Vietnam’s Coastal Resort Locations: Competitive Advantages and Disadvantages (2/5)

Vietnam’s Coastal Resort Locations: Competitive Advantages and Disadvantages (2/5)

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Mark Gwyther, Managing Director
Vietnam

This is a guest post by Mark Gwyther of MGT Management covered in 5 separate posts – Introduction (1/5), The South Coast (2/5), The Central Coast (3/5), The South Central Coast (4/5) and When to Invest & Conclusion (5/5). It’s a must read if you’re new to coastal Vietnam.

“Vietnam’s Coastal Resort Locations: Competitive Advantages and Disadvantages” is just Part II of  a three-part series entitled “Vietnam’s Coastal Tourism Growth is Inevitable: Why, Where and When to Enter the Market”. The entire series looks at the future of Vietnam’s coastal tourism market for investors outside of Vietnam.

The other two parts are:

Part I : Why Is Vietnam’s Tourism Growth Inevitable: Look to Mexico

Part III : Why the Cost of Debt is Creating a Buying Opportunity in Vietnam’s Coastal Tourism Industry

 

The South Coast

Coastal tourism began on the outskirts of HCMC, but it caught the localities by surprise and the infrastructure was not in place to remain competitive in attracting foreign FDI and international brands. Can things turn around? One resort developer is gambling that the answer is “yes”.

Vung Tau

Front Beach Vung Tau Vietnam
Front Beach, Vung Tau, Vietnam

Vung Tau is a city located on a peninsula at the mouth of the Saigon River, making it the shipping entry point to HCMC’s ports. It is the nearest coastal city to HCMC and also the center of Vietnam’s oil and gas industry. Bars and restaurants sprung up that targeted foreign oil workers and expats wanting to get out of the city for weekends, giving the town a reputation as HCMC’s Pattaya (although on a much smaller scale). As incomes for Vietnamese grew, Vung Tau became the most attractive destination for locals. It was a two hour drive and bus tickets cost less than $5 per round trip. Hundreds of small, one and two star hotels and seafood restaurants opened, catering to the local population. Front Beach, where development started, is public and there are no resorts. On summer weekends, the beach is crowded, dirty, and filled with people peddling all sorts of things. Being close to three major shipping ports and the mouth of the Saigon River has caused ocean pollution.

After beach resorts were introduced in Phan Thiet/Mui Ne, the back side of the Vung Tau peninsula started to be developed in a similar fashion. Called Back Beach, the area now has a few nice resorts including the 5-star Imperial Resort, and a golf course. International brands have not invested yet. Approximately 2,000 residential units are being built in the area as well.

Vung Tau’s popularity is due to its location near HCMC and the cost of travel. The city had 2 million visitors in the first two months of 2012, most of whom were Vietnamese. In the last few years, its popularity with locals and the general increase in traffic in the country has resulted in drive times nearly doubling what they once were. Instead of an hour and a half, it’s a three-hour drive along a terrible road. Vung Tau’s location at the mouth of river enables people to get there by boat. Several hydrofoil operators run a total of 7 trips a day, with a capacity of about 60 per trip. The trip costs about $15 each way and takes less than 2 hours, making it appealing to travellers who don’t want to spend the time on the road or the cost of an air ticket. Like the road, the constant use over the last 10 years has led to the boats becoming old and run-down.

Work is progressing on 72 km of Highway 51 that connects Vung Tau with Bien Hoa (near HCMC), turning it into a 6-lane highway with tolls. According to the construction company, it is 85% complete and expected to be open in late 2012.

 

Phan Thiet / Mui Ne

Phan Thiet and Mui Ne (PT/MN) were the first resort locations in Vietnam. Many beautiful beaches are closer to HCMC, but Highway 1A bypassed these locations and does not meet the coastline until Phan Thiet.

Vietnam Highway 1A
Highway 1A (pink)

Since the mid-1990’s, the 35 km of coast between Mui Ne and Phan Thiet has filled with resorts, residence villas, bars, and two golf courses. The golf courses were among the first in Vietnam and many of the expats who lived in HCMC would take weekend trips to get out of the city. PT/MN was a relaxing alternative to Vung Tau, which is closer to HCMC but the beaches were all public and crowded with Vietnamese vacationers. Resorts in PT/MN have private beach rights, a policy that encourages the resorts to keep their beaches clean and allows them to keep away irritating peddlers. With the strong, consistent winds, the area has also become popular with travelers who kite and wind surf. For many backpacking tourists and locals, the area’s closeness to the city makes it very affordable to reach. Bus tickets are less than $10 one way.

Despite being the first beaches to have resorts, the large foreign-owned brands have not entered the market with the exception of Accor (Novotel Phan Thiet) and the Thai owned/operated Anantara Mui Ne Resort. The reason becomes clear when driving. As Vietnam’s manufacturing sector rapidly grew in the last ten years, factories and industrial parks were built outside of HCMC along the only major highway at the time. That highway is the same route that tourists must take to Phan Thiet/Mui Ne, and it has not been improved. Rather than taking two to three hours to drive, it now takes more than six hours. The road is so bad that Russian tourists frequently arrive at Cam Ranh Airport and take a bus to PT/MN despite it being twice the distance.

The growth in coastal development caught the Binh Thuan government unprepared. Waste water from over 125 resorts in the area was not being processed until a 2009 decree required each resort to process its own. Estimates are that 25% still have not complied. Even more damaging, the region’s growing economy attracted more Vietnamese households and businesses to the area, and a river that flows through the province dumps a lot of their waste water into the bay. This has caused big problems with algal bloom . The beaches also have erosion problems from over-development.

The future for this area greatly depends on whether Vietnam’s government is serious about plans to upgrade Highway 1A and/or build a new north-south express highway. If the drive time from HCMC can be reduced to a manageable two hours, then PT/MN can become an excellent option for tourists and locals in HCMC. Another positive development would be the completion of the new Long Thanh International Airport which is to replace the airport in HCMC and be a regional hub sometime after 2020 . The new airport will be in the middle of HCMC and PT/MN, a two-hour drive from the beach. We don’t expect the new airport or road improvements for many more years. As for now, PT/MN will continue to receive visitors who want to go to the beach and don’t want to pay too much to get there.

Ho Tram

The newest strip of beach near HCMC to undergo development, Ho Tram beach is 50 km north of Vung Tau. We would not mention it except for the largest integrated beach resort in Vietnam is being built by Asian Coast Development Ltd. The flagship resort for the strip will be the 1,100 room MGM Grand Ho Tram, scheduled to open in March 2013. The 5-star complex is situated on 2.2 km of beach.

The MGM Grand is expected to receive a casino license from Vietnam’s central government, becoming the first large resort complex to have a casino. However, Vietnam law prohibits Vietnamese citizens to enter the casino. The MGM is counting on appealing to the Asian travelers and expats going to HCMC.

Other resorts and residence villas are being developed between Ho Tram and Phan Thiet. Developers are counting on improved highway systems as well as the opening of the new airport. Residence villas are popular in this area for the same reasons as in Hua Hin, Thailand.

Conclusion

Coastal Tourism in Vietnam grew up around HCMC because of the cost and time it took to get to the resorts. While travel costs remain low, travel times nearly doubled. The advances in domestic air travel changed the market so that now it is mostly Vietnamese tourists travelling to these areas, with the exception of a large number of Russians vacationing in PT/MN. The rapid growth in coastal tourism in this area also caught the governments unprepared. Proper infrastructure like roads and waste water treatment plants are just being built, nearly a decade too late. Being further away from the Chinese border also reduces the expected overall effect of the number of new middle class Chinese vacationers. If new roads and a new airport are built, there will be more demand for 2nd homes and retirement residences near the large city of HCMC. We feel the improvements will barely keeping up with the growth, so there won’t be much improvement in travel time in the near future.

continue to . . . 

Section 3 of 5: The Central Coast – Danang, Hoi An, and Hue

 

 

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