Foreign businesses dominate Vietnam’s lucrative online travel market

Foreign businesses dominated the online travel agency channel in Vietnam, according to The Outbox Company’s Most Loved Ranking, which surveyed Vietnamese travelers’ preferences and awareness in Q1/2023.

The top online travel agents (OTAs) in Q1 are international brands in the travel sector, such as Traveloka, Booking.com, Agoda, Expedia and Trip.com. There are no domestic OTAs platforms among the top choices of Vietnamese travelers.

Traveloka has experienced tremendous growth thanks to effective campaigns during Tet (Lunar New Year) 2023, with more than 40% of travelers selecting it in Q1, which is 10% more than the second-ranked Booking.com.

One of the main reasons domestic customers prefer foreign OTAs is that they have a head start of about 20 years, with extensive experience in online transactions, global operations and established brand names with a solid reputation and strong financial backing.

According to a report by Google and Temasek, Vietnam’s online travel market is a lucrative industry that may reach $9 billion in scale by 2025.

However, this market is dominated by foreign online travel agencies (OTAs), which account for 80% of the market share, leaving Vietnamese OTAs like Gotadi, VnTrip, Ivivu, and Chudu, respectively Mytour.vn and Vinabooking with only a small percentage of transactions.

Vietnam’s tourism consumption trends have undergone significant changes in the past decade due to the emergence of digital technology.

Online payment methods, such as credit and debit cards and e-wallets, have replaced cash and are now more commonly used. Additionally, booking services for airline tickets, hotels and other travel arrangements through smartphone applications have significantly increased. These developments have facilitated the growth of online travel agencies (OTAs), both foreign and domestic.

Large hotels report that 40-60% of their total revenue comes from OTA channels, primarily foreign businesses.

Since tax regulations in Vietnam do not yet bind foreign online exchanges, they have more financial resources to invest in marketing, advertising and offering discounts to their partners, creating a significant competitive advantage.

The Private Economic Development Research Board acknowledges a tax inequality between domestic tourism and travel service businesses and foreign OTAs, as the latter do not have representative offices in Vietnam. This disadvantages domestic OTAs when competing with foreign OTAs on pricing.

The founder of Gotadi Ngo Minh Duc believes that Vietnam’s tourism industry needs to build a community and product ecosystem and adopt smart policies to dominate the market.

Vietnamese tourism businesses must link and transform digitally to create an ecosystem of Vietnamese people with smart service providers, smart users, and smart destinations, no longer losing at the “home field”, Duc said.