This is an interview with John Gardner, CEO and Founding Partner, at Optimum Hospitality in Ho Chi Minh City. It covers fuel price impacts on: hotel and resort performance, domestic vs international demand, construction and development (delays), and regional travel dynamics.
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BARNES: Sorry, I was just saying, is it okay for me to record?
GARDNER: Oh, yeah.
BARNES: Yeah, cool. And so, yeah, like I pretty much explained in my message, just sort of looking at the impacts that the fuel crisis is having on the tourism industry in Vietnam. And I guess you’re working in or with hotels and things. What kind of things are you seeing being impacted most?
GARDNER: Okay.
So, there’s just been a slowdown generally around — for some reason my camera won’t — it says it won’t — it can’t find my camera.
I don’t know why.
So, sorry about that.
I’ve tried just trying to turn my camera on and it says camera not found. Make sure your camera is plugged in.
Well, my camera is plugged in and my previous call my camera was working 100 percent perfectly.
So, I do not know why the camera is not working on this.
Anyway, back to what we were talking about.
BARNES: Sure.
GARDNER: So, what we found in, you know, just talking to my colleagues around the country and just talking to industry people is that there has been a slowdown, obviously, in European business simply because fares have increased quite dramatically.
And it is not a sudden stop.
It has just been a gradual slowdown.
So, the bookings that were already made, you know, some months ago from Europe in the long haul, they have been continuing, but there are no sort of new bookings coming up, or very few.
They have dropped quite significantly.
Also, even business coming from Korea, which is actually one of the biggest inbound markets into Vietnam, has also dropped quite a bit.
And there are a lot of resorts that relied significantly on the Korean business.
They are hurting quite a bit.
One of my colleagues who runs a very large resort up near Nha Trang has been very lucky to have replaced a lot of the Korean business he had with Russian business.
And I think he is rather fortunate because that is a little bit unusual.
I do not think all the resorts have managed to replace the Korean business.
And that is a big resort.
It is a 600 room resort.
So, he needs to replace some of the business that has been lost.
But I think all resorts are hurting a bit in that regard.
It is a holiday week in Vietnam this week.
That is why I am actually away.
But the resorts, from what I understand, and certainly the ones we have been involved in, are getting a lot of domestic business.
The domestic tourism is actually quite good.
Especially those resorts that are in driving distance of Saigon and Hanoi, they are doing okay.
I do not know about Da Nang.
I have not spoken to anyone from Da Nang, which is, as you probably know, a major tourist destination.
So I am not really sure of the situation up there.
But I think the whole country is being affected to some extent.
There has been a cancellation of some domestic flights, like all airlines around the world, they have cancelled some flights to reduce the cost of fuel.
But how much of an impact that has had throughout the country, I am unsure.
One of the other things I found out too a week ago is that a lot of the domestic business that goes to resorts goes by bus.
And during holiday periods, the bus companies put on extra buses, hoping that they will get extra business.
Well, I found out that in fact the buses will only take reservations, and once the reservations are full, once the bus is full, that is it.
No more buses are put on the trips.
So that was an interesting one that I had never anticipated.
BARNES: But it makes sense, right? Because of the fuel costs. Yeah.
GARDNER: Well, it makes a lot of sense.
But it is something that I had not considered until I had this conversation with a colleague.
BARNES: Sure. And so how are businesses kind of responding to this? Like how do you kind of cover those lost tourists, the lost income?
GARDNER: Well, you try and, as far as the resorts and hotels go, you try and put together packages that have additional services and benefits, you know, to try and entice people.
I think probably what has happened is that a lot of the domestic market, a lot of Vietnamese that might have headed off overseas during the holiday periods, have probably decided to stay in Vietnam.
And even though the fuel costs have gone up maybe 30 percent or so, they would rather pay a bit extra on fuel to drive to a resort rather than pay a lot more and fly to another country, fly to Thailand or somewhere like that where they do love to go.
So I think it has probably focused the domestic market on Vietnam rather than overseas.
BARNES: Sure. And are hotels anticipating long-term implications? Is it affecting investment or project developments, or is it too early for that?
GARDNER: I think what it has done is that with the fuel prices increasing, it has increased the cost of construction.
So there is a lot of new hotel and resort development around the country.
And I know that in some cases some of those projects that have been under construction have either been put on hold or they have slowed right down because they just cannot afford to proceed.
I suspect what they are doing is hoping that the fuel prices will drop and construction costs will come back again somewhere in the future, I imagine.
But that has happened quite a bit, particularly in Phu Quoc, and I heard also in some new resort areas in Da Nang and further north.
So they have just been put on hold or slowed down a lot.
BARNES: Yeah. Yeah. I wonder too if, I mean after COVID it took a while for tourism numbers to get back up. I think last year was the first year that they had beaten their pre-2019 levels, and so I mean this coming in on top, were those businesses fully recovered, or were they still recovering from that when this hit?
GARDNER: Yeah, look, they pretty much recovered from COVID.
What happened after COVID, though, was the domestic business really went wild in Vietnam.
There was revenge travel for the domestic market.
So what really pulled back the numbers for total tourism numbers was the inbound market, as it took some time to recover, but the domestic tourism went very well straight after CO.
BARNES: Sure. Sure. Okay, cool. And then I guess, what are your expectations moving forward, or what is the industry expecting?Is this expected to be a short-term thing, or are people preparing for something that is going to take months or years?
GARDNER: Ask Mr. Trump.
Look, I think the whole the whole world is is wondering the same thing.
You know, it’s it’s affecting everybody.
Everybody in well, all facets of life, not just tourism.
And but if we talk about tourism, I think everyone’s just wondering what’s going on.
I’m sure there’s many people around the world are just holding back waiting the the the longhaul flights from from Europe to to this part of the world that the costs the prices of flights are exorbitant.
You know some of my friends who are Europeans they’re telling me how much the the flights are now to go back home and for for a trip just ridiculous.
Absolutely doubled the price you know.
So that’s obviously going to affect tourism to Asia.
But what we’re hoping is that regional Asian business will will will still continue even though it’s sort of slowed down right now from countries like Korea and Taiwan and Hong Kong etc.
We are sort of hoping that that will still continue.
But also we have actually seen a bit of a rise in the Australian market.
The Australians, I think maybe a lot of Australians who might have gone to Europe, North America, or other places, the Australian numbers have come up quite significantly in the last few months.
I cannot give you exact numbers.
I do not know that.
But I am just talking, I have a lot of, I communicate a lot with colleagues in different resorts around the country, and these are the comments I am getting.
BARNES: Yeah. Yeah. Okay. Cool. All right, man, that is plenty for me. Did you have anything else you wanted to add? Anything you think I have missed?
GARDNER: No, I do not think so.
I think, you know, a lot of people are just in this holding pattern, waiting to see what happens and hoping that this whole crisis gets over quickly.
But, you know, construction costs, as I said, just holding back on wanting to spend too much on travel.
The whole world is in a bit of an unsure state right now.
So, I think people are just not so willing to spend so much.
And even construction costs are not just on some hotels and resorts.
There has been a hold on other real estate developments in the likes of Saigon and Hanoi as well.
They have slowed down or just put a hold on further developments.
Not all of them, but a lot have.
Some of the big developers just carry on anyway.
You know, they just have deep pockets and they are able to carry on.
BARNES: Yeah. Yeah, for sure. Okay, mate. Well, thank you very much for your input and thank you for your time. Enjoy the rest of your holiday.
GARDNER: Yeah, thank you, Mark. And again, sorry about my camera.
BARNES: I have no idea why it is not working, but I actually had you for the first sort of two or three minutes and then you dropped out, if that makes any difference. So, it was working at the start. But anyway, all good, man.
GARDNER: All good.
BARNES: Thanks again.