Savills warns Phu Quoc of losing tourism appeal

Phu Quoc Island, known for its natural landscapes and strategic proximity to major Southeast Asian cities, has rapidly emerged as one of Vietnam's fastest-growing destinations.

Since late 2012, improved accessibility and the expansion of flight routes to Phu Quoc have boosted tourism and hotel development.

Presently, the island has 25,000 accommodation units, most of which are small, locally operated properties. However, 15 per cent of the inventory includes upper upscale and luxury hotels and resorts.

Compared to regional competitors, Phu Quoc’s accommodation stock is only equal to 27 per cent of the stock in Phuket and 31 per cent of that in Bali.

Mauro Gasparotti, director of Savills Hotels points out that burgeoning tourism and hospitality real estate are posing threats to Phu Quoc’s tourism appeal.

“In the past, many developers rushed to enter without careful planning and execution with replication of products that disregard market trends, the islands heritage or product identity”, he said.

“Despite high-quality developments, the lack of central attractions in Phu Quoc reduces its appeal and there are no sound tourism anchors. The oversupply of certain products like shophouses is also a concern. The island is facing the challenge of numerous unoccupied commercial spaces with low traffic, which can negatively impact its vibrancy and create a sense of neglect”, he claimed.

Uyen Nguyen, head of consultancy at Savills Hotels added that the rapid growth in hotel and resort stock has imposed downward pressure on room rates, and hotels across segments are struggling to increase rates.

Despite increased demand in June, prices must remain competitive given the vast number of rooms. Premium to high-end properties are trading at $100 to $120 per room per night, and occupancies are hovering around 30 – 35 per cent.

Domestic visitors accounted for over 85 per cent of the island’s visitors before the pandemic. This strong base of local clientele supported a sound recovery in 2022, and tourist arrivals equalled the 2019 base at 5.1 million.

Phu Quoc is still in the early stages when it comes to international arrivals. Before the pandemic, the numbers represent only 6 per cent of Phuket’s international arrivals, 11 per cent of those to Bali, and 60 per cent of those to Boracay.

Connectivity is a vital factor in the development of an international destination, and Phu Quoc faces significant obstacles in this matter. Phuket and Bali are well-established destinations and enjoy excellent international connectivity with frequent and direct flights from major cities such as Singapore, Shanghai, and Hong Kong.

In contrast, Phu Quoc has fewer direct flight routes and less frequent flights. Phuket offers 150 per cent more daily flights, while Bali has 430 per cent more daily flights compared to Phu Quoc.

Additionally, Phuket and Bali have stronger links with local transport hubs, boasting significantly more flights to Bangkok and Jakarta. Phuket has 330 flights per week to Bangkok, and Bali has 400 flights per week to Jakarta. Phu Quoc has approximately 160 flights to Ho Chi Minh City and 90 flights to Hanoi.

Despite the growth in hospitality developments, the supporting infrastructure required to support environmentally and economically sustainable growth on Phu Quoc Island remains inadequate. The lack of centralised coordination to ensure alignment between individual projects and tourism development goals poses a challenge.

Mauro said: “ Sustainability, local communities, and cultural preservation are fundamental to tourism development and must be considered from the planning stage. Addressing the challenges of connectivity, infrastructure, and coordination will be essential for Phu Quoc's successful transformation into a world-class international destination.

In addition, to compete, and affirm its position on the international tourism map, Phu Quoc’s tourism industry must promote itself by utilising communication activities and marketing channels properly and efficiently.”