Socialist Republic of Vietnam

After the tsunamis wreaked havoc on beach resorts in the region, Vietnam’s Victoria Phan Thiet resort received urgent calls from European tour operators looking for alternative destinations.

Gilles Poggi, general manager of the Victoria, who had lost a close former colleague when the giant waves hit Thailand, was taken aback. "Everyone was shocked at this terrible tragedy," he said. "But the show must go on. These were travel industry professionals. People had their trips cancelled and had to be offered an alternative."

Since then, the French-owned Victoria, like other hotels along Vietnam's striking Mui Ne beach, has received a steady inflow of visitors. In the past two months, always a busy season, eight percent of Mr Poggi's guests have been re-routed by travel companies from resorts in or near the tsunami-affected areas.

Mui Ne instead of Phuket?

Just three years ago, the idea that Mui Ne beach, 200km from Ho Chi Minh City, could substitute for Phuket might have seemed far-fetched. In 2002, the seafront had only 15 small hotels and a handful of restaurants.

But five years after the Vietnamese government declared Vietnam the "destination for the new millennium", the global tourism industry seems finally to agree. Once a destination mainly for intrepid backpackers and US veterans making peace with wartime pasts, Vietnam received 2.9 million foreign visitors in 2004, up from 2.4 million in 2003 and 2.1 million in 2000.

Tourism revenues rose to US$1.7billion, equivalent to 3.7 percent of gross domestic product and up 27 percent on 2003. Hanoi expects between 3.2 and 3.4 million international visitors this year to generate about $1.9billion, while foreign arrivals in January and February were up 11 per cent on last year. On Mui Ne beach, scores of new hotels and resorts, many locally owned, now cater both to the rising domestic middle-class and foreign tourists.

"Vietnam is quite a trendy destination," said Richard Craik, marketing director for Exotissimo, a travel agency specializing in Indochina. "Everybody has heard of Vietnam, and everybody is intrigued by it."

Interest in Vietnam as a destination for investment has also grown recently. Five international banks are vying to acquire stakes in Vietnam's two biggest private commercial banks, as a first step towards penetrating the country's potentially vast retail banking market.

The suitors for Vietnam's Sacombank and Asia Commercial Bank - understood to be HSBC, ANZ, Standard Chartered, Citibank and Singapore's DB - are keen to expand in one of Asia's fastest-growing economies which has 80 million people.

Cumbersome visas

Vietnam still has a lot of work to do to turn itself into a true tourist paradise. Cumbersome visa rules deter some prospective leisure travelers. Poor, crowded roads even relatively short road journeys take hours. In peak season, both hotel rooms and flights are in short supply.

"Five-star properties in Saigon and Hanoi at this time of the year are running 90 to 100 percent occupancy," Mr Craik said. "We also need more flights. Often, we have to turn down business because groups can't get here. Once they are here, they can't move around the country because domestic flights are booked up."

Yet the country is slowly gearing up to welcome the foreign hordes. United Airlines recently launched the first direct flight to Vietnam since the war ended, and other US carriers are expected to follow. Vietnam Airlines has its own ambitious fleet expansion plans, while high-end resorts and hotels, many with foreign partners, are under construction.

Hanoi is also cautiously easing visa restrictions, starting with relaxed requirements for tourists from Japan, Korea, and south-east Asian countries. Tourist professionals believe that providing visas on arrival could stimulate low-season weekend trips by the many western expatriates living in Asia.

Nguyen Thi Lap Quoc, director of the Ho Chi Minh City tourism department, says: "We admit that visas have been a hassle. But even for Vietnamese tourists who want to travel abroad, visas is a big problem, especially to Europe."

For now, the travel boom is fuelled by curiosity, French colonial nostalgia, word of mouth, and private companies' marketing efforts. In the longer-term, Vietnamese tourist officials worry that they lack the resources and savvy to compete with other south-east Asian countries' slick tourism marketing machines.

"Vietnam's propaganda is inefficient - many people still remember Vietnam as a war," Ms Quoc said. "They do not know the modern Vietnam, where visitors can feel safe, [and experience] friendliness and happiness."

Source: Financial Times, March 7, 2005