s strongest performing economy, well ahead of the average growth of 4.4 percent predicted for the region.
According to the World Bank in its 2015 ‘Taking Stock’ report, all of these factors have led to greatly improved confidence, enabling Vietnam to create strong foundations for mid-term growth.
The global bank’s Country Director for Vietnam, Victoria Kwakwa, said: “This is a good time to solidify macroeconomic stability and rebuild policy buffers including through decisive efforts to rein in fiscal imbalances and tackle remaining vulnerabilities in the banking sector.
Reforms aimed at boosting foreign direct investment (FDI) and a raft of newly signed trade deals have also contributed to Vietnam’s new rose tint on the ASEAN map. Other fundamentals are also favorable: total export turnover increased by 9.2 percent from the same period last year, mostly due to manufacturing of high technology products such as cell phones, electronics, and computers.
Another shot in the arm for Vietnam is the Trans Pacific Partnership Agreement. Analysts at the World Bank predict that Vietnam could be the greatest beneficiary of the 13-nation deal, which accounts for a combined 40% of global GDP. The agreement could boost Vietnam’s GDP by as much as 8 percent over the next two decades, while adding 17 percent to its real exports and 12 percent to its capital stock over the same period.
Add to that perfect storm of growth, the fact that Vietnam is also sitting pretty in the new ASEAN Economic Community (AEC), with ASEAN its third largest export market after the USA and Europe.
The government has also announced sweeping reforms to foreign ownership and share trading to stimulate growth and investment, reducing the sectors where foreign investment is banned from 51 to just six, along with the recent abolition of the 49% cap on foreign ownership of share trades on the stock exchange, allowing international investors to fully acquire listed companies, excluding the banking sector.
Vietjet, the country’s low-cost carrier, recently announced new routes connecting Ho Chi Minh City with Kuala Lumpur (Malaysia) and Tainan City (Taiwan), with more routes planned. Vietnam is poised to soar like never before and the possibilities this raises for affordable hospitality are exciting indeed.
With the economic fundamentals looking healthy, the government paving the way for investment with a fervor that puts its ‘capitalist’ neighbors to shame, and a new class of traveller emerging – the ‘Millennials’ – combined with the Vietnamese love of value, prudence and saving money, and you can see why it’s possible that this is where the affordable hotel model might find its natural home in South East Asia.
I would expect affordable hotels to appeal not just to the Millennial nomad traipsing through Asia or the young entrepreneurial class who flit around the region, needing their laptop, smartphone and a good wifi connection to take care of business, but also to the rising young entrepreneurs and creative types in Vietnam too.
Our experience in Malaysia supports this directly. Vanguard Hotels and our investors are progressing positively with our commitment to introduce our mid range, affordable hospitality brand “Vivid” in George Town Penang by 2018. We believe that Penang is about to see a renaissance in terms of its offerings to the tourism industry with the creation of two strategically located convention centers which will add another dimension to the attraction of Penang, particularly for the M.I.C.E market.
This and the continued growth of the MM2H investment in the city make Penang an exciting and vibrant potential growth area for Vanguard Hotels. Currently, together with our on-going project in KL, this will amount to a US$40 million investment in Malaysia for the Vanguard Group.
The Pacific Asia Travel Association (PATA) has released a new unique consumer research report titled ‘Stepping Out of the Crowd: Where the Next Generation of Young Asian Travelers is Heading, and How to Win a Place on Their Travel Itinerary’. The report examines the travel trends of young Asian consumers and explains how secondary destinations and attractions can benefit from the rise in outbound travel from Asian source markets.
It also suggests where the wise hotelier will deploy resources: to cater to the motivation of the Millennials to leave the crowds in popular cities to get out and discover the food, culture and lifestyles of local people. I’ve said it before and it bears repeating: the Millennials are the coming force, and at present they are underserved or simply ignored by many hotel brands.
I see opportunity where we feel their pain and understand their desires, making them feel the USD60-USD80 spent on an affordable hotel is a smart decision and great value, saving them money while placing them in the heart of buzzing destinations and districts and connecting them to the dining and cultural experiences they crave.
It’s a revolution in the making, and Vietnam is going to figure prominently in the bold new world of affordable hospitality in Asia.