“The tourism sector has been a major factor in job creation, economic development and poverty alleviation in Vietnam, leaving no doubt that it’s played a crucial role in our country’s overall socioeconomic progress.” When Vietnam’s state vice-president Nguyen Thi Doan addressed the World Travel & Tourism Council last year, she wasted little time in underlining the significance of tourism to her nation. Having accounted for 4.5 per cent of GDP in 2012, forecasts predict a per annum increase of 6.7 per cent until 2023. With its stunning natural landscapes, cultural riches, hospitable people and a favourable climate, it’s easy to see why Vietnam is ranked among the top three emerging tourism destinations worldwide.

A civets economy
The country’s tourism growth feeds into a larger picture; one that has seen Vietnam positioned as one of Asia’s most exciting economic prospects behind China. Indeed since financial and political reforms – termed as doi moi (or restoration) – were initiated in 1986 to facilitate the transition from a centralised planning system to a multi-sector market economy, Vietnam has posted annual per capita growth of 5.3 per cent, according to McKinsey. Throughout the 90s the country became a global investment darling and in 2007, the same year it joined the World Trade Organization, it attracted more foreign direct investment than the majority of other Asian tiger economies. The factors that underlined this success varied from a young, flourishing labour force to a notable shift from agriculture into manufacturing and service-based industries.

Vietnam’s reputation as an enticing investment market was further cemented when the Economist Intelligence Unit identified it as a CIVETS nation in 2009. An acronym championed by former HSBC chief executive Michael Geoghegan, CIVETS encapsulates six countries – Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa – all of which have been earmarked as the new batch of emerging economic powerhouses, following in the footsteps of BRIC countries. Speaking of the CIVETS, Geoghegan has observed: “Each has a large, young, growing population. Each has a diverse and dynamic economy. And each, in relative terms, is politically stable.”

Yet Vietnam’s economy has, more recently, lost some of its roar due to concerns about inflation, bad bank debts, falling foreign investment and corruption scandals among its state-owned enterprises. This meant that in 2012 the country’s growth slowed to its weakest pace in 13 years, with GDP increasing by only 5.03 per cent. In April 2013 the IMF then lowered Vietnam’s growth projections into 2014, raising questions about the ruling party’s ability to reform the fragile banking system and state-owned firms that dominate the economy.

Silver Linning
Among these gathering clouds, the tourism sector has remained a bright spot on the horizon. Figures from the Vietnam National Administration of Tourism showed that international arrivals reached over 6.8 million in 2012 – a 13.8 per cent increase over 2011. China, South Korea and Japan were the top source markets, confirming the trend for travel originating from other Asian countries. Factor in the additional 32.5 million trips made domestically and overall tourism turnover reached VND162 trillion (US$7.7bn, €5.8bn, £5bn) last year.

With a strategy that seeks to secure private and public investment of VND1.9 quadrillion (US$94.2bn, €71.6bn, £70bn) for tourism infrastructure between 2011 and 2030, it’s expected that this sector will be a key national industry within the decade. Accordingly, targets have been set for 10.5 million international arrivals and 48 million domestic trips by 2020, with forecasted revenues rising to VND392 trillion (US$18.5bn, €14.1, £12.2bn), for the year.

Set against this landscape, the VND3.1 trillion (US$144m, €109.5m, £94.7m) generated by spa tourism in 2012 can be considered a relative drop in the ocean. But Euromonitor International’s 2012 Health and Wellness Tourism in Vietnam report predicts this sector will achieve a compounded annual growth rate of 16 per cent over the next five years.

Hospitality influence
From the Euromonitor report, which compares revenues of hotel and resort spas (86 per cent) versus other spas (14 per cent), it’s clear that wellness tourism is driven by hospitality operations: “The healthy growth of hotel and resort spas shows that more consumers prefer to go to premium facilities in spite of higher prices as they provide professional services and trusted products.”

Key purchasers, it says, are middle- and upper-income consumers and foreign tourists who enjoy Vietnam’s low-priced spa services. Other spas are typically operated by small independent players, with varying service quality due to loose government management.

Not surprisingly, it’s resort and hotel development that will underpin expansion, rather than local businesses. While awareness is still limited among the country’s upper and middle-classes, Euromonitor predicts that more Vietnamese will become interested in spa “thanks to the greater exposure of western culture in the country.”

Although estimates for the country’s middle-class vary – KPMG suggests 14.6 million of the 88-million total while McKinsey reports over 7 million – it’s universally acknowledged that these consumers are a growing force, interested in spending their money on products and leisure. This presents an interesting opportunity for hotel brands incorporating major spas in cities such as Hanoi and Ho Chi Minh. Outside Vietnam’s two main urban hubs, coastal regions make natural homes for spa resorts, and new locations include Asian Coast Development’s integrated Ho Tram Strip project in southern Vietnam, which will accommodate five different resorts with spa offerings after its completion in 2020.

In the following pages, we delve into three different Vietnamese spa businesses to see how they’re faring in the market.