The TPP, if ratified, will allow investors from 11 foreign countries to provide tour operator services in Vietnam for the first time, raising concerns among local travel companies about losing out in their home market to foreign rivals that have stronger international experience and financing.

Under the Trans-Pacific Partnership Agreement (TPP), Vietnam would allow foreign companies from other TPP countries such as Australia, Japan, and the US, to provide inbound services and domestic travel solutions for tourists.

At present, foreign companies are not allowed to operate inbound tours, and have to partner with local businesses instead.

“Once we open door to foreign travel agencies, they will likely expand their business in Vietnam, creating huge challenges for local firms,” said Luu Duc Ke, head of the travel agency Hanoitourist. “Local firms will lose out unless they manage to hold on to their Vietnamese customers and increase their ability to lure foreign visitors.”

With a population of more than 90 million and the rapid expansion of a young middle class, Vietnam could supply a large volume of local customers to travel agencies, while the country’s natural beauty is a huge draw for foreign visitors, Ke said.

More than four million international visitors arrived in Vietnam between January and May, up 20% over the same period last year, according to the General Statistics Office.

Nguyen Cong Hoan, vice general director of the Hanoi Redtour travel agency, said that foreign firms were in a strong position to increase their market share through their large network of hotels, and cooperation deals with airlines. “This stands in sharp contrast to local tour operators which are mostly small- and medium-sized enterprises.”

Unsound competition practices and weak coordination among local enterprises have made them less competitive than their foreign rivals.

Many local travel agencies are competing by slashing their tour prices, which is only made possible by a broad fall in quality.

This myopic tactic has undermined visitors’ trust in local agencies. Visitors will leave local firms for foreign ones which offer the same services in Vietnam, Hoan said. “The possibility of losing the market is very real.”

Hoan added that foreign companies may tap the market through online services, which they have long-term experience in. They may also focus on inbound tours to take foreign visitors to Vietnam and then outbound ones to take local visitors to foreign countries.

To hold their own in this situation, local travel businesses need to focus on improving the quality of services and products, industry insiders have warned.

Online sales should be increased because it facilitates clients and costs tour operators less, allowing them to offer more discounts to customers.

Local firms should learn from foreign agencies, particularly in relation to the development of tourism products, promoting marketing activities, and expanding online services, said tourism management lecturer Huynh Van Son.

VIR