Vietnam’s Coastal Resort Locations: Competitive Advantages and Disadvantages (4/5)

Vietnam’s Coastal Resort Locations: Competitive Advantages and Disadvantages (4/5)

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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

 

South Central Coast

The weather is perfect, the beaches are beautiful, the blueprint for development has been established; will the south central coast be Vietnam’s next big coastal resort destination? The waiting game has begun.

Along a 20 km stretch of beach, minutes away from the Cam Ranh International Airport (the 4th largest airport in Vietnam), the entire beach is claimed by developers with management deals from Westin, Holiday Inn, Mirax, and some of the larger Vietnamese hospitality companies. A wide, 4-lane road passes by and access roads lead to the beach, dividing the construction sites. However, construction has barely begun. The area is a near replica of China Beach two years ago, when resort developers south of Danang were waiting for the airport to be expanded and improved. Once it was, the developers built and the tourists came. We expect the south central coast to follow in the central coast’s footsteps. This area has many potential resort sites in various stages of development and a modern city just to the north.

Nha Trang / Cam Ranh

Cam Ranh Bay Long Beach
Cam Ranh’s Long Beach (right) and Cam Ranh Bay (left)

Nha Trang is 320 kilometers north of Ho Chi Minh City, forty five minutes away from the Cam Ranh International Airport. With a population of 300,000 people and a reputation as the best beach city in Vietnam, 20 story hotels have begun lining the street across from the ocean. Sheraton and Novotel have already opened and Marriott and Crown Plaza hotels are opening soon. Popular beach bars like The Sailing Club and Louisiana Brewery provide night life and two golf courses are just outside the city. The increasing number of expats moving to Nha Trang will help support the modernization of the shopping centers, private schools, and entertainment complexes. Condominiums are being built that appeal to westerners who are looking to move overseas for their retirement . All this gives Nha Trang a very different feel than Danang. Nha Trang is a beach city, while Danang is a city next to the beach. Khan Hoa People’s Committee has recently decided to make the beaches near Nha Trang’s city center accessible to the public so that everyone staying in hotels and condos in the city center has access. Most hotels are within walking distance. Beach resorts are being moved south to Cam Ranh or to nearby islands where they can have private beach rights. Over-development has caused Nha Trang Bay to become polluted so the policy makes sense.

Cam Ranh’s Long Beach, is still mostly undeveloped, like China Beach a few years ago. The wait may not be for long, as Russian tourists have been flying directly into the Cam Ranh Airport in greater numbers. Charter flights from eastern Russia started arriving direct to Cam Ranh in October, 2011. The original plan was for one flight a day from October to May, with 180 tourists who stayed on average 12 days. The program became so successful that by March, up to four flights were arriving some days and the charter planes will continue operating year-round. Seventy-five percent of the arrivals stay in Nha Trang, and the others go to Phan Thiet/Mui Ne. The resorts in Cam Ranh and Ninh Thuan will be able to provide accommodations for more of these tourists in the future, eliminating the need for a six hour bus trip.

The Cam Ranh International Airport’s current capacity is 450,000 people per year. In 2010, that left 191,000 potential international travelers having to arrive to the province by other means. The Khan Hoa government plans to increase the number of runways and the size of the terminal to receive 5.5 million travelers by 2020 and 8 million by 2030.

Cam Ranh and Nha Trang are both great ports for cruise ships. The Vietnamese government has been slow in promoting cruise ship tourism, but arrivals by sea are increasing despite there being no national policies or encouragement. It is unclear which port will eventually be chosen, but whichever it is has the potential to be a significant port-of-call for Asian cruise lines.

Ninh Thuan Province (Binh Tien, Vinh Hy, Ninh Chu Bay)

Ninh Thuan Province new beach highway
Ninh Thuan Province – Red line indicates the new beach highway that is nearly finished.

Northern Ninh Thuan province is the same distance from the Cam Ranh airport as Nha Trang. The beaches are just as beautiful, the water is cleaner, and the weather is noticeably better. Even though the center of the province is 100 km south of Nha Trang, it receives about half (705mm/yr ) the rainfall. It is the driest area in Vietnam as evidenced by 90% of the grapes grown in the country come from this area.

After witnessing the problems caused by rapid tourism growth in the south, the provincial government hired The Monitor Group to prepare a development plan for the province and streamline the investment process. Incentives exist for foreign and local businesses that can save developers significant amounts of money on corporate taxes and land lease payments compared to Khanh Hoa and Binh Thuan. Also, Holland has committed to helping with a large waste water treatment plant .

While very few entertainment or businesses targeting foreign tourists exist, the province is the capital of the Cham people and several Cham temple complexes 700 years old are still in use nearby. Other temples, pagodas, and monasteries were built in the hills above the beach. Finally, the wind is even better than Mui Ne for water sports.

All three factors we identified for a successful coastal resort area are present. Then why is Ninh Thuan under-developed and unknown compared to its neighbors? Because Highway 1A was built inland of the Nui Chua National Park and it bypasses the beaches.

A new beach highway will be completed in 2012 that will connect the beaches of northern Ninh Thuan province with the Cam Ranh Airport and the current road south of Vinh Hy Bay is also being widened, making drive times less than 45 minutes . Investors are beginning to take notice. The Intercontinental Hotel Group will manage the flagship resort in a large integrated tourism complex in Binh Tien. Another 5-star resort is nearly finished on the cliffs of Vinh Hy Bay, and Ninh Chu Bay is filled with smaller 3-star resorts owned by Vietnamese companies. But the area is not that well known even inside Vietnam so opportunities to find land at discounted prices remain.

Conclusion

The biggest difference between the south central and central coastal tourism clusters is the absence of cultural sites near Nha Trang. Better weather, water activities, and a traditional beach town atmosphere will draw tourists who aren’t necessarily looking to explore Vietnam’s culture. These will be the repeat tourists who come to escape the winter in Russia, want to explore dive sites, and have fun at night in Nha Trang.

We believe there is a lot of potential in this area. Cam Ranh has one of the best deep-water ports in Asia that could be perfect for a cruise ship port. Phan Rang/Ninh Chu Bay is located in the middle of the southern tourism triangle. If the government follows through with their plan to re-open the Phan Rang to Dalat train, then perhaps a situation similar to Bali could develop with resorts in the mountains and the sea connected. The area is currently an eight hour trip from HCMC by driving or train, but that could be shortened to less than four hours with a new express highway or high-speed rail system, both of which are planned.

Nha Trang Bay does have some pollution problems, but resorts are being moved off the beach to locations near Cam Ranh. Ninh Thuan province is still unknown, and resorts in Cam Ranh are still waiting. Also, the airport requires upgrades to handle the number of tourists needed to fill the resorts that are being built. In other words, the area is a lot like Danang a few years ago.

continue to . . . 

Section 5 of 5:  When to Invest & Conclusion

 

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