Airports in major cities are increasingly overwhelmed with passengers, presenting a big challenge for tourism development as more than 80% of international visitors come to Vietnam by air, Savills said.

Passengers wait for boarding at Tan Son Nhat International Airport in HCMC

In 2016, there were about 10 million international tourists to Vietnam. By 2030, this figure is estimated to soar to 18 million, with China and Russia becoming Vietnam’s two fastest growing source markets.

In addition, Meeting-Incentive-Convention-Exhibition (MICE) and business travelers accounted for over 40% of total international arrivals to Vietnam last year. There were five million visitors to HCMC and four million to Hanoi.

Troy Griffiths, deputy managing director of Savills Vietnam, said the total rated travel accommodation supply in Vietnam grew 18% year-on-year by 2016 to 420,000 guest rooms.

Rising tourist arrivals are creating more business opportunities for hotels, especially those in the upper-medium-end and high-end segments. From 2013 to 2016, four and five-star hotel rooms shot up by 20% per year on average, meeting international tourist demand for upscale resort and luxury accommodation, Troy said.

HCMC has the largest hotel supply in the country, with 16,000 rooms of three to five stars, which are 70% higher than in Hanoi.

Over the next three years, HCMC expects to have 3,500 new rooms, a 22% increase. Pressure will be higher in Hanoi, with the future hotel room supply accounting for up to 50% of the current number.

In 2016, resort cities and islands outperformed HCMC and Hanoi thanks to higher growth in international arrivals.

Phu Quoc became a new attractive destination for international travelers with tourist arrival growth reaching 40%. Danang posted over 30% growth in foreign visitors and Nha Trang reported 23% while the respective rates of HCMC and Hanoi were 10% and 19%.

Therefore, guest rooms surged in these new places of interest last year. Nha Trang had the largest number of hotel rooms among the coastal cities, with over 12,000 rooms meeting three to five-star standards.

Danang had around 9,000 guest rooms and an occupancy rate of about 65%. On Phu Quoc Island, high-end resorts were mushrooming, with the fourth quarter of 2016 seeing high-end resorts and hotels there accounting for 71% of the total with 2,500 rooms of 3-5 stars.

International visitor arrivals to Vietnam are now three times higher than a decade ago, with growth in 2016 amounting to 26%, said Savills.

Meanwhile, airport infrastructure development has not matched that of the tourism industry. Last year, international arrivals by air totaled more than 8.2 million, representing more than 80% of the total.

Airports in major cities have struggled with overload, especially those in HCMC and Nha Trang. The airport in Danang operates at 113% capacity despite a 2011 expansion from 4.5 to 6 million passengers a year.

Over the next two years, Tan Son Nhat International Airport will boost its annual capacity from 25 to 38 million passengers. Danang airport’s current domestic terminal is able to handle nine million passengers a year and it will be expanded to receive an additional 4-6 million passengers a year.

Meanwhile, the operation of the first phase of the Cam Ranh airport expansion project has been rescheduled from early 2016 to the first quarter of next year. With 4.8 million arrivals to Nha Trang in 2016, the planned capacity upgrade to 2.5 million passengers a year might not meet the growing demand.

According to the Government’s master plan, around US$5.6 billion will be needed for developing airport infrastructure between now and 2020.

Savills said airport infrastructure development would leverage tourism growth, particularly in Danang, Nha Trang and HCMC.

SGT