IHG sees room for growth in Vietnam

IHG has entered Vietnam for 15 years. What differences do you see between then and now, in term of international and domestic?

Rajit Sukumaran, IHG’s managing director, Southeast Asia and Korea: The fact that we have been here 15 years means we can really look back and see what has changed from a trends standpoint. Vietnam has always been strong in domestic tourism. That is the case from back then to now.

You are seeing some certain trends changes in domestic. No longer going to hotel city, you go for staycation, you choose a list of destinations – go down to Hoi An, or up to Ha Long. You also see a lot more of that now, given the improved infrastructure across Vietnam.

So other things you also see are multifamily travel which is coming up quite a bit. It is no longer going to be just a couple traveling, but travel the whole family, either their parents or grandchildren.

We are seeing a lot more happening now. This is very evident in our resort markets. When you look at markets in Nha Trang, Danang, Phu Quoc, you will see this group of travelers becoming larger.

What has forced us to do is now looking at new destinations where guests want to go. The onsen resorts have been doing with Sun Hospitality is one example of where new travelers want to go, and we want to be there for that.

On the international front, the difference is quite stark. We see big changes over 15 years ago. The number of airlines that came to Vietnam, and the flight to catch coming from Hanoi to Ho Chi Minh City were a lot more limited than you see today.

We see new international routes open up. As an international hotel company, we need to cater to these changing international guest arrivals also.

That gives you an idea of how things are shifting, but things are only getting better from a growth standpoint. That’s why it is so exciting to be in a market like Vietnam because the country got infrastructure, middle class growth, income growth, international arrivals picking up, air routes will be picking up. So there’s a lot more happening. It’s only going to get busier. We just need to make sure that we are there to open up our doors to welcome guests.

Regarding the luxury hotel market, recently, in Vietnam, there is a desire for Vietnamese to experience luxury hotels. What does IHG think about this trend and its plans to respond to this trend? 

Paul Cunningham, IHG’s senior director of operations, Southeast Asia and Korea: When we talk about the luxury market, we can split between resorts and cities.

In the cities, we've seen in the luxury space a restabilization of domestic and international demand. We see more international travelers who are going into the luxury space in the city, in fact all brands, and there's little bit of leisure as well, but mostly business.

When it comes to resorts, we see more domestic. Demand will be split between 70 – 30, probably 70 per cent or more domestic in the luxury space in the resort.

A certain type of domestic travel is really interesting to watch, because in that luxury space, we're seeing multi-generational traveling multi-family travel that are really looking for new experiences. They're looking for brands that suit them, and they want to be part of and looking for world class dining and seamless service.

We've seen really good feedback from the domestic market from our newest luxury property in Phu Quoc – The Regent , and the feedback about the guest experience – it should be quite unbelievable. Great feedback there, as well as our Intercontinental Da Nang which is very well established, and the local market knows that property pretty well.

When it comes to luxury, we got the Six Senses brand, the Intercontinental brand, and now with Regent, said that already gives us a very very strong reputation on the market to be able to manage award winning properties across Vietnam.

And it puts us in a very strong foundation to be able to know turbocharge and grow our other brands like Voco, Hotel Indigo, Holiday Inn Express.

In recent months, many sectors of the economy have been greatly affected by inflation. How does inflation impact IHG’s business?

Rajit Sukumaran: To inflation, there's definitely a cost increase we're seeing across, it's not just Vietnam, it's everywhere. But I think what's really, really important to see is that there is still strong demand for travel.

History has taught us that travel is probably one of the last discretionary spends people want to part with, when it comes to having to cut down on spending. So we're seeing a lot of essential business travel that you can’t put off.

I think, for these reasons, the demand has always been robust, despite the fact you see increases in costs.

And the other trend to see is also how your rates have been performing. Our average rate has been up 11 per cent compared to 2019’s price, based on a recent announcement. That shows the strength of the IHG brands in order to withstand these inflationary pressures.

The industry before the pandemic traditionally always outpaced economic growth. And this time around, we're coming out of a pandemic where we are coming up stronger than the went in. So we are in a much better position actually to deal with some of these cost increases ever happened before.

Global economic situations now are going down and facing kind of recession, that means Vietnam – one of most open economy – will be affected. So why does IHG plan to double the number of hotels in Vietnam in the country?

Rajit Sukumaran: IHG has been here for 15 years, we've gone through so many ups and downs together with Vietnam. I think that's the commitment is we stay committed to that we will be here for the long term.

I think it's important to also note that our brands continue to be in very high demand to owners and guests. Strategy for IHG has always been going with the right partner, with the right location, with the right brands. And I think that's always in a lift to kind of support us in our growth strategy.

When it comes to economic volatility, I think it's important we stay focused on our strategy. Our strategy is to develop IHG portfolio of brands and transform our IHG One Rewards – loyalty program

So these actually appeal very strongly to hotel investors and hotel owners to join our enterprise platform, so that they can develop and explore organic opportunities to deliver on our ambition for industry leading growth.

I think the thing to notice and focus on is the resilience of the industry and the business model. It's gone through many ups and downs, but travel always returns very, very quickly.

STR data shows that occupancy levels across the country is rising – up more than 65 per cent year-on-year on 2021 in September, with average daily rate (ADR) up 25 per cent for the same period – so we know there’s strong pent-up demand to travel to Vietnam.

I think, finally, our resilience of the business model, and our ability to pivot and be agile to respond to changing macroeconomic conditions has been proven recently by the pandemic as true. So that's why we're confident that we should stay focused on our strategy.

Covid saw people leave the industry, so what’s IHG’s plan to lure staff into the industry?

Paul Cunningham: Our employees, the people who work with us - our teams are our biggest asset and of course, the hospitality industry has taken a really big hit, not only in Vietnam, but across many regions.

So our focus is on growing people and giving them a career is really part of our priority. We have to make sure people see that they have a clear career path, able to grow within the company.

We're focused on trying to make sure that hospitality is a great place to work. And that talks to what we call the end to end associate journey, from the minute they walk in the door, and from the staff canteen from the entrance of the hotel throughout their entire career, that is a place where they can shine.

In Vietnam, we in fact have a talent campaign called Shine, which shines the spotlight on people and employees who've had the career path and how they have been able to grow themselves.

We also have very strong in-market human resources in both the north and the south, where we're focused on training people around the growing and retaining talent, and making sure that we're able to attract people to IHG and to the industry supported by our office in Singapore.