Vietnam’s Richer Provinces Captures the Majority of Tourism Sector Revenues

Nhat Trung

05:15 10/07/2019

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60 percent of revenues accrue to just 2 of Vietnam’s 63 localities (Ho Chi Minh City and Ha Noi), and nearly 90 percent to only 9 localities.

Vietnam’s Richer Provinces Captures the Majority of Tourism Sector Revenues
In some localities, such as Khanh Hoa, this revenue growth outperformance is the result of relatively faster growth in international visitors, who tend to spend more on average, than their domestic counterparts. In other cases, such as Lao Cai and Ninh Binh, revenue growth has been driven by the surge in domestic visitors, which has more than compensated for their relatively lower average spending. 
Despite this promising trend of tourism-led income “convergence”, Vietnam’s richer provinces still capture the majority of tourism sector revenues, and the geographic distribution of tourism earnings remains highly concentrated—60 percent of revenues accrue to just 2 of Vietnam’s 63 localities (Ho Chi Minh City and Ha Noi), and nearly 90 percent to only 9 localities.
In light of these generally-favorable economic impact dynamics of tourism spending in Vietnam, the recent decline in average daily visitor spending poses risks to the durability of tourism benefits.
According to the GSO’s tourist expenditure survey,31 which has been conducted every few years since 2003, the average daily spending per international visitor peaked in nominal terms in 2011, at US$106, and has since declined and leveled off at around US$96. 
However, given the continued depreciation of the Vietnamese dong vis-à-vis the U.S. dollar over the past decade (which raises visitors’ local purchasing power per USD), and local price inflation (which erodes purchasing power), it is more instructive to look at the evolution of average expenditure adjusted for these two opposing effects. 
On this adjusted basis, average daily international visitor spending has been on a steady decline since 2003. As discussed above, in the past several years, this decline predominantly reflects the shift towards a larger share of Chinese visitors in the nationality mix of inbound tourism, who spend less on average per day. 
For domestic visitors, average daily spending has been rising in nominal terms since 2003, but has effectively been flat in real terms. In other words, although Vietnamese nationals are traveling domestically in greater numbers, they do not appear to be allocating a greater share of their real incomes to tourism-related spending.
If this expenditure erosion persists, Vietnam will have to rely on increasingly faster growth in visitor numbers to sustain or increase the economic yield of tourism activity. Such a dependence on a greater volume of tourism could exacerbate current overcrowding pressures in certain destinations, place additional strain on local infrastructure, and degrade key natural and cultural tourism assets.

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