Tourism boom a boost to economy: VinaCapital

By VNA   June 27, 2024 | 11:00 pm PT
Tourism boom a boost to economy: VinaCapital
Spanish tourists pose for photos in front of a temple in Hoi An ancient town, September 2023. Photo by Nguyen Anh Tuan
The recovery in tourist arrivals is expected to continue, adding more than 1 percentage point to Vietnam’s GDP growth this year, Michael Kokalari, a chartered financial analyst and chief economist at VinaCapital, has said.

He said in a report that the number of foreign tourists visiting Vietnam is expected to increase by 40% this year – after having leaped by nearly 250% last year – driven by the continued recovery in outbound Chinese tourism.

"Foreign tourism accounted for about 8% of Vietnam’s GDP pre-Covid (versus 12% in Thailand), so Vietnam’s continued tourism recovery in 2024 should add over 1 percentage point to Vietnam’s GDP growth this year, after having boosted GDP growth by more than 4 percentage points last year."

The number of tourists visiting Vietnam had soared by 65% year-on-year in the first five months of 2024 to reach slightly above pre-Covid levels despite the fact that Chinese arrivals in Vietnam - and the rest of Asia - remained well below 2019 levels.

Chinese tourists had used to account for a third of Vietnam’s arrivals and China only reclaimed the position for the first time since Covid last month.

The ongoing recovery in Chinese tourist arrivals coupled with the current "extraordinary desire" of Americans to travel meant that the total number would likely exceed pre-Covid levels by more than 5% this year.

Domestic tourism accounted for 4% of the country’s GDP, but since it had already fully recovered last year increased spending by domestic tourists would not be a major factor in GDP growth this year.

Taken together, foreign and domestic tourism had accounted for 12% of GDP before Covid.

The recovery in foreign tourist numbers after Vietnam reopened its borders had initially been driven by Korean and American tourists, and then China lifted its "Zero COVID" restrictions in 2023.

Vietnam had also eased its tourist visa requirements, helping boost tour operators’ revenues by nearly 50% in the first five months.

Hotel room occupancy remained 20% below pre-Covid levels primarily because Chinese tourist arrivals were still 25% below those levels.

"Chinese and Russian tourists account for a significant proportion of the ‘mid-market’ traveler cohort, a segment of the market that has not fully recovered, in our understanding.

"However, higher-end properties such as the Hanoi Metropole, the Fusion Resorts and other premium properties owned and operated by Lodgis are at or above pre-Covid levels."

The number of foreign tourists visiting Vietnam jumped by more than 200% last year to nearly 13 million, or 70% from 20% of pre-Covid levels in 2022.

"That surge directly boosted GDP growth, but we estimate that purchases by foreign tourists account for about 10% of retail sales in Vietnam and we observe that foreign tourism puts money into the hands of a wide range of local merchants, further boosting the economy, albeit indirectly.

"We estimate that the total contribution of tourism to Vietnam’s economy is over 15% of GDP."

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