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Vietnam’s hotel sector: challenges and a mandate for change

Posted by Thai Pham on

In our last two blog entries on top hotel industry trends (part 1, part 2), we outlined a number of factors that are shaping how the hospitality sector operates. Hoteliers in Vietnam are advised to “be alert to new opportunities during tough economic times by changing their business strategies and researching the market” (*) . We believe four areas should be tackled to tremendously improve the Vietnamese hotel sector’s performance.

Customer segments

According to Grant Thornton (2012), for the 2012-13 period, an additional 5,000 rooms will be made available from three-, four-, and five-star hotels on the market in the northern, central, and southern regions. “However, far too many hotel developments are built in Vietnam with an expectation that tourists will come and occupancy levels will be 90% and above,” said Stephen Wyatt from real estate advisory firm Knight Frank Vietnam. Such days are far behind us now. An increasing oversupply exists in the luxury segment, prompting the need to shift the focus towards mid-market and budget products.

Specifically, hoteliers in Vietnam should pay more attention to:

  • Middle-class guests
  • Domestic travellers

hotel experience

Economic growth means an increase in the middle-class population, especially in emerging markets like Vietnam. Therefore, to ignore this growing sector would be a serious mistake. This also represents an opportunity for local hotel brands to thrive in providing lower-end products, taking advantage of their local know-how and flexibility.

Brand identity

Although the luxury segment has become increasingly saturated, the importance of brand identity within it will continue to grow by 2015 (Deloitte, 2010). To reinforce their brands, luxury hotels need to differentiate themselves more, avoid cliché messages, and deliver their branded experience consistently chainwide.

As customers are demanding more personalisation and valuing the emotional connection between their hotel experience and how it impacts their quality of life, developers are realising a potential in boutique hotel brands, also known as lifestyle brands, e.g., W hotels and Hyatt Place. These hotels:

  • Focus on a specific experience/style/image rather than on functionality
  • Are usually smaller
  • Emphasise connecting emotionally with guests

Furthermore, the lesson for hoteliers in Vietnam is that whatever market segment they are in, it is important to create a brand identity that is:

  • Consistent
  • Aligned with or supportive of the national tourism industry’s image

Talent management

As competition gets fiercer, only the best hotels will survive. One of the contributing factors to a hotel’s success is human resources, especially when employee turnover in the hotel sector continues to be high. Retaining engaged staff has become a critical task, as long-term employees are more likely to have a high brand loyalty and help better maintain brand consistency.

Thus, hotel executives need to:

  • Develop a clear talent management strategy that fits with the overall corporate strategy
  • Redesign operating models/organisational structures to optimise job fulfilment

Technology

The proliferation of social media platforms has made it easier for customers to share their hotel experiences, whether good or bad. Therefore, if hotel brands are to weather increasing scrutiny, they need to keep track of their online presence by:

  • Engaging with consumers, e.g., replying to feedback, creating polls, establishing a fan base
  • Investing in improving their business website, e.g., optimising search rankings, creating better navigation
  • Developing a multi-channel approach while making sure to assign dedicated staff to manage every channel

Another aspect of technology to consider is in-room products, which are largely shaped by consumer demand. Thus, hoteliers need to keep their eyes and ears open.

Finally, hotel management systems, such as back office management, reservation management, and customer relationship management (CRM), are no longer optional for hoteliers, but rather are musts for operational excellence. Even with these in place, though, the assessment of predicted ROI will need to be more rigorous. “Technology is always noticed most when it fails and operators must aim for seamless, invisible systems and pre-emptive problem solving” (Deloitte, 2010).

(*) Views from experts at the 2nd annual Hospitality Management Conference held on Nov 15, 2012, in HCM City

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We have come to the end of this series. Check back on this blog for future posts on the hospitality/hotel sector. Previous entries in the series:

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Hospitality Management Solutions

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 Rick Yvanovich
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