Solving the resort destination development chicken-or-egg dilemma

Solving the resort destination development chicken-or-egg dilemma

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resort destination development chicken and egg

 

Vietnam’s emerging resort destination airports face a classic chicken-or-egg dilemma. Do resort hotels come first or does air lift capacity come first?

Until there are passenger volumes airlines are not interested. Until airlines start servicing a destination hotel developers are not interested.

As counter-intuitive as it sounds, investment in supporting infrastructure does not guarantee an emerging resort destination’s immediate success. This applies to any country, large hotel developers will not come just because you’ve got state-of-the-art airport, power supply, roads or sewage treatment plant. Why? Because infrastructure alone does not reduce tourism market risk at the beginning of the development cycle.

The success of an emerging resort destination really depends more on the success of the emerging resorts (and an appropriate level of supporting infrastructure)

How to resolve chicken-or-egg dilemma?

Two ways to solve the dilemma:

1. Simultaneous large-scale development, led by government or large business group, with immediate build up into both hotel room capacity and co-opting air access infrastructure.

2. Gradual organic development. Small investments in hotels matched with small investments in access infrastructure. When the destination grows in scale match with large-scale air access and similarly large-scale investment into higher end hotel properties. This has been the conventional approach in most of Southeast Asia’s coastal resort destinations.

A water analogy

Think of it this way.

A large water pipe carrying a lot of water (air lift capacity) requires a large holding water tank (hotel room capacity). If there’s no holding tank capacity then why run a large water pipe?

So, you can either (1) build both the large pipe and large water tank at the same time or (2) gradually increase pipe capacity as tank capacity increases.

In the current situation where infrastructure has been built up to future capacity it essentially becomes a waiting game between hotel developers.

 

 

Via Thanh Nien News:

Half of Vietnam’s eight international airports mainly serve domestic flights despite aviation authorities’ initiatives to attract foreign airlines.

Last September the Civil Aviation Authority of Vietnam announced a halving of landing fees and ground handling costs at five airports to attract international carriers.

But Phu Bai near Hue, Lien Khuong near Da Lat, and Can Tho and Phu Quoc in the Mekong Delta have difficulty even in attracting domestic airlines.

Only Cam Ranh near Nha Trang has had any success. (our comments: And that’s because of the presence of Nha Trang)

Phu Quoc, for instance, opened in 2012 with a capacity to handle more than three million passengers a year and plans to attract flights from Singapore, Hong Kong, Thailand, and Malaysia.

But there are no international flights yet and passenger numbers are only a fourth of the capacity, CAAV chief Lai Xuan Thanh told Thanh Nien.

Foreign airlines, despite being interested in starting flights to Phu Quoc, remain concerned about the quality of the island’s tourism infrastructure, he said.

Since it opened its international terminal in 2011, Can Tho airport has received flights from Taiwan only before and after Tet (the Lunar New Year).

The airport, with a capacity of three-five million passengers a year, sees three round flights from Hanoi and Phu Quoc every day.

Flights from Ho Chi Minh City have been canceled due to lack of demand.

Lien Khuong Airport was also upgraded in 2009 to serve 1.5-two million passengers annually. But it now receives flights from HCMC, the central city of Da Nang, and Hanoi.

Though the Ministry of Transport has approved a proposal by Lam Dong Province, where the airport is located, to begin flights to Singapore, it is not known when that will happen.

Phu Bai only received flights from HCMC and Hanoi.

Thanh said the start of international flights to these airports depends on the market and carriers.

There is large demand for international flights to Cam Ranh, but very low elsewhere, he said.

Asked if it was wasteful to invest in international terminals that remain unused, he said since the standards for domestic and international terminals are almost the same, there would be no waste, implying they could be used for local flights.

Meanwhile, more domestic airports are planning to add international terminals — like Vinh in the north-central province of Nghe An and Cat Bi in the northern port city of Hai Phong.

Official figures show that 21 airports in Vietnam served nearly 45 million passengers last year, with Tan Son Nhat in HCMC accounting for 20 million and Noi Bai in Hanoi for more than 12 million.

Image: Todd Levy

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