Waiting for the Metro: Hospitality in HCMC
Tourism numbers are up in Saigon, but that doesn’t necessarily translate to increased profits in the hospitality industry. With more than 35 years in the industry and almost five years as the general manager of the New World Saigon, David Wicker explains the situation.
Would you say that the room rates in Ho Chi Minh City are rather low compared to the rates of hotels in other destinations in Vietnam?
They are. If you go to Da Nang, Nha Trang and even Hanoi you see in many 4- or 5-star hotels a room is $150 to $200, whereas in Ho Chi Minh City, unless you’re talking about the high-end Hyatts or the Reveries, room rates tend to be at the low side of $100. A lot of that is because of the quality of the in-bound business that’s coming into the country. The wholesale businesses [and] the corporate industries tend to be very budget-conscious. So in order for us to achieve our fair market share, we really need to squeeze rates down.
So what would it take to be able to raise the rates?
Some of the safety features of the country and the variety of tourist sights within Vietnam is quite limited. People come to Ho Chi Minh City and say what can they do? There’s the Cu Chi Tunnels and Mekong Delta and there’s not much else. Whereas if I go to Bangkok I’ve got a whole week of activities I can do. There isn’t a great deal of organised places for people to go where it’s structured in terms of safety and security, where there are orchestrated tours run by the government or government-authorized bodies, and so there’s a hesitation for any professional [hospitality] operator to offer higher rates.
How about HR-related issues? Have you seen any change since you’ve been here?
Talking about the shift in the mentality of working regimes here is a little bit of a controversial issue. The changing face of the newcomers today is that they’re more hungry, they have a better understanding of the skills required [for their job] as well as the development of those skills. And they’re interested in promoting them, whereas we have had a lot of staff that’d been at the hotel for a long time. They’re quite happy to be at the lowest levels of job task and not interested in any future promotional development. That’s something that in today’s environment would be quite unusual.
You run a 5-star hotel here in Saigon. What’s the ratio between the corporate clientele and tourists?
We are primarily a corporate hotel. Over 70 percent of our business is corporate, so 30 percent is leisure. But it varies. I have to mention, the corporate business tends to have a lower flexibility with their rates. They can’t afford to spend two to three hundred dollars a night for rooms in Ho Chi Minh City. So there are a lot of local hotels offering 50- to 100-dollar rooms, and businesspeople will be using those hotels in preference to us. When it comes to the big global companies, there’s a lack of presence of some of the big international players. Marriott has a very low presence here, for example. Intercontinental has one hotel. When you look at the number of hotels that those brands actually have, it tells you the bigger picture is incomplete. There are a lot missing.
Based on what you’ve told me, the demand for new hotels is still a bit weak here. Would you say there’s limited ability to grow?
Sure, yeah. We’re in a transition phase. There is growth and development is moving in the right direction, but some of the basic infrastructure needs to be put in place. The traffic is a classic example. It takes so long to get from point A to point B here because of congestion. And those become negatives for [the travel and hospitality company] Aegis to try to sell to groups.
So all of these constraints seem to be long-term issues. To overcome them will take years, and so would you say that during the next five years we can’t expect to see radical change in terms of hospitality offering in Ho Chi Minh City?
That’s really quite true, and I think it’s probably linked to the mass transit system. Once the government has got the underground train system in place, it may help. And it will start to add value to some of the corporate businesses coming in. Information technology companies and some of the big pharmaceutical companies who are probably desperate to move out of China because of the rising costs, but not necessarily convinced that Vietnam offers them the right opportunities. So five years, yes.