Coronavirus outbreak casts shadow on Vietnam’s tourism

The new coronavirus 2019-nCoV continues to spread rapidly, although key details of its nature are still unconfirmed by the WHO. Latest updated this February 3, WHO had reported 17,389 confirmed cases with eight cases from Vietnam, and 362 deaths (361 cases in China).

Coronavirus are a large family of viruses that includes the common cold and SARS, the epidemic which killed almost 800 globally in an outbreak from 2002 to 2003. It is said that Coronavirus is more dangerous for the global economy than SARS. Uncertainty about the severity and duration of the coronavirus outbreak makes it impossible to form a definitive judgment about its economic impact.

Troy Griffiths, deputy managing director, Savills Vietnam says that, even if the coronavirus outbreak turns out be comparable to SARS, its global economic effects are likely to be larger than in 2002/2003, as China has a much bigger share in the global economy nowadays. Moreover, economies are much more interlinked than 17 years ago.

The lens for thinking about the economic impact in the global scale is the experience of SARS in 2003, which was felt mostly in China. One study estimates that the SARS crisis cut the gross domestic product of mainland China by 1.1 per cent and that of Hong Kong, where the services sector is a pillar of the economy, by 2.6 per cent. 

Vietnam faces high risks of being affected by this dangerous and rapidly spreading disease, against which there hasn’t been a vaccine, since it is a popular destination of Chinese tourists and shares a long borderline with China. Currently, the epidemic had not yet had a significant impact on real estate activities in Vietnam. Still, with the markets anticipating the worst, it’s worth thinking through the risks for Vietnam.

Griffiths states that as Chinese tourism arrivals accounted for one-third of international visits to Vietnam, it is already apparent that the coronavirus will hit tourism and hospitality the hardest, by the new Chinese travel restrictions and sharp near-term slowdown in Chinese tourist visits, at least over the next three months. 

"The retail sector might also face the harsh condition as nobody would like to leave their house to go to the shopping mall or restaurants”, Troy says. 

According to Mauro Gasparotti, director of Savills Hotels Asia - Pacific, hotels in Viietnam have started to receive a handful of cancellation requests over the last few weeks by not only group and MICE guests but also independent travellers. 

He pointed out that the emergence of coronavirus has caused three key impacts on Vietnam tourism, all of which would possibly hurt Vietnam hospitality this year. 

"The first and most obvious impact would be the expected drop in Chinese travellers who made up the largest proportion of foreign tourists to Vietnam in 2019, accounting for over 30%", he said. 

Coastal destinations would face the same issue with destination like Nha Trang – Khanh Hoa expected to be particularly affected as China was the biggest source of arrivals accounting for more than 70% of foreign visitors to the province, according to Khanh Hoa Department of Tourism. 

Main cities like Hanoi and Ho Chi Minh City would also be negatively affected by the slowdown of MICE and corporate travellers as a series of meetings, conferences and oversea trips have been postponed or cancelled due to the ongoing spread of coronavirus. 

"The second impact of coronavirus to Vietnam is the significant expected decline in global demand to Asian countries which will likely be perceived to be at higher risks of coronavirus compared to other destinations", he added. 

After a few years of significant growth in international arrivals to Southeast Asia regions (more than 138 million international tourist arrivals in 2019 with an impressive CAGR of 7.8% in the past nine years), a steep slowdown would be observed in the upcoming time. 

Consequently, destinations like Thailand, Indonesia and Vietnam would be expecting a temporary slowdown in travellers from Europe, Australia, United States, etc. where leisure groups are more likely to cancel or postpone their trips due to the fear of outbreaks. 

"The third impact would be on local demand as people are now more hesitant from traveling to crowded places like airports, train and bus stations and even restaurants and entertainment places to avoid contagious infections. 

At the other end, local demand would largely depend on the ability of Vietnam government to contain the spread of virus within the country. If the virus could be well contained, local travellers would be less impacted", said Gasparotti.