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Vietnam’s service sector struggling to recover

Vietnam’s service sector struggling to recover

Wednesday 25, 05 2022
Companies operating in the service sector in Vietnam were heavily affected by the pandemic. There is a need for supporting policies for these companies to recover.

Declined revenue in the service sector

Through quarterly reports published for two consecutive years, 2020 and 2021, market research organizations such as Savills and CBRE have said that the COVID-19 pandemic has caused many great fluctuations in the economy, and has especially impacted the tourism, accommodation, and the food and beverage (F&B) industries of Vietnam.

 market research organizations

CBRE's statistics showed that in Hanoi, in the 4 to 5 stars hotel segment, many hotels were only able to operate at a fraction of their available capacity due to social distancing. In the third quarter of 2021, the average room rate reached 94.4 USD, a decrease of 3.9% over the same period in 2020 and 16.4% compared to 2019. Similarly, the average occupancy rate was 26.2%, down 3% over the same period in 2020 and 54.7% over the same period in 2019. Therefore, RevPAR only reached USD 24.7, down 14.2% over the same period in 2020 and 72.9 % over the same period in 2019.

In addition, according to the Vietnam National Administration of Tourism, in 2019 (before the occurrence of COVID-19), the total revenue from tourists reached 755,000 billion VND, by 2020, it was only 312,000 billion VND, down 58.7% compared to 2019. The total revenue in 2021 continued to decrease to 180,000 billion VND, down 42.3% compared to the previous year.

In 2022, Vietnam's tourism industry aims to welcome 65 million tourists, including 5 million international visitors and 60 million domestic tourists. Total revenue from the tourism industry is estimated at 400,000 billion VND.

In need of support

Many economic experts recommend that to recover the tourism, hotel, and F&B industries, there should be overall policies, and stabilizing input costs is assessed as essential.

Ms. Do Hong Xoan - Chairman of the Vietnam Hotel Association - expressed concern at the news that the excise tax on alcoholic beverages excise tax increase is in consideration.

At the irregular meeting in January 2022, the Government submitted to the National Assembly a draft Law with the amendment and supplement of several laws, including the Law on Special Consumption Tax. According to the tax system reform strategy to 2030 just approved by the Government, a roadmap to adjust and increase excise taxes on tobacco, beer, and alcohol will be developed.

Government submitted

"The hotel and F&B industry consume a very large amount of drinks. Food and drinks account for about 50% of total revenue in some hotels," said Ms. Xoan, concerned that the tax increase would cause prices to rise high, putting pressure on input costs. Besides, with increased prices, drinks may be unsellable, which will also greatly affect the revenue and profit of the hotel and the beverage industry.

The Chairman of the Vietnam Hotel Association said that to recover the tourism industry, supporting policies and solutions are needed. If the beverages tax increases, then the beverage, hotel, and F&B industries will all be affected and will certainly face more difficulties.

Many F&B businesses are also worried about the news of the increase in excise tax on alcoholic beverages. F&B is an industry strongly affected by the COVID-19 pandemic. Even when the pandemic ends, this industry will still face many difficulties due to changes in business methods and customer behavior in the new situation.

According to one F&B business owner, the increase in input costs will create an additional burden that hinders the recovery of operations. What businesses need most right now is stability and support to reduce the impact of the pandemic on business operations.

F&B business

Companies operating in the service industry in Vietnam are currently in dire need of policies to support production and business, especially tax policies, reduce input costs, and nurture revenue sources. Those are favorable conditions for the service industry to quickly recover, contributing to the economic growth target of 6-6.5% set by the National Assembly.



Compiled by VietnamCredit

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