Association and joint venture in Vietnam Tourism Industry

Vietnam has emerged as an attractive destination thanks to its charming landscapes, hospitable local people and diverse cuisine. The country aims to become one of the leading tourist attractions in the world. Before the pandemic, Vietnam recorded annual tourism growth of 22.7% during the 2015-2019 period. This sector made up 9.2 percent of its gross domestic product.

Vietnam tourism is now making concerted efforts to recover after a stagnant stage, focusing on promoting domestic travel while also welcoming foreign visitors. One of the solutions that the Government is giving priority to is the association among domestic firms nationwide and the joint venture with foreign investors.

The impact of Covid-19 on Vietnam tourism

After many years of continuous growth, the year 2020 saw heavy losses due to the Covid-19 pandemic. The number of domestic and international tourists declined sharply.  

In 2019, the total revenue of tourism was VND755,000 billion. However, by 2020, the number fell to VND312,000 billion, down 58.7%. By 2021, it continued to fall to VND180.000 billion, down 42,3% compared to 2020.

The pandemic demonstrated the profound impact of the Vietnam tourism sector to the whole economy. Thousands of businesses in the aviation sector, accomodation, food and beverage suspended operations or even went bankrupt as a result of tourism “freezing”. The total number of tourists served by accommodation, food and beverage service establishments in 2020 reached 97.3 million VND, a decrease of 44% over the previous year.

During the pandemic, the tourism industry made great efforts to mitigate the heavy losses and remove difficulties for businesses and workers, such as lowering land tax, electricity prices, reducing or making sightseeing free at many destinations.

From May 15 this year, the Vietnamese Government no longer required a Covid-19 test prior to tourists’ entry into Vietnam. This is one of the moves to boost the recovery of Vietnam tourism post-pandemic. Since then, according to Vietravel Holdings, regular flights and holiday packages as well as charter flights have been booked with an occupancy rate of more than 90%.

Joint venture as a solution for tourism recovery

The resumption of international tourists has stirred hopes of a strong recovery in the Vietnam tourism industry. However, experts said it will take a long time for the industry to return to its pre-pandemic performance.

Since the outbreak of the pandemic, Vietnam tourism hasn’t reached its full potential as there are still a lot of lucrative landscapes for businesses to flourish. However, the local travel businesses suffered heavy losses during the past 2 years, which made it hard for them to further exploit their local tourism potential.

Local businesses are seeking new directions to attract tourists in order to recover most quickly and effectively. They are giving priority to innovate tourism services such as creating experiential and sustainable products and services imbued with local and national identity. However, the lack of capital prevented them from achieving that goal.

These difficulties raised high demand for business joint ventures as a solution. A great way to innovate products and services is to form a strategic partnership with other businesses. While one business has the expertise in the local culture and environment, the partner business can facilitate the innovation process with operation and marketing funds.

The partnership makes it possible for the local business to revive or expand their tourism products plus create memorable and unique experiences for visitors. In return, the partner business can benefit from the prosperity of local tourism. 

Tourism associations and joint ventures are given priority in Vietnam

Joint ventures in tourism have become a crucial trend these days. Especially in the post-pandemic period, the joint venture is said to boost the recovery of Vietnam’s tourism industry.

Firstly, tourism associations between provinces and cities nationwide have gained importance in promoting local tourism. Five major tourism associations were formed in 2020 to stimulate demand for local tourism and attract more domestic investment

In fact, the tourism association aims to develop the link of the tourism product chain among provinces, from product design, value-added services, to advertising and promotion. Meanwhile, cooperation between travel agencies, accommodation establishments and tourism business units plays a crucial role in the product link mentioned above. Therefore, in addition to strengthening tourism associations among provinces and cities; the Government also promotes the cooperation between local tourism enterprises with enterprises of other industries or with large domestic corporations. 

For example, Hung Thinh Group, a major real estate developer in Viet Nam, has formed a strategic partnership with Vietravel to promote tourism in Quy Nhon City. The two companies will optimize the strengths of their ecosystems for the development of resort real estate, travel, aviation services, tour packages and new travel routes. They will also jointly support the promotion of their images, actively applying digital technology in resource management and service implementation to bring experiences and enhance the enjoyment of visitors.

Foreign investors have several chances to enter and participate in the Vietnamese tourist industry. Specifically, the National Assembly of Vietnam has introduced the Tourism Law of 2017 (taking effect from January 1, 2018). The law contains several amendments aimed at simplifying investment requirements and making it simpler for foreign investors to invest in the Vietnam tourism industry.

Importantly, foreign investors can establish joint ventures in Vietnam to promote international travel services (inbound). Unlike the Tourism Law of 2005, the Law on Tourism in 2017 doesn’t require a Vietnamese partner in a joint venture to have an international travel business license. This means any Vietnamese individual or company can participate in a joint venture with foreign investors. In this way, the Government aims to welcome more international investors to participate in the development of travel services in Vietnam.

The joint venture with foreign firms enables Vietnamese enterprises to upgrade their tourism products and services, developing new and distinctive products to serve each market segment and hop on the tourism trends of the world. These products are based on the cultural resources such as history, landscapes and local cuisine.

Through the expansion of international cooperation, Vietnam's tourism has attracted major investment from foreign capital (FDI). This will make an important contribution to solving the problem of human resources and technical facilities for the industry’s further development in the near future. The strategic cooperation can give both firms the opportunity to exploit the full potential of Vietnam tourism and create better momentum for this sector to reach regional and international levels.

In conclusion

Tourism associations and joint ventures have gained in both popularity and importance in recent years. With many potentials that have yet to be fully exploited, Vietnam tourism is expected to develop more tremendously in the near future and become an important pillar in the country’s economy. 

Vietnam is now focusing on making a quick recovery for tourism, and we consider this is a golden time for investors to enter this market. With insightful knowledge and acclaimed experts, Viettonkin can provide you with valuable advice and guidance to establish joint ventures in the Vietnam tourism market. Let us walk side by side with you on your journey to success!