Finding the silver lining: how the strong US dollar affects Vietnamese tourism

On the black market, the USD has reached 25,770, while the benchmark rate of the State Bank of Vietnam has remained stable at 24,245. This increase in the USD exchange rate negatively affects the cost of imported goods, inflation and the competitiveness of Vietnam’s exports.

Most importantly, as the Vietnamese dong continues to depreciate against the US dollar, this could lead to higher import costs for companies in Vietnam, which could lead to higher prices for consumers as companies pass on the higher costs to maintain their profit margins. A weaker Vietnamese dong could also make it more expensive for Vietnamese companies to repay their dollar-denominated debts, leading to greater financial pressure and possible bankruptcies.

Moreover, a depreciating dong could also reduce the purchasing power of Vietnamese consumers as imported goods become more expensive. This could lead to a decline in consumer spending, which could have a negative impact on domestic businesses and the economy as a whole.

Although the current situation is far from ideal, we should be wise to consider the saying ‘trong cai rui co cai may’.“ (every cloud has a silver lining), especially in the case of one of Vietnam’s most successful exports: tourism.

Vietnam’s tourism industry may face challenges due to the current fluctuating exchange rates, but there are also potential opportunities to be discovered.

Foreign tourists take a boat trip in Ha Long Bay, in the north of Vietnam. Photo by Pham Ha

First, the strength of the US dollar has a major impact on attracting American tourists to Vietnam. A favorable exchange rate could lead to greater purchasing power for American visitors, potentially attracting more U.S. tourists to Vietnam.

Conversely, an unfavorable exchange rate could deter them due to higher costs. A robust US dollar also results in longer lengths of stay and increased spending by American tourists during their travels in Vietnam, which benefits the local economy, leads to greater revenue from tourism activities and contributes to domestic tourism growth.

Second, a favorable exchange rate can also attract more American tourists during off-peak seasons, promoting more balanced tourism demand throughout the year. With the expected continued strength of the US dollar against the Vietnamese dong in 2024, Vietnam is expected to see an increased number of US visitors throughout the year, potentially helping to reduce seasonality in Vietnam’s tourism industry. However, a stronger US dollar could affect the cost of imported goods and services for Vietnam’s tourism industry, affecting the profitability and competitiveness of establishments such as hotels, resorts and transportation companies that rely on imports.

Third, a high exchange rate makes Vietnam a more affordable and attractive destination compared to neighboring countries such as Thailand, Malaysia, Laos and Cambodia. This competitive advantage can attract tourists who might otherwise have chosen other destinations, benefiting Vietnam’s tourism industry. Likewise, it can encourage international tourists (not just from the US) to add Vietnam as an additional destination when visiting Southeast Asia.

And fourth, the strong US dollar can encourage foreign investment in Vietnam’s tourism infrastructure, such as hotels, resorts and attractions. This investment could lead to improved facilities and services, further increasing the country’s appeal as a tourist destination. A strong US dollar, coupled with the recent passage of two important laws related to land and real estate (Constitution No. 31/2024/QH15 and Updates to the Real Estate Activities Law No. 29/2023/QH15) will make Vietnam a create an extreme country. desirable destination for foreign investment in tourism and hospitality and other areas, thus boosting the country’s economy.

The US has long been one of the most important travel markets for Vietnam. More than 2.4 million Americans visited Vietnam between 1977 and 2006, making it the second largest market in terms of international arrivals.

Between 2007 and 2016, more than 4.46 million Americans visited Vietnam (4th market in terms of international arrivals). In 2023, Vietnam received 717,073 US visitors (4th market in international arrivals) and 232,358 visitors in the first 3 months of 2024 according to the General Statistics Office (GSO). According to the United Nations World Tourism Organization (UNWTO) and the World Travel and Tourism Council (WTTC), American travelers are among the highest spenders and have the longest stays, making them a highly sought-after inbound travel market. American visitors spent an average of $1,710 during their visit to Vietnam in 2019, ranking third behind the Philippines and Belgium (GSO).

This is the ideal time to invest in promotional campaigns specifically aimed at American tourists. Focusing on this market can yield significant returns for the tourism sector. Capitalizing on the influx of American tourists in Vietnam could have a ripple effect on other sought-after visiting countries such as Canada and Europe. By attracting more American travelers to Vietnam through strategic promotional campaigns, the tourism industry can encourage visitors from high-income countries to explore and visit Vietnam.

To maximize the benefits of the current favorable exchange rate for Vietnamese tourism, it is essential that the government and tourism industry stakeholders implement strategic initiatives. One effective solution is to invest in infrastructure development and improve the quality of tourism services and facilities. By improving transportation networks, upgrading accommodations, and offering diverse and engaging tourism activities, Vietnam can attract a broader range of travelers – not just Americans – and increase its competitiveness in the global tourism market.

*Nuno F. Ribeiro, PhD CHE, is Senior Lecturer in Tourism and Hospitality Management, RMIT Vietnam and Member of the Vietnam EuroCham Tourism and Hospitality Committee.