English 
Vietnamese In the vibrant and welcoming land of Vietnam, the hospitality industry is facing a significant challenge this summer as tourist travel by air has plummeted by up to 60%. Instead of exploring the beauty of their own country, travellers are opting for international destinations like Thailand or Malaysia. The primary culprit behind this shift in travel patterns is the soaring cost of airfare within Vietnam.
Read more: Effective Labour Market Strategies to Combat Staff Shortages in the Hospitality Industry
Table of Contents:
- Decline in Domestic Air Travel
- Reasons Behind the Surge in Airfare
- Hospitality Industry's Reaction to Recent Scenario
- Conclusion
Decline in Domestic Air Travel
The hospitality sector in Vietnam is currently facing significant challenges due to the surge in airfare prices.
This summer, domestic air travel saw a drastic decrease of up to 60%, with many tourists opting for international destinations like Thailand or Malaysia instead of travelling within Vietnam. The high cost of domestic flights has led travellers to prefer short-distance journeys that are more conveniently connected by road.
Reasons Behind the Surge in Airfare
Airlines use sophisticated algorithms to calculate the average revenue needed for each flight and the average seat-fill ratio. By allocating tickets into different pricing bands, airlines aim to maximise revenue.
There are two major reasons for the increase in flight tickets:
Imbalance in demand
An imbalance in demand significantly hikes up airfare. For instance, when one leg of a journey is in high demand but the return leg has a low fill-up rate, prices soar. A more balanced demand from both directions could mitigate this issue (1).
For example, with Viettravel Airlines, the flight from Ho Chi Minh City (HCMC) to Phu Quoc always has a seat-fill ratio that is 20% higher than the flight from Phu Quoc to HCMC. This imbalance in demand drives up prices, despite the airlines already taking some losses to make the increase more reasonable. (Vnexpress)
Rising operational costs
The largest proportion of flight ticket costs comes from fuel and aeroplane rental, accounting for up to 70% of the total cost. The remaining 30% covers sales, crew salaries, airport fees, insurance, and other expenses.
Several factors have contributed to rising operational costs:
- Fuel Costs: Jet-A1 fuel prices have surged, significantly impacting airlines' operational expenses.
- Currency Fluctuations: The depreciation of the Vietnamese dong against the US dollar has increased costs for international transactions.
- Fleet Size Reduction: A decrease in the number of operational aircraft has strained supply.
- Leasing Costs: The cost of leasing aircraft has risen sharply.
Read more: Seasonality in Hotels: Revenue Management Strategies You Should Adopt
Hospitality Industry's Reaction to Recent Scenario
Strategic Adjustments
To cope with the current situation, the hospitality industry is adjusting its strategies:
- Loyalty Programs and Promotions: Hotels and resorts are implementing loyalty programs and offering better promotions to attract and retain customers, especially those who prefer short-distance trips.
- Cost Management: Effective internal cost management is crucial to maintaining a competitive edge in a high-cost environment.
Read more: How Infor SunSystems Hospitality Empowers Hotel Businesses
Need for Collaboration
Currently, there is a lack of cooperation between the aviation and tourism industries. Hoteliers and authorities could lead in establishing collaboration among these sectors to create more cohesive and attractive travel packages for tourists.
Conclusion
The high cost of airfare is undeniably impacting the Vietnamese hospitality sector, leading to a decrease in domestic tourism and a shift towards international travel. Addressing this issue requires both strategic adjustments within the hospitality industry and enhanced collaboration with the aviation sector. By working together, these industries can create more balanced and appealing travel options for both domestic and international tourists.
