Introduction

The hotel industry is obviously the basic activity of international tourism. It is very important to the overall

Chapter 1 Introduction 1.1. Background The hotel industry is obviously the basic activity of international tourism. It is very important to the overall economic sector and plays an important role in most countries in providing facilities for the transaction of business, for meeting and conferences, for recreation and entertainment. In that sense hotels are as essential to economies and societies as adequate transport, communication and retail distribution systems for various goods and services. Through their facilities, hotels contribute to the total output of goods and services, which makes up the materials well - being of nations and communities. According to the World Trade Organization (WTO), since 1960s, the world had more than 32 million hotel beds. This total hotel capacity is very unevenly distributed, since developing countries possess less than 10 percent of this hotel potential. This sector has close relationship with tourism sector. The development of tourism sector will improve the hotel industry operation and vice versa. The composition of this sector of activity is also diversified, ranging from international chains with tens of thousands of beds to small hotels with a few rooms. But as far as international tourism is concerned, the hotel industry is clearly dominated by the big hotel chains. In Vietnam, since 1986, when the Vietnamese government enacted a new policy “ doimoi “, especially after the lifting of US embargo, more and more foreign travelers have visited Vietnam, contributing to the development of the Vietnam tourism industry. Vietnam tourism industry is growing rapidly. It is expected to contribute substantially to the Vietnamese economy in the coming years. The hotel industry will play a major role in this sector. In 1994, there were some 200 hotels and guest houses with approximately 4,000 rooms in Hanoi and 4,399 rooms in Ho Chi Minh city 1 . However the quality of most hotels does not reach the standard required, especially by foreign guests. It is difficult for foreigners to find a “ suitable room “ in Vietnam. Most of hotels in the nation also lack training and experience as well as accommodation and facilities available. Besides, with very high growth rate in hotel industry in the last years, Ho Chi Minh city is running into trouble now. Nearly 4,000 rooms were added in 1995 alone, causing a oversupply status in the hotel market in Ho Chi Minh city. Now the hotel market is oversupply but lacking international standard rooms in big cities as well as Vietnam as a whole. An average occupancy rate was reduced from 80-90 percent in 1994 to 40-45 percent in 1996. Although a shortage of quality and surplus of quantity of hotel rooms in Vietnam due to delays in finalizing major hotel projects, room supply is also expected to grow 20 percent annually. The number of visitors is still expected to increase to 2,3 million in 2,000. Therefore, the strategy for hotel industry in Vietnam is very necessary to ensure that the supply of hotel rooms can meet the demand in terms of quantity and quality. 1.2. Statement of the Problems 1 Saigon times 10/1994 From the background, there is a need to find ways to adopt the development strategy for hotel industry in Vietnam. What are problems and difficulties of Vietnamese hotel industry. What are the lessons for Vietnam hotel industry from other countries in the region. How does Vietnam hotel industry implement to cope with its problems and develop its operation in the future? 1.3. Objective of the Study The proposals of this study are as follows: • To identify key performance measures in hotel industry in Asia countries. • To analyze hotel industry in the selected Asian countries in order to identify high performance countries. • To analyze how the industries have achieved high performance, with intention to draw the relevant experiences for Vietnam. • To analyze the development of hotel industry in Vietnam. • To provide customers’ perception of Vietnamese hotels. • To analyze the gap between high performing hotel industries and Vietnamese hotel industry. • To suggest the lessons for Vietnam to develop its hotel industry in the coming years. 1.4. Scope of the Study The study focuses on the major problems and difficulties which are faced by hotel industry in Vietnam now. This study does not include tourism industry as a whole and some relative sector such as restaurant or service industry. The study focuses on examination the development of hotel industry of Singapore, Thailand, Indonesia and South Korea. Based on these analysis, the study tries to find some lessons for Vietnamese hotel industry. 1.5. Methodology This study requires: 1.5.1 Primary sources of data collection 1. Primary sources: data were collected by direct interviewing managers of some selected hotels and directors of government offices: Vietnam General Department of Tourism, Hanoi Tourism Office, Research Institute for Tourism Development, Tourism Margazine, Hanoi tourism company, some hotels in Hanoi and from survey of international travelers. 2. Primary information Interview with government officers -2- Four government offices are selected to interview: Vietnam General Department of Tourism, Hanoi Tourism Office, Research Institute for Tourism Development, Hanoi tourism company and Tourism Margazine. The information collected from these interviews is: • Assessment of strengths and weaknesses of Vietnam hotel industry • Information on the challenges and opportunities of Vietnam hotel industry in the next 5-10 years • Policies and strategies for tourism development in Vietnam in the past and in the future Interview with Vietnamese hotel managers 10 hotels were selected to interview including 1 joint - venture, 3 state - owned and 6 private (mini) ones The information selected from interviewing is: • The difficulties and problems faced in hotel operations • The factors influencing their operations • Evaluation of the performance of their own hotels Interview with Thai hotel managers and officers The information selected from interviewing is: • The role, responsibilities and authorities of Thai Hotel Association, Tourism Authority of Thailand and Board of Investment in improving hotel and tourism development? • The relationships between Thai Hotel Association, Board of Investment and Tourism Authority of Thailand in hotel development? • What are influences of Thai Hotel Association , Board of Investment and Tourism Authority of Thailand to the hotel industry development of Thailand in recent years? • What are the tourism and hotel policy of Thai government, Thai Hotel Association and Tourism Authority of Thailand? • What are the influences of Vietnam war to Thai hotel development? • Who establish the promotion campaign in developing tourism and hotel industry? What are the main objectives of these promotion campaign? From survey international travelers 150 foreigners were chosen from 13 hotels in Hanoi, of which − 50 foreigners in 2 joint - venture hotels. − 50 foreigners in 5 state - owned hotels. − 50 foreigners in 6 private hotels. The information selected from this survey is: • The evaluation of foreign visitors on quality of hotel accommodation, facilities and services -3- • Their satisfaction on price, employment skills and marketing activities in Vietnamese hotels • Their evaluation of external factors which influence on hotel development 1.5.2 Secondary information • Statistics on status of the development in the hotel industry in Vietnam, such as occupancy rate, number of rooms in different categories, number of visitors and hotel investment including both domestic and foreign sources • Organization of hotel industry and its linkages with tourist department, tourist destination and travel agencies • Government policy, such as policy of tourism authority, policy of travel agencies and policy of local government. • Management and labor skill of hotel industry • The major issues and problems and the ways competent agencies plan to handle the strengths and weakness of their approach • Overview and strategies of hotel industry in Singapore, Thailand, Indonesia and South Korea. -4- 1.5.3 Research Framework Figure 1.1: Methodology of the Study -5- Research objectives Literature Review Information and Data Analyze the development of hotel industry in Vietnam Draw valuable lessons for Vietnam hotel industry Analyze the gap in hotel development between Vietnam other selected countries Conclusion and Recommendations Evaluate the current situation of Vietnamese hotel industry 1.6 Organization of the Study This study is organized as follows: Chapter 1 provides an introduction including the background of the research, the objectives, the problem statement, the methodology and scope and limitation of the study. Chapter 2 contains a description and analysis of the development of hotel industry, its operation as well as difficulties and strategy in Thailand and some other countries in the region. The valuable experiences are drawn from their experiences to apply in the hotel industry in Vietnam. Chapter 3 analyses Vietnamese hotel industry situation in terms of hotel industry profile, the strengths and weakness, opportunities and constraints of VN hotel industry, government policy in hotel industry development and development trend of hotel industry. Chapter 4 provides foreign customers’ perception of Vietnam hotel industry Chapter 5 analyses the gap between the hotel industry in Vietnam and other Asian selected countries. The necessary lessons for Vietnam are drawn in this part. Chapter 6 provides the conclusions and recommendations for further study. -6- Chapter 2 The Development of the Hotel Industry in The Selected Asian Countries 2.1 The Development of The Hotel Industry in the Asia-Pacific Region This section briefly overview the hotel industry development in the whole region. Based on relative performances of different countries in the region, four countries were selected for an in-depth study to provide references to the tourism authority in Vietnam. 2.1.1 The Situation of The Asian Hotel Industry “ Asia-Pacific ascendancy “ is an economic description of the rapid rates of growth achieved by a handful of countries in the vast region (Japan, Hong Kong, Singapore, South Korea, Malaysia, the Philippines, Thailand, and Taiwan). The health of the Asian hotel industry continues to be slowed by the world recession. Nevertheless, Asian hotels have done well in adapting their marketing strategies to cope with the difficult times. The main issues is that hotels were planned for in the days of the pre-Gulf war optimism are now beginning to come on stream. They face the problems of high costs and low yields, which means long-term problems with profitability efforts to attract and develop the intra-Asian traveler market are continuing-an effort which many hoteliers believe is vital to the future success of their market. In line with the segmentation of the tourism industry itself, the Asian hotel industry has changed to meet demand. There is now a wider choice of hotels available in more destinations at better prices than ever before. Hotel groups are seeking to expand their presence in order to develop market share and distribution, thus lowering unit costs and raising efficiency levels. Some of the trends taking place: 1. The growth of Asian Hotel chains: Home-grown groups like Century International, Shangri- La, Regent, Omni, New World, ANA, Southern Pacific Hotels and Dusit Thani are now becoming common names around the region where once names like Aheraton and Hilton used to dominate. This trend is likely to continue. 2. The growth of franchise operations: Operations like Best Western and Choice, which once were entirely United States and European oriented, are now spreading out in South-East and South Asia, providing a marketing franchise alternative to hotel owners who only want distribution but no management help. 3. The growth of Asian hotel owners: the owners of many of the Asian hotel groups are also real-estate barons in their own countries. Many of them are cash-rich, and have used their connections to buy hotels in Europe, the United States, Australia, and New Zealand. The strength of currencies like the Japanese yen, Singapore dollar and Malaysian ringgit coupled with the real estate sumps in many of the industrialized countries has assisted this trend. -7- In the heady days of the late 80’s, hotel developers were divided into two main camps-winners and winners. The rules change in the 90’s. Occupancy rate is falling, room rate growth is slow and sophisticated competition come on-line. In this decade, there will be winners and losers. Many of the opportunities which lie ahead will focus on converting the losers into winners. These opportunities are not just for management companies, but also for shrewd investors with an eye toward undeserved and hence, undervalued hotel assets. Nearly any hotel will eventually make a good investment-albeit often for the second or third owner. For years, the real estate play in the hotel sector made mockery of the business of marketing and managing hotels. Now that much of the real estate play is sitting on the bench, its back to basics. Values now become a function of a property’s ability to generate sustained cash flow. The nineties challenge developers and operators to create value in sold and competitive markets where the salvation of unchecked real estate appreciation is nowhere to be found. The late eighties were marked by generally strong occupancy rate levels and significant real growth in average room rates, but reality has quickly stepped back into most markets. This reality has and will expose a lot of the excesses of the previous period, meaning over- developed or misdirected projects. The result is a good number of costly hotels which are poorly positioned, branded, marketed and managed. In a sense, the physical hardware of these hotels is currently undeserved by the software in place. Some of these hotel are independent, some are managed by smaller chains. In each case, a change toward the optimal positioning, branding, marketing and management will enhance cash flows and create immediate value. In most cases, owners are interested in saving face. Other investors and bankers with options are typically interested in getting out. Management companies that can respond to these needs with flexibility will find no shortage of opportunities in the coming years. This flexibility will include a modular approach to typical management contract and representation services and a willingness to trade a long-term contract for a participation in the creation and realization of value through a property sale. But opportunities are not only directed toward management companies. Investors with an eye for undeserved assets and willingness to act discreetly will quietly reap rewards. Best of all worlds will be those investors and management companies that act in tandem to turn properties around an participate in the upside through exercising options or participating in appreciation. 2.1.2 Reasons for Choosing Four Countries In the last few years, total rooms supply was increased very fast in Singapore, Bali and Jakarta (Indonesia), Bangkok and Phuket (Thailand) than Tokyo and Shanghai. Hotel industry in Singapore developed with highest occupancy rate, while occupancy rate of hotels in Thailand was reduced to lowest level compared to other countries in the region. Occupancy rate in Indonesia was similar to Japan and China (Appendix F - Table 1). -8- Moreover, in recent years, four countries namely Singapore, Thailand, South Korea and Indonesia contributed an important role in developing of the region. The Gulf war in 1990 less impact on the economic development of these countries. Each countries has different characteristics in economic development as well as tourism and hotel development. Each countries now faces different problems in its tourism and hotel development. Thailand is country with basically stable, the last coups having little effect in the country. Tourism and investment led to a boom in the 1980s. The downside of tourism is that Thailand faces the worst AIDs crisis in Asia (Adams et al., 1991). Still, tourism development continues as it did in the 1980s, with hotel room supply set to double to 40,000 in Bangkok alone in 1992. Meanwhile, tour operators are shifting emphasis to northern cities and resort islands. There appears to be no environment planning policy and this will have severe negative affects on tourism in a decade’s time. Beside Thailand, Indonesia is the dominant power in the six-nation ASEAN. It has a population of 175 million, abundant natural resources, and unique physical environments. The economy is doing well and Indonesia is seeking a greater role on the world stage (Adam et al., 1991). The country earned US$ 1.89 billion from tourism in 1990, and tourism is being targeted by the government for employment creation. “ Visit Indonesia Year “ increased tourism beyond about 3.5 million persons in 1993. There is interest in setting more educational training for tourism (Schwartz, 1991). South Korea is one of the strong economy in the world. Its per capita income is now over $5,000 and the country’s growth rate is one of the highest in the world. In 1990 1,5 million South Koreans traveled abroad. However, domestic travel has been less buoyant because of unsettling political reforms and the threat of North Korea collapsing, with the prospect of thousands of North Koreans heading for the South (Adam et al., 1991). Singapore is a densely populated city-state with 2.7 million people living on an island no larger than 300 square miles. Recording the second-highest standard of living in Asia (after Japan), it has a per-capita GDP that exceeds that of United Kingdom. Part of the reason for Singapore’s economic growth is the fact that it has a lucrative tourist industry, which attracted 6.4 million visitors in 1993, more than twice its resident population. Singapore shares the same distinction as other popular tourist destination such as France and Spain. The tourism industry in Singapore is strongest in the Asian countries. Singapore government plans development process of tourism industry with high successful level. In general, Singapore government contributed an important role in the development of hotel and tourism industry in Singapore. Thus, although facing many problems and crisis in the recent years, these four countries are still developing with fast level. Their tourism and hotel industry contributed strongly on the development of Asia. The lessons and experiences will be drawn from them are very necessary for Vietnam hotel industry in its development process. This is the reason why these four countries are selected to serve as references for hotel industry development in the country 2.2 The Development of The Hotel Industry in Thailand 2.2.1 An Overview of Thai Hotel Industry -9- Thailand, a nation of more than 55 million people, is one of the developing world’s most dynamic economies. A favorable economic climate in the 1980s propelled the Thai economy into achieving one of the highest growth rates in the world with an average annual gross domestic product of 10 percent from 1986 to 1990 2 Tourism plays an increasing and crucial role in the growth of the Thai economy as the country shifts from an agricultural base to a more industrialized and service-based economy. Tourism is Thailand’s largest source of foreign-exchange earnings, with receipts accounting for about 5 percent of country’s GDP. Since 1965 Thailand was among the three major tourist destinations in southeast Asia in the same category as Japan and Hong Kong. Many observers believe Thailand will be an important hub for traveling through Asia, particularly to Vietnam, which is just opening to tourism. In 1994 total visitors visited Thailand was more than 6 million, of which 59.4 percent were East Asia. Total revenue collected from visitors in this year was $ 3,722 million. In 1996, the top five arrivals, categorized by quantity and country of residence, were dominated by Asians. They were led by the Japanese. The other four were Korean, Chinese and Taiwanese, followed by the biggest none Asian group the Germans 3 . Compared to the world's top tourist destinations such as France, Italy and Spain, each of which hosts 27-50 million visitors a year, the Thai tourist economy-accommodating 5 million international tourist, cannot be considered to be very large. Measured in relation to GDP, however, Thailand's tourism income is significant, i.e. about 5.4 percent of the country's GDP. Compared to tourist arrivals in countries endowed with the world's wonders, such as Egypt (with 2.6 million tourists) and other Asian countries, such as India (with 1.8 million tourists), the Thai tourist industry has clearly been an economic success. A much lower cost of doing business, a destination that’s growing in demand, and the ability to get reasonably good rates is a mixture that give more and more foreign and domestic investors the ability to operate in this industry. Thailand also occupies an advantageous geographical location because it is a convenient stop-over or transit point between Europe, Australia and the Far East. The success of Thai tourism cannot be explained solely by the attractiveness of the country's natural and historical resources, but has been brought about by skillful management and representation. According to the INTRAMAR 1990-1994 World Destination Minister Survey of 1450 travel agents in 40 cities in 26 countries throughout the world, Thailand ranked first in three positive attributes: warmth and friendliness, inexpensive place to stay, and interesting night life. However, Thailand seems lose some its competitive advantage now. Its positive image began to decline in the minds of visitors, primarily from the negative publicity surrounding its ongoing image problem over AIDs, the sex industry, and environmental neglect at some destinations. Consequently, tourists were avoiding Thailand in favor of Singapore, Malaysia and Indonesia (especially Bali). From 1989 to 1990, visitor arrivals in Indonesia increased from 1.6 million to 2.2 million, Malaysia increased from 3.9 million to 7.5 million, while Thailand only increased from 4.8 million to 5.3 million. In addition, Thailand ranked second, after India, in terms of sanitation problems and health hazards, according to the World Destination Minister Survey 1990-1991 Hotel industry is an essential and critical component of Thailand’s tourism industry and the national economy. However, the hotel industry in Thailand had not been developed yet until 1960s. In 1940s there were only nine " first class " hotels in Bangkok, of which only four, the 2 “Far Eastern Economic Review”, Asia Yearbook 1992 (Hong Kong: Review Publication Co. Ltd), p209 3 Tourism Authority of Thailand’s January-August 1996 statistics -10- [...]... percent annually This striking growth rate was the result of the TOT's concentrated effort for the tourist promotion program Another reason behind this significant annual increase in arrival figures was the introduction of jet service for international flights in the early 1960s Facilities were improved at the Don Muang airport in 1962 to accommodate the expected heavier flow of air traffic In addition, there . Chapter 1 Introduction 1.1. Background The hotel industry is obviously the basic activity. Organization of the Study This study is organized as follows: Chapter 1 provides an introduction including the background of the research, the objectives, the