Hotels: A market-sizing exercise (part 2 of ???)
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NUMBERS OF DOMESTIC TRAVELERS IN VIETNAM HAVE JUMPED STARTING IN 2014 AND THEN LEVELED OFF. SOURCE: VIETNAMESE GOVERNMENT
Two days ago, we looked at the size of international visitors and came up with two potential paths, one to 30m visitors in 2025 and the second to 35m in 2025. I have a conservative bent, so I would lean to the 30m figures, but I’ll use both in future calculations.
But now that we have an idea of international visitors, we need to think of domestic hotel guests, both tourists, businessmen and any other visitors (say people visiting family). I have found a fair amount of data on domestic tourists and two things surprised me.
First, domestic tourists have grown from 28m in 2010 to 80m in 2018, according to the Vietnamese government. I am somewhat suspect about these numbers, because they go up so quickly, especially 2014 when the numbers jumped from 38.5m to 57m (48%). No other period saw growth like this.
I want to focus attention on this for a second. Just remember, when looking at data on emerging markets, I find that it is worth really looking into the numbers and see if they are realistic. I don’t think this jump is realistic. But figures for 2015-2018 show a much slower growth rate. One interpretation is that the government started counting domestic tourists differently in 2014. And then after that used this new counting method. The second is that the numbers overstate all domestic figures.
HOW WE REACH GUEST NIGHTS FROM HOTEL ROOM DATA. SOURCE: GRANT THORNTON, VIETNAMESE GOVERNMENT, VIETECON.COM ESTIMATES
One thing to look at would be hotel guests, if possible. I found a few things. First, 48% of all domestic travelers stayed overnight in the first two months of 2016. This is the only data that I was able to find [if I find more, I will update this]. So, let’s say this is true for all periods and make it 50% to make the math easier. That means in 2015, with total domestic tourists of 64.6m, only 32.3m stayed in hotels. And I found another stat from 2017 that says domestic travelers to HCMC stayed 3.6 days on average. For the country as a whole, let’s say 3 nights (to account for less popular destinations). That gets us to 32.3 x 3 = 96.9m nights. Foreign visitors in 2015 were 7.9m and the same 2017 stats said the average duration of stay was 5.2 nights, so let’s round down to 5. That gets us to 39.5m. But let’s say on average 1.2 foreign guests stay in one room, but 1.5 domestic guests stay in a room. That results in 47.4 foreign room nights and 145.35 domestic room nights for a total of 192.8m nights occupied. In 2015, there were only 355,000 rooms in the country making for just 130m hotel nights.
This is too high. Sometimes this happens. You do all the work, and it just doesn’t look right. I would say what seems wrong is the average nights stayed. I bet this is less than we suspect, for both foreign visitors and locals.
HOW TO REACH GUESTS NIGHTS FROM TOURIST FIGURES. SOURCE: GRANT THORNTON, VIETNAMESE GOVERNMENT, VIETECON.COM ESTIMATES
Back to certain ground
HOW TO REACH GUESTS NIGHTS FROM TOURIST FIGURES. SOURCE: GRANT THORNTON, VIETNAMESE GOVERNMENT, VIETECON.COM ESTIMATES
What I like to do when this happens, I like to go back to what we actually know and strip out all the assumptions. So what do we know? We know foreign visitors. That number seems pretty certain. I also think that 5 nights is probably pretty realistic, although it is hard to say. That gets us to basically 40m guest nights, out of a total of 122m. That leaves 82m for domestic travelers. I am concerned that the 50% figure and the nights stayed of 3.5 could be too long. If 50% is correct, then duration of stay needs to be 2.5 nights. That seems long to me, but is conceivable.
Just one more check, we have a bit of data on guests at 4- and 5-star hotels: 80% of them are foreign. Now there were 51,591 rooms at 4- and 5-star hotels in 2015. If occupancy is 62% (based on Grant Thornton figures), that means 11.7m hotel nights. Now if there are 1.2 guests in a room, that is 17.5m guest nights or almost half of the total international guest nights. That means the majority of foreigners were staying at 3-star rooms and below. As a reference there were 30,734 3-star hotel rooms in 2015, adding another 8.4m guest nights (at the 63% occupancy rate, 80% foreign and 1.5 guests per room). Some people came on cruises, or stayed with families, or in hostels. I guess. It’s plausible but does raise some issues.
So, in conclusion, we have some key estimates that seem relatively true now:
Foreign visitors were 7.9m and they stayed on average 5 nights per stay and there were 1.5 of them in each room.
Domestic travelers were 65.6m, half of which stayed overnight (the rest were day trippers), they stayed 2.5 nights on average and there 1.5 of them in each room.
These figures get to our 122m guest nights, which is based on 355k rooms, occupancy of 63% and 1.5 guests per room.
Well, it took longer than I expected to get to this point, but that’s fine. That’s why it’s my blog! I don’t have to cut it down. Sometimes it is just helpful to show the work.
Anyway, next week, let’s take these number and run them backwards to check them and then forwards with our estimates through 2025. Then we can see how many hotel rooms we will need.