Coronavirus Outbreak: Impact on Vietnam’s Tourism Industry

The novel coronavirus (nCoV) outbreak in China has already caused drastic changes to the global travel and tourism industry and will further impact businesses. Events such as natural disasters (Australia bushfires in 2019, volcano eruptions in the Philippines in 2020) or political instability (Brexit, U.S. - China trade war,) have significantly impacted the tourism market.  

Global pandemics have a much more significant impact on global demand and a considerable influence on the specific destinations in both short and medium term. At the time this article was written, several airlines have reduced or cancelled flights to and from China, including Air Canada, American Airlines, British Airlines, Cathay Pacific, etc. Vietnam has responded by suspending all flights to and from coronavirus affected areas in China. Outbound restrictions have been placed on Chinese tourists by the Chinese government to contain the possibly spread of the virus, causing a severe downturn due to China’s status as the world's largest outbound tourism market. The outbreak has resulted in tour and rooms cancellations not only by Chinese tourists but also global travellers who planned to visit Asia.

Vietnam is no exception as the effects of the global pandemic have already become apparent. According to Mauro Gasparotti, hotels have begun to receive a handful of cancellations over the last few weeks by not only group and MICE guests but also independent travellers. Mr. Gasparotti mentioned “The emergence of coronavirus has impacted Vietnam’s tourism industry. The first and most obvious impact is the expected drop in Chinese travellers - who account for over 30% of foreign arrivals to Vietnam.  Coastal destinations like Nha Trang – Khanh Hoa will suffer as China tourists accounted for over 70% of international visitors, according to Khanh Hoa Department of Tourism. Main cities like Hanoi and HCMC will also be negatively affected due to the drop in MICE and corporate travellers and the postponement or cancellations of meetings, conferences and overseas trips. The second impact is the expected drop in global demand to Asian countries - which will likely be perceived to be at higher risk of spreading the virus compared to other destinations. After years of increasing international arrivals to South - East Asia  (over 138 million international tourist arrivals in 2019 with CAGR of 7.8% in the past nine years), a steep slowdown is expected shortly. Consequently, destinations like Thailand, Indonesia and Vietnam will see a temporary drop in travellers from Europe, Australia, United States, etc. According to a survey conducted by STR, during the SARS outbreak (2002 - 2003), hotels in Asia experienced a 4.5% drop in RevPAR.

According to the Thailand Ministry of Tourism, the drop in Chinese travellers caused by coronavirus outbreak could lead to a loss of more than $1.5 billion in tourism revenue this year. The third impact would be on local demand as people are now more hesitant to travel to crowded public places like airports, train and bus stations and even restaurants and entertainment venues. Domestic demand would largely depend on the ability of the Vietnamese government to contain the spread of virus. If the virus can be contained, local travellers would be less impacted. 

That said, if the outbreak is contained, we are positive that a steady recovery will occur in the second half of the year and the tourism industry will once again be a booming market for Vietnam. For properties serving a large number of clients from currently affected areas, we strongly recommend that strict procedures are implemented to protect the safety and health of customers and staff.