Tourism in dire need of solutions to save itself

10:13 | 19/05/2020
With difficulties in accessing government support packages, about 90 per cent of Vietnamese tourism businesses specialising in inbound tourists are struggling to find ways to temporarily shift to exploiting domestic visitors as their main markets remain completely paralysed.
1492p17 tourism in dire need of solutions to save itself
While many local agencies are struggling to focus on domestic tourists, some are seeing the situation as a warm-up

With 18 years of tourism service experience, Dan Thuy Hong, director of Tay Ho Tourism and Trading JSC, has experienced several ups and downs in the profession, but nothing like is being felt today.

Hong said that in response to the coronavirus crisis, her business received support from the government’s VND62 trillion ($2.7 billion) social security package. The package allows businesses to extend the tax payment time until the end of June, postpone insurance payments for all employees until the same time, and also extend the time to pay bank debts until the end of October.

Recently, Hong also received notification of a credit loan, but there is no plan to use it as the expected loan amount is even lower than the interest that the business must pay to the bank every month. “Every month the company pays the bank nearly VND200 million ($8,700) in interest. By the end of October, the amount we have to pay would be nearly VND1 billion ($43,500). This is really a huge burden because in recent months the company has had no revenue,” she explained. “Businesses just want to extend the time to pay off debts and pay taxes for a year or two, so that we can pay slowly instead of having to pay all the money when we start operating again, putting us under severe pressure.”

Nguyen Quoc Ky, general director of Vietravel, proposed additional measures at a seminar with leaders of Ho Chi Minh City to reduce or delay the tax payment time for businesses affected by the pandemic. “VAT is postponed to the end of the year, but travel companies do not have VAT to pay taxes because there is no revenue. So for the months that were seriously affected, it should be possible to consider exemption for businesses.”

In addition to reducing taxes and interest rates, many businesses also expressed concerns about the VND1.8 million ($78) support package for each employee who has a labour contract or unpaid leave. Ky mentioned that the disbursement of this support package was implemented very slowly and asynchronously among localities, causing difficulties for Vietravel’s 1,700 employees.

Dao Xuan Thinh, director of Thinh Dat JSC and owner of Le Champ Tu Le Resort, shared that when he learned about the support policy for employees who lost their jobs; his business contacted the locality for implemented procedures to support staff but was informed that no specific instructions were provided.

Thu Trang, director of sales and marketing at Indochina Sails, assesses that the current support packages are mainly aimed at unemployed workers, but in addition to salaries, businesses also have a lot of other expenses and problems that are not being solved before further challenges will undoubtedly emerge.

In the context of the common difficulties of the tourism industry, most groups expect the government’s support packages to be quickly implemented. However, there are difficulties in accessing these support packages while revenues mainly depend on tourists coming from outside – a trend not currently able to recover, forcing each tourist business to try and find a new reason to exist.

Intermittent activity

Phuong Nguyen, managing director of Custom Vietnam Travel, said his company only catered to tourists from Western countries but since losing this market, the company had to close until recently. He started to plan to exploit the domestic market but nothing has yet been implemented because the group is not specialised in this area.

“There is nothing to do yet so I plan to try and test the domestic market. From now until the end of the summer, if there is no harvest, the company will continue to stop all activities and wait for the epidemic to end,” he said.

At the time being, Custom Vietnam Travel will focus on short weekends. The thinking is that this year, students will not be able to take long holidays and the way people travel is set to change. Freelance travel, small group travel with family and friends, and prioritising the use of personal vehicles could become the preferred advantage. The company’s tours will be categorised into different segments such as resort tours for high-class and senior guests, and adventure tours for young people with good affordability.

This is also an opportunity for tourism businesses to develop personalised products, targeting high-spending visitors. He claimed, “I don’t know how effective it is, but I think businesses will focus on products that are private because they are appropriate for now. With many years of designing private tours, I see the demand for individual groups of Vietnamese tourists in recent years has increased and many groups have a much higher level of spending than inbound visitors.”

Some other businesses temporarily stopped working with foreign partners, turning to domestic travel, service, and aviation businesses to create travel combos for Vietnamese people at an attractive price. Nguyen Mai Phuong, owner of Rendezvous Hotel in Hanoi, said her business has stopped co-operating with RedDoorz to work with domestic travel agencies.

Many diversified tourism products with super discounts of 30-50 per cent are constantly being launched and promising to launch more strong incentive programmes in the near future, especially when the Ministry of Culture, Sports and Tourism launched the “Vietnamese travel Vietnam” scheme and many destinations such as Quang Ninh, Nha Trang, and Thua Thien-Hue announced exemption and reduction of entrance fees for domestic tourists.

However, this new direction adds to the fierce competition among tourism businesses, particularly between tourism businesses serving international visitors and domestic tourists. According to statistics, there are currently nearly 2,700 travel businesses in Vietnam specialising in both inbound and outbound guests.

In some of the favourite tourist destinations for international visitors, such as Hoi An, up to 80 per cent of travel companies, restaurants, and hotels operate based on international arrivals, with only the remaining 20 per cent exploiting the domestic market. Completely losing the international tourist market, which saw 18 million visitors in 2019, and the high profits that came with it, all these businesses will have to turn to the fierce competition of serving domestic visitors, of which there were 85 million last year.

Jumping into new waters

Some businesses worry that they cannot compete with those with experience in serving domestic customers when they do not have enough resources to change products and understand the tastes of customers, so they have resorted to temporarily freezing operations instead. Others do not expect much, but still consider it as a way to “warm-up” so that customers know that their business still exists.

Le Quoc Viet, owner of Santa Vietnam hotel said, “Businesses are forced to share pieces but those that have adaptability will create many strengths and overcome the situation. However, there are still customers for those businesses to exploit; that is, quite a lot of foreigners are living and working in Vietnam.”

Vietnam is also launching stimulus packages and deep discounts for its services, as well as free support for other services to better suit Vietnamese customers. A number of well-known tourism businesses with products for international visitors are also beginning to re-route their activities based on assessments, but faith remains in foreign tourism markets despite a slower recovery, one which could grow more sufficiently over the next few months.

Viet added, “I know that many Vietnamese travel agencies are still co-operating with foreign partners to build new products. After recovery, the market in general will have big fluctuations including tastes, needs, and how to deploy tours.”

Proposal to reduce aviation fees

To help aviation businesses overcome the aftermath of the ongoing coronavirus pandemic, the government has considered to reduce take-off and landing rates, and fees for outbound flight control services for domestic flights by 50 per cent from March to the end of September.

In response to the plan, airlines have launched attractive promotions with cheap fares on many domestic routes. Vietnam Airlines has launched a preferential programme of 50 per cent discount on domestic flights from Hanoi and Ho Chi Minh City to destinations like Phu Quoc, Dalat, and Danang with fares at VND99,000-249,000 each way excluding taxes and fees ($4.20-$10.60).

This is considered a solution to stimulate development of the industry, especially in the context that airlines are forced to cut labour because of declining sales. In addition, the reduction of fees also contributes to stimulate domestic tourism development, creating more opportunities for travel agencies and tourism businesses to link with airlines to launch package travel combos at cheap prices, in response to the “Vietnamese travelling Vietnam” initiative launched by the Ministry of Culture, Sports and Tourism.

The Ministry of Finance also consulted on a draft circular proposing to reduce evaluation fee for issuing certificates and licenses in civil aviation activities, and granting permits to access restricted areas.

The fee for this will be reduced to VND16 million per grant ($680). The re-issuance fee level for changing contents is reduced to VND12 million per grant ($510).

Fees for assessment and issuance of licenses to operate airfield assurance services are also expected to decrease.

Fees for assessment and issuance of licenses for provision of services at international airports are proposed to be reduced to VND40 million each time ($1,700). In the case of providing services at other airports, the fee for the first time shall be reduced from VND30 million per grant to VND24 million per grant.

It is expected that reduction of the above fees will remain in place until the end of 2020. From 2021 onwards, fees will revert back in accordance with current regulations.

By Hoang Oanh

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