Vietnam Private Sector Support Programme. Final Report on Participatory Tourism Value Chain Analysis in Da Nang, Central Vietnam

Transcription

1 Vietnam Private Sectr Supprt Prgramme Final Reprt n Participatry Turism Value Chain Analysis in Da Nang, Central Vietnam Jnathan Mitchell and Le Chi Phuc 3 rd September 2007

2 Cntents EXECUTIVE SUMMARY 2 1 INTRODUCTION Backgrund Why turism? Value chain apprach Why Rapid Appraisal? Why Pr-Pr? Structure f reprt 8 2. OVERVIEW OF TOURISM Turism demand Turism supply Enabling envirnment Assessment f issues facing the turism sectr in Vietnam 13 3 RAPID PARTICIPATORY VALUE CHAIN ANALYSIS The Methdlgy What is Participatry Appraisal f Cmpetitive Advantage? What is Value Chain Analysis? Value Chains & PACA The Prcess Assessment f the prcess Prceedings PACA hst and VPSSP prgramme ffice Da Nang Final assessment f pre-assessed prpsals Cmparisn with previus research techniques Lessns learnt fr future applicatins DIAGNOSIS OF THE TOURISM SECTOR IN DA NANG The turism value chain map Turism demand Turism supply Supprting structure Strengths and Weaknesses Surprises Quantificatin f the turism value chain Accmmdatin Assessment f results f the turism value chain analysis 50 5 TOURISM DEVELOPMENT STRATEGY Intrductin Framewrk PROPOSALS WAY FORWARD 63 1

3 Tables, Figures and Bxes Table 1 Turism business envirnment in Asia...12 Table 2 Travel & Turism Cmpetitiveness Index, Table 3 The Study Prcess...20 Table 4 Summary f respnses at the presentatin wrkshp plus wn insights...23 Table 5 Da Nang htel stck...37 Table 6 Resrts n the Da Nang Peninsular with develpment licenses...40 Table 7 Drivers f change in Da Nang turism...53 Figure 1: The $42m Da Nang turism value chain...2 Figure 2 Alternative Futures fr Turism in Da Nang...3 Figure 3 Lcatin f Da Nang Prvince...2 Figure 4: Exprt perfrmance f varius ecnmic sectrs in Da Nang, Figure 5 Analysis f turism sub-sectr in Da Nang, Figure 6 Indicatrs f pverty in Vietnam 1993 t Figure 7 Internatinal arrivals in Vietnam in 2004 (millins)...9 Figure 8 Internatinal arrivals in Vietnam in Figure 9 Example f a simple prduct value chain...15 Figure 10 Turism as a service value chain...16 Figure 11 Sequence f activities in...19 Figure 12 Evlutin f turism research methds...26 Figure 13 Turism stakehlders mapped in Da Nang...29 Figure 14 Da Nang Turism Value...30 Figure 15 Turists staying at least ne night in Da Nang, 2000 t Figure 16 Turists bed-nights in Da Nang, Figure 17: Turist expenditure fr turists in htels in Da Nang and Vietnam average, Figure 18 Internatinal turists and day visitrs in Da Nang, 2000 t Figure 19 Lcal linkages frm the $41m Da Nang turism value chain...45 Figure 20 Alternative Futures fr Turism in Da Nang...54 Figure 21 Actin Plan...64 Acknwledgements This reprt is mainly summarizing the effrts f a remarkable grup f peple wrking tgether in Central Vietnam. Led by Christian Schen f the Vietnam Private Sectr Supprt Prgramme (VPSSP) with supprt frm the authrs f this reprt, the nine persn lcal team was enthusiastic, skilled and hard-wrking. We acknwledge the achievements f Lam Thanh Binh, Nguyen Thanh Viet; Trung Si Hai Nhan; Le Hang Van; Nguyen H Quc Ba; Tran Thi Thu Hien; Le Thi Hang; H Mai Anh and Trinh Thi Ly. We als acknwledge the supprt f ur hsts in the Department f Turism in Da Nang and the Eurpean Cmmissin, which finances the VPSSP. 2

4 EXECUTIVE SUMMARY This Reprt aims t imprve the lives f peple living in Da Nang, thrugh develping the turist sectr and imprving its links t the pr. The Reprt describes an innvative apprach t turist develpment a participatry pr-pr value chain analysis - that was supprted by lcal stakehlders and funded by the Vietnam Private Sectr Supprt Prgramme. This is prbably the first truly participatry turism value chain exercise ever cnducted. Because this exercise was, in many ways, a vyage f discvery, the Reprt seeks t capture the essential elements f the prcess as well as present the findings f the exercise. The study team cmpleted 50 interviews, ten wrkshps and detailed htel, turist, taxi, and hstel surveys during tw missins in Da Nang ne in Nvember 2006 and a fllw-up missin in April This Reprt includes an analysis f the turism value chain in Da Nang itself, an utline f the strategic chices facing the sectr, and sme detailed prpsals fr addressing these prblems. The Turism Value chain The size f the turism value chain in Da Nang is significantly larger than previusly thught, at abut $42m in This represents a cntributin f 5.6% t the ecnmy f Da Nang. The main reasn fr turist spending being larger than fficial statistics suggest is that significant expenditure by turists is taking place utside the fficially-defined turist sectr f htels, restaurants and transprt (fr instance, craft shps, and infrmal sectr hstels and cafes). The value chain is currently cmprised abut 60% dmestic and 40% internatinal, even thugh freigners spend abut 2.5 times as much mney each day as dmestic turists. Whilst there are real advantages frm balancing freign turism with dmestic demand, the increasing dminance f dmestic turism in Da Nang reflects the failure t grw internatinal turism despite rapid grwth natinally and in ther destinatins in the regin. Reliance n the relatively lw-value dmestic sectr as the future fr Da Nang is risky because it is premised n ever larger numbers f relatively lw-yield turists. The feasibility f this strategy is questined by the fact that, in 2006, the number f dmestic turists staying vernight in Da Nang fell. Althugh dmestic turist demand has been buyant until recently, it cannt cmpensate adequately fr the failure f Da Nang t attract upmarket turists (whether dmestic r freign). The imprtance f this is reflected in the fact that nearly 40% f ttal accmmdatin spending in Da Nang is generated by tw upmarket htels with the rest being generated by sme 100 frmal sectr htels and 200 hstels. The failure t develp upmarket resrts n the cast has seriusly cnstrained the grwth f the turist value chain in Da Nang. Linkages between the turist sectr and the pr are strng with at least 26% f turist expenditure in Da Nang accruing t nn-managerial wrkers and entrepreneurs an estimated figure f $11m last year. Typical earnings fr this categry f wrker r entrepreneur are abut $100 per mnth. Whilst this level f incme is nt regarded as pr in Vietnam it falls belw the internatinal pverty line. The finding that abut ne-quarter f turist turnver at the destinatin accrues t the pr cmpares favurably with existing, admittedly few and far between, internatinal benchmarks. Da Nang turism has strng pr-pr linkages fr several reasns. First, the direct linkages frm turism t the pr (wages paid t the 4,200 wrkers and entrepreneurs in turist sectr such as htel and restaurant wrks, taxi and guides) accunt fr ver half f all pr-pr benefit flws - 1

5 sme $5.8m in The imprtance f direct flws reflects the labur market cnditins f lw unemplyment and high demand fr labur that increase returns t labur. Indirect linkages between turism and peple wrking beynd the turist sectr accunt fr just under half f pr-pr benefit flws - sme $5.1m. This reflects the imprtance f turist expenditure n craft and massage and, t a much lesser extent, the dwnstream linkages between turism and the lcal agricultural sectr. Interestingly, we estimate that slightly mre peple rely n turism fr their livelihd thrugh these indirect linkages abut 4,500 wrkers and entrepreneurs than the number f peple wrking within the strictly-defined turist sectr itself. Figure 1: The $42m Da Nang turism value chain Pr-Pr Impact Accmmdatin $14.1m Sme nn-managerial & nn-catering staff with wages f abut $2.7m each year (19% pr-pr) Transprt $7.8m Sme 750 taxi drivers & switchbard peratrs, plus cycls drivers in Da Nang with wages f $1.2m per year (16% pr-pr) Fd $7.1m Sme restaurant, bar and café staff earning $0.99m each year farmers supply $0.5m prduce t turism sectr annually. Cmbined pr-pr flw f $1.5m (21% f retail expenditure) Shpping $6.2m Almst tw-thirds f spending in the craft sectr supprting crafterrs. Pr-pr flw f sme $3.4m (54% pr-pr) Other htel spending $3.3m Massages accunt fr abut half nn-rm htel expenditure. 320 wrkers earn sme $1.3m annually (39% pr-pr) Sightseeing $2.4m Da Nang has sme 260 registered guides earning $0.9m per year (38% prpr flw) Entertainment $0.9m Very limited entertainment expenditure in Da Nang Using the data frm the turism value chain exercise relating t turist numbers and expenditure patterns in different segments f the market, it was pssible t mdel the implicatins f fur very different futures fr turism in Da Nang as part f a Turism Develpment Strategy exercise. All the financial figures in these scenari exercises are based n current prices. Nightmare scenari examines the cnsequence f extraplating the recent trends in turism demand in Da Nang. Average annual bed-nights ccupancy in Da Nang have reduced ver the last tw years (2005 and 2006) by -6.4% fr internatinal visitrs and -4.8% fr dmestic guests. Extraplating these negative demand trends t 2012 clearly illustrates the serius cnsequence f this deleterius scenari. The turist sectr cntracts frm the current value f $42m t abut $33m. Given the dynamic grwth f the nn-turist ecnmy in Da Nang (averaging 12.9% since 2000), this reduces the current cntributin f turism t the City ecnmy frm just belw 6% tday t 2

6 belw 2% in just six years. The flw f benefits t the pr als haemrrhages if the current trends cntinue and fall frm abut the current level f $11m per year t an annual figure f $8m. In ther wrds, under the nightmare scenari turism virtually ceases t becme an imprtant ecnmic sectr fr the City in six years. Falls in turist demand that are as steep and prtracted as envisaged under the Nightmare scenari will render many turist establishments unviable within a few years. The Business as usual scenari is a less depressing view f future turism in Da Nang. It lks at the implicatins f turism carrying n very much as it has dne fr the past six years. This scenari is based n the pattern f turism demand fr the perid s the very pr results last year are diluted with mre psitive figures frm earlier in the Millennium. Internatinal turist bed ccupancy has been languishing fr a decade and has declined by an average f 0.5% a year since but dmestic turism has grwn by an average f 11.4% a year ver the same perid. S, the questin implicit in this scenari is, can Da Nang rely n buyant dmestic demand t drive turist develpment in the future? There are sme psitives. Turism, driven purely by dmestic demand, is prjected t grw frm $42m a year t $66m a year by Hwever, the nn-turism ecnmy grws even faster, s the cntributin f turism t the City ecnmy shrinks frm nearly 6% tday t just 3.8% in six years time. In ther wrds, whilst buyant dmestic demand can grw the turist sectr, it cannt prevent a rapid decline in turisms cntributin t the City ecnmy. Figure 2 Alternative Futures fr Turism in Da Nang 9% 8% Stay anther day 2012 ($104m) Turism (% f Da Nang ecnmy) 7% 6% 5% 4% 3% 2% Yu are here 2006 ($42m) Business as usual 2012 ($66m) Harness the beach 2012 ($94m) 1% Nightmare scenari 2012 ($33m) $0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 Benefit flws t the pr (USD) The Harness the beach scenari wrks frm the Business as usual baseline and illustrates the impact f adding sme nine hundred upmarket htel rms in six castal resrts in Da Nang between 2008 and The scenari is entirely realistic and shws the dramatic impact f implementing the already apprved castal develpments n the Sn Tra Peninsular and China 3

7 Beach. Turism is prjected t grw frm $42m tday t $94m in 2012 and duble the flw f benefits t pr peple. This scenari is the first ne that allws turism t almst maintain its cntributin t the City ecnmy. Under the Harness the beach scenari turism shuld cntribute sme 5.4% t the Da Nang ecnmy in The reasn that increasing the current rm stck by slightly ver nequarter has such an imprtant ecnmic impact is that these rms generate abut $97 f rm revenue cmpared with the mre standard htel stck in the City area n average rm rates f $12 per rm per night. Increasing the stck f up-market accmmdatin des nt, hwever, cme at the expense f the pr. The value chain analysis shwed that, due t high levels f staffing and the gd wages prevailing in 4 and 5 star htels, increasing htel revenue des nt sacrifice the slice f turist turnver received by the pr. In the Stay anther Day scenari, we mdel the impact f increasing current lengths f stay (1.7 and 1.6 days respectively fr internatinal and dmestic vernight turists) frm the Business as nrmal scenari. The effect f turists spending anther day in Da Nang is t raise turist revenue t ver $100m per year by 2012 almst tw-and-a-half times the current vlume f business, and a dubling in pr-pr benefit flws. These scenaris suggest that the nly way that turism can actually increase its cntributin t the ecnmy f Da Nang beynd the current level f nearly 6% is t achieve success n several frnts. First, in the shrt-term the recent sharp decline in turism demand must be urgently reversed. Any cntinuatin f the decline in mainstream dmestic demand culd make the turist sectr unviable in a very few years. Secnd and in the medium-term, getting the up-market castal resrts up and running frm 2008 t 2010 is essential t making Da Nang attractive t upmarket internatinal and dmestic turists. Finally, the lnger-term and difficult task f increasing turist length-f-stay is the key t increasing turism s cntributin t the ecnmy f Da Nang. The shadw circles n the Nightmare and Stay anther day scenari indicate the impact f increasing lcal linkages thrugh dubling the lcal supply f agricultural gds t the turist sectr and internatinal turist spending n craft in Da Nang almst dubling t the level f Hi An. Whilst increasing lcal linkages des have a psitive impact n the cntributin f turism t the ecnmy and the pr f Da Nang, the impact is much mre muted than variables influencing turist demand in the City. These scenaris suggest that there are three key strategic issues facing turism in Da Nang, namely the need t: Reverse the recent cllapse in turism demand; develp the beach; and encurage turists t stay lnger. The reprt ends with a review f the prpsals generated by this study prcess and the prgress achieved in implementing them ver the since Nvember

8 Getting Invlved This exercise is abut getting peple invlved in the future f turism in Da Nang. The Prvincial Gvernment, Turism Assciatin and private sectr are implementing sme f the prpsals utlined abve and these will becme visible ver the cming mnths. Discuss yur wn ideas fr hw t encurage turism with friends and clleagues and give us yur feedback at VPSSP Da Nang Office (Tel: Fax: vpsspdanang@vnn.vn) A part f the study team respnsible fr this Study 1

9 1 INTRODUCTION 1.1 Backgrund The Vietnam Private Sectr Supprt Prgramme (VPSSP) is funded by the Eurpean Cmmissin. VPSSP This Prgramme aims t reduce pverty and create jbs thrugh the prmtin f the private sectr in three prvinces ne f which is Da Nang Prvince. Da Nang is lcated n the cast in Central Vietnam, half-way between the tw majr cities f Vietnam, the plitical and administrative capital f Hani sme 800km t the Nrth and the cmmercial capital f H Chi Minh City (HCMC) a similar distance t the Suth. Figure 3 Lcatin f Da Nang Prvince The VPSSP Prgramme plans t utilise sectr and value chain analysis as a tl t understand, and imprve, the perfrmance f a small number f specific sub-sectrs ver the next 2-3 years. Turism has been selected as the first sub-sectr in the Da Nang ecnmy t benefit frm a value chain analysis. This Reprt summarises an innvative rapid participatry value chain analysis prcess that was used t assess the turism value chain in Da Nang Prvince frm 6 th t 17 th Nvember 2006 and a fllw up missin frm 17 th t 27 th April Da Nang is the third city f Vietnam. It has a ppulatin f sme peple and is bming ecnmically mainly as a result f labur-intensive exprt rientated manufacturing industry. 2

10 The prvincial ecnmy in 2005 was estimated at $743m 1 and has been grwing at an annual real average rate f 12.9% since Cmbined with mdest demgraphic grwth f nly abut 1.8% per year, this implies very rapidly increasing average incmes. The size f the Da Nang ecnmy equates t an average grss dmestic prduct figure f $950 per resident each year which cmpares very favurably with the average grss natinal incme per capita figure in Vietnam f $690 in Why turism? The ratinale fr selecting turism as the first sub-sectr t analyse in Da Nang demands elabratin. With internatinal turism cmprising 5% f Da Nang s ttal exprts internatinal turism is wrth abut $16m ut f a ttal exprt basket f $350m (MCG Management Cnsulting 2006) the priritizatin f turism abve ther mre significant sectrs f the Prvincial ecnmy appears anmalus. As Figure 4 illustrates, it is certainly the case that, in terms f exprt revenue, sectrs such as textiles, fisheries r shes are much mre significant than turism. Indeed, internatinal turism (the part f turism that cnstitutes an exprt) is ranked between children s tys and wd chips in the Da Nang exprt prfile. The apparent paradx f the Peple s Cmmittee identifying diminutive turism as the lead ecnmic sectr fr the Prvince has nt been lst n the Vice Directr f the Prvincial Turism Department. Figure 4: Exprt perfrmance f varius ecnmic sectrs in Da Nang, Exprt Revenue in 2004 (US$m) Textiles Fisheries Shes Frzen Shrimp Children's tys Int. turism Wd chips Handicraft Cffee Surce: MCG Management Cnsulting (July 2006) Ecnmic Ptential Study Da Nang 1 Da Nang Statistical Office (2006) Da Nang Statistical Yearbk 2005 indicates grss dmestic prduct fr Da Nang in 2005 f VND 11.9 trillin, which equates t $743m. 2 Wrld Bank (2007) Wrld Develpment Indicatrs 2007 Grss Natinal Incme per capita 3

11 Nte: Value f turism exprts is based n estimate that 40% f ttal turism value chain f $42m is derived frm verseas turists There is, hwever, a rbust ratinale fr selecting turism t initiate a value chain exercise. First, lking at turism nly as an exprt excludes dmestic turism. The fficial definitin f turism as the activity taking place in htels, bars and restaurants and the transprtatin sectr is als restrictive as the value chain analysis indicates. We estimate that turists in Da Nang in 2006 cntributed sme $42m t the lcal ecnmy - suggesting that turism is a much mre significant sectr in the lcal ecnmy in Da Nang than Figure 4 suggests. Secnd, a cmprehensive and rbust analysis f Da Nang s ecnmy assessed the five mst prmising sectrs in the lcal ecnmy fr a value chain interventin (textiles and garments; wden furniture; fisheries; transprtatin; and, turism) against three main criteria: relevance t prgramme indicatrs (imprtance f the sub-sectr in terms f jbs and SME invlvement); grwth ptential (underlying cmpetitiveness f the sub-sectr based upn current perfrmance and future ptential); and interventin ptential (pprtunity fr prject interventins t achieve change at the lcal level). Figure 5 Analysis f turism sub-sectr in Da Nang, 2006 Critical Success Factr Analysis: Safety Facilities Business netwrk Human resurces Custmer services Innvativeness Prices Prices Innvativeness Custmer services Danang Safety Facilities Business netwrk Human resurce Internatinal buyers Surce: MCG (July 2006) Da Nang Ecnmic Ptential Study In this assessment, it was cncluded that turism shuld be the first-ranked sectr. Turism was assessed as having: relevance: turism wrkfrce f and 177 Small and Medium Enterprises; 4

12 grwth ptential: Figure 5 indicates that turism has strng alignment between the perceptins f lcal prducers and internatinal buyers; the sectr has strng gvernment supprt; a high level f private investment and significant impacts flwing frm Vietnam jining the Wrld Trade Organisatin in Nvember 2006; and interventin ptential: mainly pssible at lcal and reginal level; the level f c-peratin between enterprises and authrities is expected; and, the sustainability and systemic nature f change are cnsidered achievable. This study supprts the main thrust f the ratinale fr turism in the Ecnmic Ptential Study. It is shwn later that turism generates many mre jbs and enterprises than the fficial figures suggest. The ptential fr deliberate interventin t stimulate rapid turist grwth is underlined in the strategy sectin f the Reprt. Third, turism has lwer barriers t entry than many nn-agricultural sectrs f the ecnmy. The cnsequence f this, cmbined with the labur intensity f the sectr, is that turist develpment ften stimulates pr-pr grwth (a pattern f ecnmic grwth which benefits pr peple). As Vietnam is a lw incme cuntry it is lgical t priritise the selectin f an ecnmic sectr that has the ptential, nt nly t grw the prvincial ecnmy, but als t include pr peple as direct beneficiaries in this grwth. It is these reasns which cntribute t the rbust justificatin f the chice f turism fr the first value chain analysis under the VPSSP. 1.3 Value chain apprach Value chains are a way f representing the series f transactins frm the prvisin f inputs fr a primary prduct t primary prductin, transfrmatin, marketing t final cnsumptin and subsequent recycling. In additin t being a way f representing a sequence f prductive prcesses, value chains can als be: a tl t describe the inter-relatinships between a range f functinal activities, service prviders, custmers, supprting institutins and supply chains. The need t simplify reality can be fully appreciated with even a cursry view f the cmplexity inherent in a typical turism stakehlder map (see Figure 13); cnceptualized as an institutinal arrangement linking and crdinating input suppliers, prcessrs, traders and distributrs f a prduct r service; and regarded as an ecnmic mdel which describes hw technlgy and factrs f prductin may (r may nt be) cmbined t allw prducers t successfully access the market. The turism value chain develped by participants fr Da Nang is described in mre detail in Sectin Why Rapid Appraisal? When lcal actrs embark n a lcal ecnmic develpment initiative, they want results, and they need them quickly. Cnventinal appraches ften require a huge up-frnt investment in terms f time and mney. 5

13 It ften takes a lng time t cme up with a series f prpsals and these are nt always practical and cmpatible with the lcal mindset. Rapid appraisal, as a research methd, has several distinct advantages ver a slwer, desk-based apprach t research. First, as a trigger fr prgressive actin by lcal stakehlders, lng duratin, desk-based research is remarkably ineffective. Hwever cmprehensive and rigrus the empirical analysis invlved in detailed research prjects, lcal stakehlders rarely embrace an analysis that they have nt been instrumental in shaping. Secnd, rapid appraisal can galvanise energy and creativity in the develpment prcess. The initial diagnsis shuld nrmally take n lnger than tw weeks with the immediate presentatin f findings. In cntrast, lng lasting cnventinal research prcesses sap energy and ften fail t engage lcal stakehlders. In extreme cases, cmmissining research studies may prvide decisinmakers with an alternative t taking actin. Third, external cnsultants shuld nt dminate a rapid appraisal prcess. They may play an imprtant rle in the first diagnsis, and they must be prepared t back-up lcal actrs later n. In this study the first missin was highly participatry in terms f the research prcess and the diagnsis. Hwever, the subsequent wrk which cnsisting f the implementatin f cncrete activities, and the subsequent missin in April 2007, was driven by the external cnsultants wrking clsely with public decisin-makers in Da Nang. Successful lcal ecnmic develpment initiatives depend, first and fremst, n the mtivatin, dedicatin, and insistence f lcal actrs. Identifying their attitude and mtivatin fr actin is a crucial task f a participatry rapid diagnsis, and any practical prpsal must clsely relate t the capabilities and the mtivatin f lcal actrs. Finally, there is n incnsistency between rapid appraisal and strategic thught as we hpe t demnstrate in Sectin 8 f this Reprt. In the past, it was thught that Turism Master Plans were the key tl fr strategic thinking in the sectr. Hwever, mre recently, there has been a grwing recgnitin that Master Plans are smetimes weak in terms f analysing the strategic issues facing the turist sectr. Few Master Plans have made significant effrts t understand either the linkage between turism and the nn-turist ecnmy r the links between turism and pr peple. Rapid appraisal can interrgate the questins which cncern plicy-makers and, at least as imprtant, can prvide answers within a time-scale that reflects the realities faced by decisin-makers. 1.5 Why Pr-Pr? The aim t reduce pverty thrugh turist develpment might seem unnecessary in Vietnam, a Cuntry with ne f the mst successful recrds in pverty reductin internatinally. Fr the tw decades since the adptin f the di mi ecnmic refrms in 1986, real ecnmic grwth has averaged 7% a year with per capita grwth an impressive 5%. The cnsequence f this has been t reduce the natinal pverty rate frm 58% t 29% in the ten years after Perhaps even mre impressive than the ecnmic recrd has been the steady increase in the human develpment in Vietnam. The cnsequence f this is that Vietnam has a level f human develpment that exceeds that bserved in several f her middle-incme neighburs. In additin t the bjective ecnmic success and human develpment perfrmance, pverty features in very few discussins in Vietnam with public fficials, street vendrs, htel wners r taxi drivers. This subjective bservatin culd reflect several factrs. 3 Wrld Bank et al (2004) Operatinalising Pr-Pr Grwth A Cuntry Case Study n Vietnam 6

14 After the trauma f the American War and ecnmic cllapse in the mid-1980s, it culd simply be a human need t see pverty as a feature f the past and rather fcus n a brighter future. Pverty is nt mentined because peple d nt want t be pr. Despite Vietnam s dynamic grwth perfrmance it is still a pr cuntry ranked 169 th in the wrld accrding t a natinal incme per head figure f $690 in A remarkable feature f Vietnam that is nt captured in these ecnmic data is the cnsiderable scial capital f the ppulatin. Taking the Human Develpment Index (which assesses the health and educatin f a ppulatin as well as its incme) Vietnam s internatinal rank jumps t 109 well ahead f middle incme cuntries such as Suth Africa 5. Ntwithstanding the rapid decline in pverty (hwever measured) and the cnsiderable scial capital f the ppulatin, it is imprtant t keep a fcus n the distributinal aspects f grwth strategies in Vietnam. The fact that the fficial pverty rate in Da Nang is just 7% reflects the lw level f the natinal urban pverty rate (VND r $18 per husehld per mnth) rather than the prsperity f its citizens. As Figure 6 illustrates, defining wh is pr in Vietnam is prblematic. Restricting urselves t incme pverty, the pverty rate in Vietnam in 2002 ranges frm 58.2% t 6.9% - depending n the chice f pverty line against which peple s livelihds are measured. Figure 6 Indicatrs f pverty in Vietnam 1993 t Internatinal $2 per day Natinal pverty rate Internatinal $1 per day MOLISA pverty rate Fd pverty rate Pverty gap Surce: Wrld Bank (2004) Operatinalising Pr-Pr Grwth: Cuntry Case Study f Vietnam In this pr-pr analysis we have defined the pr as nn-managerial wrkers. This implies a pverty threshld which mst clsely apprximates the internatinal $2 per day rate. Frm ur surveys in Da Nang an average nn-managerial wage is abut $93 per mnth acrss several categries f emplyment (frm htel and restaurant wrkers t taxi drivers and pavement café wrkers). Fr single persn husehlds, this incme is sufficient t lift the husehld ut f even the mst generus definitin f pverty. Hwever, fr the husehlds cmprised f tw r mre peple, a wage f $93 per mnth is insufficient t lift the husehld frm pverty. 4 Wrld Bank (2007) Wrld Develpment Indicatrs UNDP (2006) Human Develpment Reprt

15 1.6 Structure f reprt This Reprt summarises the series f activities that tk place under the VPSSP frm 6 th t 17 th Nvember 2006 and the way frward emerging frm this prcess. The Reprt is structured t highlight the key elements f this analysis, including: Establishing the ratinale fr the prcess by placing turism and the value chain apprach in cntext; prviding an verview f turism in Vietnam; utlining the rapid, participatry value chain analysis prcess; utlining the analysis f the turism sectr in Da Nang; defining a turist develpment strategy fr Da Nang; highlighting the prpsals; and defining an actin plan t initiate the change prcess. As this bringing tgether f participatry LED techniques and mre cnventinal empirical value chain analysis is highly innvative, we have left space in this Reprt t reflect upn the lessns learned by the team frm the prcesses t share with participants. 8

16 2. OVERVIEW OF TOURISM 2.1 Turism demand There has been reasnable, if slightly erratic, grwth in internatinal turism in Vietnam ver the past decade. Freign arrivals have increased frm 1.3m in 1995 t 3.5m in 2005 an average annual rate f grwth f 10.3% ver the decade. Figure 7 Internatinal arrivals in Vietnam in 2004 (millins) Surce: Wrld Ecnmic Frum (2007) The Travel & Turism Cmpetitiveness Reprt 2007 The Vietnam Natinal Turism Administratin anticipate 4.4 millin internatinal turist arrivals in Psitive grwth factrs fr Vietnamese turism frm internatinal markets are illustrated in the Bx belw. Bx 1 Psitive grwth factrs fr internatinal turism in Vietnam Vietnam is cnsidered t be a safe and peaceful destinatin with stable natinal plicies Imprving relatinship with the United States and American Airlines services t five US cities Free visas fr arrivals frm Japan and Suth Krea Successful turist campaigns f Vietnam Natinal Turism Administratin (VNAT) and gvernment Significant infrastructure investment ver the past fur years Significant freign direct investment in turism Surce: Eurmnitr (June 2005) Travel and Turism in Vietnam An analysis f internatinal arrivals t Vietnam illustrates the large and rapidly-grwing imprtance f the Chinese market, which accunted fr ver ne-quarter f all internatinal arrivals in

17 Mre recent arrival statistics frm 2006 indicate n change f this dminance. This has a particular impact n Nrthern Vietnam, which is a mre accessible part f Vietnam t the Chinese market. Taiwanese arrivals have als almst dubled since Figure 8 Internatinal arrivals in Vietnam in % 25% 20% 15% 10% 5% 0% China Taiwan USA Krea Japan France Australia Cambdia Surce: Eurmnitr (2005) Travel and Turism in Vietnam The United States has lng been a significant surce market fr Vietnam. Hwever, interestingly, the 1 st, 2 nd, 4 th, 5 th and 8 th rank surce markets are all Asian cuntries. The rapid increase in visitr numbers t Vietnam frm mre affluent Asian cuntries will have imprtant cnsequences fr the turist sectr. Fr instance, whilst there is cncern in the minds f sme turist stakehlders abut a huge vlume f lw-value Chinese turists swamping Vietnam, turist expenditure surveys demnstrate that visitrs frm Singapre have a higher daily turist spend than any ther natinality including the Americans and all Eurpeans. Aside frm the Chinese market which because f its size, ptential and ther characteristics is in many respects rather unique - the existence f this rapidly grwing and high-spending Asian reginal market, raises exciting turist pprtunities that cmplement the burgening dmestic and traditinal internatinal markets in the US and Eurpe. Frm the analysis f surce markets, it is unsurprising that abut 60% f internatinal arrivals are by air. Arrivals by sea are rising rapidly as are arrivals by land frm neighburing states. The mst significant internatinal turist flws in Vietnam are in the Suth (thrugh the HCMC gateway) at abut 45% f arrivals and the Nrth (thrugh Hani at abut 40% f arrivals). Only abut 15% f internatinal arrivals are in Central Vietnam 6, which is the lcatin f ur study area at Da Nang. The purpse f visit fr internatinal arrivals at Vietnam is well-diversified. Abut half arrivals are fr leisure purpses and the rest are split fairly evenly between business and visiting friends and relatins. This diversity f mtivatins t travel is imprtant because it indicates different types f turist flw with cntrasting seasnal characteristics, sensitivities and chices f destinatins within Vietnam. 6 JICA (February 2002) Cmprehensive Study n Turist Develpment in the Central Regin f the Scialist Republic f Vietnam 10

18 Dmestic turism is already imprtant in Vietnam, and lks set t becme mre s. In 2004, dmestic turist spending was $1.8bn (VND29.5 trillin) edging ahead f the $1.6bn (VND26 trillin) fr internatinal turist receipts 7. The prminence f dmestic turism in Vietnam is virtually unique fr a lw incme cuntry and hugely significant fr Da Nang. In 2004 Vietnam generated 19.8m dmestic trips abut seven times mre than the number f internatinal inbund trips. Hwever dmestic trips are typically shrt frm ne t three days perhaps reflecting the relatively limited leave entitlement f 12 days annual leave and 8 days public hlidays fr mst emplyees. Dmestic turism grew 23% in 2004 cmpared with 2003 and 126% cmpared with In rder t reduce the utflw f freign exchange resulting frm utbund turism, the Vietnamese Gvernment is encuraging dmestic turism. Turist events such as the Turism Year f Dien Bien Phu, Festival Hue 2004, the Rad f Central Heritages and H Chi Minh Trail, Hi An Ancient Twn, My Sn-Hlly Land f Champa and Phng Nha-Ke Bang have attracted very large numbers f dmestic visitrs. This is bviusly imprtant ecnmically, but is als critical in enabling Vietnamese citizens t discver and understand their wn Cuntry. The enrmus ptential fr future grwth f Vietnamese dmestic turism is indicated by the fact that, n average, ne ut f every six Vietnamese peple takes ne trip each year. 2.2 Turism supply The supply f turist accmmdatin is grwing rapidly in Vietnam in respnse t the increase in arrivals and the priritizatin f the turism industry as a key freign exchange earner. In June 2004 there were apprximately htels in Vietnam with rms. The Vietnam natinal Administratin f Turism (VNAT) estimates that an additinal mre htel rms are needed in the next five years t cater fr the 31 millin turists expected in 2010 (cmprising six millin internatinal arrivals and 25 millin lcal turists). T facilitate this expansin f capacity, gvernment is planning a series f turism investment cnferences, investr survey trips and in crdinatin with Ministry f Planning and Investment t bring ut special preferential investment plicies. 2.3 Enabling envirnment Ntwithstanding the buyant grwth, a recent analysis cautins that Vietnam s turism business envirnment ranking is pr within Asia. Vietnam is judged t share a high lng-term plitical risk with China and pr business envirnment with Indnesia. Eurmnitr s assessment that Vietnam has stable natinal plicies seemingly cntradicts the Business Mnitr view that the cuntry has a high level f lng-term plitical risk. This different assessment culd reflect the tw rganisatins assessing risk against a different time scale r perhaps fcusing n a different kind f risk r simply reflecting the views f different grups f stakehlders. What is mre imprtant frm ur pr-pr turism perspective is the fairly cnsistent message acrss a range f external rganisatins that there is rm t imprve the business envirnment in Vietnam. 7 Eurmnitr (2005) Travel and Turism in Vietnam 11

19 The lw ranking Vietnam receives fr its turism receipts and high rank fr visitr arrival grwth simply reflects the fact that turism in Vietnam is expanding rapidly frm a lw base. The investment envirnment reflects the extent f gvernment, dmestic and freign investment in the turism industry, relative t the sectr s cntributin t GDP. The lw ranking reflects Vietnam s lw investment base frm which it is expanding rapidly. Table 1 Turism business envirnment in Asia Cuntry Lngterm plitical risk Business envirnment Internatinal turism receipts Visitr arrival grwth Investment envirnment Shck factr Cmpsite scre Reginal rank India Singapre Malaysia Thailand Hng Kng China Vietnam Indnesia Surce: Business Mnitr Internatinal Vietnam Turism Reprt Q Nte: Lw number = pr perfrmance ranking n each criterin The shck factr captures the special factrs that have a heavy bearing n the turist industry, including vulnerability t natural disasters and terrrism the middle-ranking reflects the lw threat f terrrism being partly ffset by health cncerns. The headline cnclusin f this is that, within an Asian cntext, the business envirnment fr turism in Vietnam is needs t be imprved. The value f the Wrld Ecnmic Frum Travel and Turism Cmpetitiveness Index f 2007 analysis represented verleaf - is that the analysis places Vietnam in a cmprehensive internatinal cntext f 124 cuntries and emanates frm a very highly-regarded internatinal rganisatin. Vietnam perfrms excellently n price cmpetitiveness with a rank f 10 th ut f the 124 cuntries in the Travel and Turism Cmpetitiveness Index. The Cuntry has gd safety and security (rank 51); perceptin f turism by the natinal ppulatin (rank 51); and availability f qualified labur (rank 52) and reasnable priritisatin f travel and turism strategies (rank 76). 12

20 Table 2 Travel & Turism Cmpetitiveness Index, 2007 Criterin Rank (ut f 125) Scre (1-7 scale) Travel & Turism Regulatry Framewrk Plicy rules & regulatins Envirnmental regulatin Safety and security Health & hygiene Priritisatin f travel and turism strategies 76 Travel & Turism Business Envirnment and Infrastructure Air transprt infrastructure Grund transprt infrastructure Turism infrastructure ICT infrastructure Price cmpetitiveness f travel and turism Travel & Turism human, cultural & natural resurces Availability f qualified labur Educatin and training Natinal turism perceptin Natural and cultural resurces Overall travel & turism cmpetitiveness index Nte: Ranking by each criteria ut f a ttal f 124 cuntries Surce: Wrld Ecnmic Frum (2007) The Travel l& Turism Cmpetitiveness Reprt 2007 Mst f the ther criteria have a rank in the range f th. Perfrmance needs t be imprved, but these rankings keep Vietnam ut f the bttm quarter f cuntries in the Index. Vietnam perfrms really badly n the fllwing criteria: air infrastructure (rank 90); health and hygiene (rank 94); plicy rules and regulatins (rank 104); and, turism infrastructure (rank 121). 2.4 Assessment f issues facing the turism sectr in Vietnam There are a number f key issues facing the turism sectr in Vietnam, the: diversified nature f internatinal demand fr turism in Vietnam acrss Asia, Eurpe and the United States; ptential, as well as the risks, f an increasing reliance upn the Chinese surce market; 13

21 large and increasing imprtance f dmestic turism in Vietnam which invlves ffering visits that are affrdable and practical within a three day trip frm the tw main metrplitan areas; need t reduce Vietnam s vulnerability t the vagaries f external shcks that blight the internatinal lng-haul turism market; imprtance f business turism and visiting friends and relatins t cmplement the leisure travel market; evidence f a rapid supply-side respnse frm the accmmdatin sectr t increasing demand fr turist services, but an inadequate turism infrastructure; and aspects f the regulatry framewrk fr turist develpment that are adverse, such as pr health and hygiene and very pr applicatin f plicy rules and regulatins. 14

22 3 RAPID PARTICIPATORY VALUE CHAIN ANALYSIS 3.1 The Methdlgy What is Participatry Appraisal f Cmpetitive Advantage? In the narrw sense, Participatry Appraisal f Cmpetitive Advantage (PACA 8 ) is a set f diagnstic tls used t assess the cmpetitive advantages and disadvantages f a lcality; and t develp cncrete and practical prpsals t stimulate the lcal r reginal ecnmy (PACA Exercise). In the wider sense, it is a participatry, bttm-up, pragmatic apprach t lcal ecnmic develpment. PACA has sme specific features. Cnceptually it is an innvative recmbinatin f existing tls and methds, including Participatry Rural Appraisal (PRA) and Michael Prter s structuring tls. The apprach is based upn a quick and limited fact-finding effrt f between ne and tw weeks. The prcess is designed t empwer lcal peple thrugh training f lcal stakehlders and the limited invlvement f external cnsultants. PACA has a strict actin-rientatin and fcuses largely upn market- and business-rientated slutins t develpment challenges. The fcus is upn lking fr pprtunities t achieve quick, visible results that invlve the strng invlvement f the private sectr rather than attempting t deal with lng-term issues and main bttlenecks. PACA emplys several tls which have been develped in the cntext f participatry learning and actin. Wrkshps are nrmally cnducted using the Mescard visualizatin methd alng with ecnmic structuring tls. Other tls such as mapping, life-line, and fur-field matrices are used t structure discussins What is Value Chain Analysis? A simple prduct value chain is represented belw. Figure 9 Example f a simple prduct value chain Basic functins Specific Inputs Prductin Trade Transfrmatin Cnsumptin Prvide - equipment - inputs Grw Harvest Dry etc. Classify Prcess Pack Transprt Distribute Sell Prepare Cnsume Specific Input prviders Primary prducers Lgistics centres, Industry Traders Final Cnsumers Surce: Andreas Springer-Heinze (2006)

23 Turism is, hwever, nt a prduct it is a cmplex set f cmplementary turism services. Because services cannt be stred, prductin and cnsumptin f services are usually simultaneus and take place at a specific gegraphical lcatin the turist destinatin. The fact that with the turism sub-sectr the market (turists) mve t the prduct (the destinatin) the ppsite pattern t that bserved in cnventinal prduct value chains is captured visually by the human figures mving acrss a range f turism services in Figure 10. Figure 10 Turism as a service value chain Turism prduct as cmbinatin f services Advising turist n prduct, cntract Transprt t site Prvide accmdatin, fd etc. rganize experience, event Transprt frm site Travel agent Bus cmpany Htel Site peratr, Cultural grup Bus cmpany Crdinatin f services: a) Tur peratr b) Lcal turism bard ce: Andreas Springer-Heinze (2006-2) Sur The full turism value chain fr Da Nang is utlined in Sectin 4. This prved useful t identify relevant stakehlders, their inter-relatinships and rganize the participatry investigatin f the sub-sectr. T use a value chain mapping technique that is quickly teachable we decided t use GTZ s Value Links mapping apprach. Value Links is a mdular apprach that builds n a set f principles and criteria plus rientatin n the chice f available instruments, but is nt an verly rigid framewrk Value Chains & PACA There are sme reasns t use PACA in reginal value chain initiatives 9 : Firstly, it is nt necessarily useful t cntract cstly external cnsultants r researcher t cnduct mappings and analyses f reginal value chains. 9 Jrg Meyer-Stamer (2004) Reginal Value Chain Initiatives: An Opprtunity fr the Applicatin f the PACA Apprach Mespartner Wrking Paper 06 16

24 A PACA Exercise can render the necessary results much quicker and at a lwer cst. Mrever, it wuld already invlve, mbilize and mtivate thse players wh subsequently wuld champin practical activities in a given value chain initiative. Secndly, reginal value chain initiatives are up against a variety f bstacles, such as lack f trust between cmpanies and time cnstraints f business peple. Fr that reasn, PACA principles like swift actin fr quick wins are crucial t cnvince the players in a value chain that the initiative makes sense. Thirdly, PACA is a prven methd when it cmes t cnnecting cmpanies, supprting institutins and gvernment. It vercmes cmmunicatin barriers between these different sectrs. Especially fr gvernment it is ften difficult t prject cmmitment and cmpetence t the private sectr. PACA can be very useful in vercming this perceptin. Finally, PACA is a methdlgy that is nt nly useful t launch a develpment initiative but als t assess and refcus nging initiatives. It can be used bth t drive and t mnitr and evaluate territrial develpment initiatives. It thus slves the difficult challenge f intrducing mnitring and evaluatin int a value chain initiative. PACA appraches have been used t infrm value chain analysis (VCA) in develping cuntries mst recently in the case f fish in Indnesia. Hwever, the PACA apprach has nt been applied t a service value chain befre. Even mre striking, the study team believe that this is the first time that a participatry apprach has been applied t the develpment f a turism value chain anywhere in the Wrld. This study is, therefre, innvative in the sense f trying t bring tgether tw well-established appraches t lcal develpment PACA and VCA - in a new way t prvide deeper insights. Seeking t marry these tw appraches is nt the nly innvative aspect f this study. Traditinally, PACA appraches rely heavily n cllecting and analysing the perceptins and views f lcal stakehlders. This is critically imprtant and an element f the research methd that was retained in this study. A mini-wrkshp held during the study prcess in Da Nang 17

25 In additin, the qualitative views f lcal stakehlders were cmplemented with mre quantitative primary and secndary empirical data surces. In particular, sme effrt was made t understand and analyse the public statistics cllected by the Da Nang Turist Department and the Department f Statistics. In additin t the wrkshps and bilateral interviews with a brad range f turism stakehlders in Da Nang, the study team undertk detailed surveys f 19 htels (see Questinnaire in Annex 9); and rapid surveys f 10 hstels; 10 pavement cafes; 17 taxis and 37 turists at the Cham Museum and Da Nang Railway Statin. In additin these rapid surveys are an innvatin t bth the mre qualitative PACA apprach and the highly quantitative ecnmic fcus f many value chain analyses. What they add t the prcess is a small amunt f empirical data that, whilst ften frm sample sizes are nt statistically significant, prvides a basis t test sme f the purely qualitative perceptins cllected during interviews and wrkshps. Fr example, the perceptin f public plicy makers f turism is f very much a frmal sectr activity, cmprising f 104 htels, five main turist restaurants and 309 taxis. It was nly as a result f fficial secndary statistics fllwed up with targeted rapid surveys that the imprtance f infrmal sectr activities such as the 200 hstels, the pavement cafes and the scale f the craft sectr became apparent t the study team. It may be a paradx, but a virtue f utsiders lking at a sectr in a particular lcality is partly the cmparative perspective but als their ignrance f widely-held assumptins that simply are nt true. Many turism stakehlders in Da Nang firmly believe that hstels have nthing t d with turism but are rented n an hurly basis fr scial evil (surveys revealed 49% f hstel ccupancy was lw end business turism and very much less scial evil than in the massage rms f state run htels) and that upmarket castal resrts in Da Nang are inaccessible t dmestic turists (when 30% f rm ccupancy is due t dmestic turists). 3.2 The Prcess A hst mtivates and crdinates the PACA. The hst can be a gvernment agency, business chamber r NGO. In the VCA Turism in Da Nang the hst is the Turism Department f Da Nang Prvince. The PACA team guided the implementatin f this study. The team cnsisted f fur external cnsultants wh are familiar with the PACA methd and LED frm the VPSSP (Christian Schen and Trung Si Hai Nhan) and MCG Management Cnsultants (Le Chi Phuc) and the Overseas Develpment Institute (Jnathan Mitchell). Key members f the lcal team were surced frm the Turism Department (Nguyen H Quc Ba and Tran Thi Thu Hien); Turist Assciatin (Le Thi Hang); and ther rganisatins such as GTZ-SME An Giang (Nguyen Thanh Viet); NEDCEN (Le Hang Van); Can Th Turism Department (Lam Thanh Binh). The VCA team members are fully listed in Appendix 1. The pwer f this participatry value chain analysis is, hwever, based largely upn a much larger and mre disparate grup f stakehlders. These are the varius stakehlders wh participated in the varius wrkshps, interviews, mini-wrkshps and presentatins. These key players in the study are listed in Appendix 2. The sequence f activities cnducted by the study team in this rapid participatry value chain analysis is described in Figure 11 and the tables belw: 18

26 Figure 11 Sequence f activities in Preparatin: *Organisatin * *Advance Inf Inf Hypthesis Wrkshp Kick ff Wrkshp Kick - ff 9 th Wrkshp Nvember Interviews Mini - wrkshps Results Wrkshp: Diagnsis + Prpsal 15 th 16 th Nvember Presentatin Event 17 th Nvember Way Way - frward Wrkshp 17 th Nvember nwards Imple - mentatin Fllw up missin April 2007 Imple mentatin Fieldwrk (1 week) VCA -Exercise (2 weeks) VCA -Prject (Nv 06 April 07) The fllw-up missin in April 2007 was extremely imprtant in three respects. First, after analysing the data cllected during the first missin, empirical gaps were lcated. The fllw-up missin allwed these gaps t be filled. Secnd, allwing five mnths t elapse between the first and secnd missins allwed the team t respecting the absrptin and implementatin capacity f lcal actrs. Because lcal stakehlders had sme time t absrb the findings and prpsals f the initial missin and had benefited frm facilitated supprt between the tw missins, the mini-wrkshps in April with taxi cmpanies and the cluster f activities arund the Cham Museum were fcused and prductive. Finally, the turism develpment strategy was prduced during the fllw-up missin. 19

27 Table 3: The Study Prcess Activity Date Outputs/Results Preparatin wrks Intrductin f Study Preparatin wrk s assignment fr each stakehlder Da Nang Turism infrmatin gathering and initial analysis Cmpletin f detail plan n PACA sequence and frming VCA team Cmpletin f lgistics PACA sequence Extended Hypthesis wrkshp Kick-ff wrkshp Interviews Mini wrkshps Internal assessment Result wrkshp September th Oct st 6 th Nv rd Nv th Nv th 8 th Nv th Nv th 14 th Nv th 14 th Nv th 13 th Nv th 15 th Nv 2006 Turism Department and Turism Assciatin expressed their interest in the VCA. Ref: Descriptin f VCA Turism Da Nang. Plan and schedule were made. Ref: VCA Schedule Danang Turism, Requirement Team, Prep Checklist, Advanced Inf PACA, List f WS participants-interviewees. Research reprts n Vietnam Turism and Danang Turism were identified, shared and analyzed. Ref: Da Nang Ecnmic Ptential Study (MCG), Reprt n Turism VDR Final, Matrix Turism, Turism SPM, Halng Market Research (VNCI), Turism Expenditure Survey (GSO), Cmprehensive Study n Turism Develpment in the Centre Regin f Vietnam (JICA) Schedule fr PACA sequence was updated; Detail schedule fr the hyptheses wrkshp was made; VCA team was frmed. Ref: VCA Schedule V2, Extended Hyptheses Schedule, VCA Team list. Team members were trained t acquire key skills and knwledge, in particular facilitatin skills, an understanding f LED, value chain perspective, PACA prcess, and the turism sectr. PACA team was rganized in 4 sub-teams. Each sub-team has a cmbinatin f external and internal, balance in gender, and senirity. The team als frmulated hypthesis and prepared fr kick-ff wrkshp. VCA team intrduced PACA t mre than 30 participants representing turism enterprises, institutins, assciatins, and authrities f Da Nang. Then fur sub-teams facilitated the participants t use Prter diamnd mdel fr analyzing Da Nang Turism. Ref: Kick-ff wrkshp minute There were 37 interviews with representatives f htels, restaurants, tur peratrs, transprtatins, suvenir shps, investrs, management f attractins, and supprting institutins. The strengths, weaknesses f each actrs, and linkages between them were identified. Interviews minutes were cmpleted after the interviews and handed in at the end f the next day. Ref: Minutes f 37 interviews. 4 wrkshps were cnducted with representatives frm: htels, tur peratrs, craft village, and supprting institutins. Sub-teams facilitated the wrkshps using the 5 frces mdel and interactive matrix. The mini-wrkshps prvided general infrmatin cncerning each sub-sectr and its links. Ref: 4 mini wrkshps minutes. The PACA team summarized the findings and frmed a mdel fr Danang turism value chain. The PACA team analyzed cllected infrmatin, synthesized findings, cmpleted the value chain, priritized prpsals, and prepared fr the presentatin wrkshp. 20

28 Activity Date Outputs/Results Ref: 25 prpsals were selected. Presentatin wrkshp Meeting with the Hst fr the fllw-up Intrductry Meeting with Hst Interviews and surveys Way frward wrkshp n English skills fr taxis Way frward wrkshp n prpsals arund Cham Theme Internal Strategy Wrkshp Wrap-up meeting with Dept. Turism Internal wrap-up meeting 17 th Nv th Nv th April th 22 nd April rd April th April th April th April th April 2007 Mre than 30 participants attended and cmmented n findings and 25 prpsals. Turism Department and Turism Assciatin cmmented n the VCA Turism peratin and utcmes, and expressed their interest in further cperatin with VPSSP in implementing the prpsals. Feedback n Draft Reprt and agree n activities fr fllw-up missin. Review f wrkplan fr missin Interviews with Department f Turism (Turism Prmtin Centre and Statistics); VNAT; Taxi drivers; hstel wners; htel management; craft shps; DOLISA; Departments f Agriculture and Department f Statistics; Civil Aviatin Authrity; tur peratrs and restaurants. Surveys with taxi drivers, market stall wners, Actin Plan was develped in mini-wrkshp frmat with representatives f the taxi industry and the Turism Prmtin Centre Ref: Annex 8 Actin Plan was develped with Cham Museum management, Apsara Restaurant, Furama Htel and a tur peratr Ref: Annex 8 Cnsultants frm VPSSP, MCG and ODI develped strategic elements fr turism prmtin strategy in Da Nang. Reprted back n findings f missin and next steps VPSSP and ODI 3.3 Assessment f the prcess Prceedings The allwance f tw weeks fr study planning, team frmatin, initial infrmatin gathering and analysis was nt verly-generus. Hwever, because the team had a pwerful cmbinatin f lcal, research knwledge and sectr knwledge and experience, it was pssible t generate a useful analysis and findings within a frtnight. In particular, the rle f the hst ffice in acquiring infrmatin, preparing lgistics and sharing lcal knwledge was critical t the success f the missin. In additin t the utput, three days f extended hypthesis wrkshp at the beginning f the prcess trained and familiarised all team members with participatry value chain methdlgies. As a result f this, the rapid participatry value chain analysis prcess was well-structured, and interviews and wrkshps were well-facilitated. This prcess is demanding in terms f the time required f the lcal team members. A number f the lcal team had n-ging prfessinal cmmitments during the study prcess, which reduced their ability t participate fully in the study prcess. 21

29 A textile and craft shp in Da Nang After training the team was divided int fur sub-teams which cllectively cnducted 37 interviews, fur mini wrkshps, and tw mini surveys with the lcal stakehlders f Da Nang turism value chain. All links f the value chain were explred cvering htels, restaurants, transprtatin service prviders, tur peratrs, supprt institutins, attractins, investrs, and the turists. The infrmatin gathered frm the field wrk days was vlumus and helpful fr the team in the later stages drawing the full value chain map, analysing the strengths and weaknesses f the chain, and refining prpsals. Infrmatin cllected frm the mini turist survey, ntwithstanding the small sample size, prved t be useful t strengthen the team s analysis and prpsals. Besides, tur peratrs (Sng Han, Vitur, and Hanh café) and tur guides, wh wrk directly with turists, htels, restaurants, transprtatins, and attractins, did prvide systematic infrmatin n the situatin f lcal turism and specific links f the turism value chain. The result f the field wrk culd have been better if the team culd have had mre time t wrk n the turist survey and interviews with ther tur peratrs. There are several imprtant stakehlders wh were nt available fr interviews r mini wrkshps n the time-lines implied by this study prcess. Limited participants jined the wrkshps and there were tw mini wrkshps, with transprt cmpanies and restaurants, which were cancelled due t the absence f participants. Feedback frm sme f the interviewees and wrkshp participants revealed that lcal stakehlders received little infrmatin and received it late, and subsequently did nt fully understand and were nt prepared enugh t jin in and cntribute. 22

30 The nly five star htel currently in Da Nang, the Furama Resrt & Spar The fllw-up missin in April 2007 was able t develp a much strnger empirical base fr the study, facilitate mre fcused Way Frward Wrkshps and initiate a turism develpment strategy. During the presentatin wrkshp, feedback was received frm lcal stakehlders n the study prcess and findings. These are captured in Table 4 belw. Table 4: Summary f respnses at the presentatin wrkshp plus wn insights Research methd Impleme ntatin and Presentat in Outcmes Prs - rapid appraisal and implementatin; - a brad range f actrs in the turism industry get invlved thrugh interviews and mini-wrkshps; - utputs are specific and feasible prpsals which are taken frm an analysis f current situatin f Da Nang turism; and - a new and interesting methd - 2 weeks f intensive wrk generated a reasnably elabrate picture f Da Nang turism; - clear and infrmative presentatin; - the analysis des cnfrnt sensitive issues and - the narrwer fcus and better preparatin f the Way Frward Wrkshps in April resulted in a sharper implementatin fcus. - a cmprehensive turism value chain f Da Nang; - a relatively rbust analysis and findings n the strengths and weaknesses f Da Nang turism; - 25 gd prpsals which are specific and highly feasible; and - A turism develpment strategy that has an adequate empirical basis and is relevant t the cncerns f plicy-makers in Da Nang. Cns - lack f quantitative research may have biased the cnclusins. The fllw-up missin tested a number f assumptins used in the missin in Nvember 2006 and fund several f these t be flawed. - t much fcus n supply-side research, is evidenced by a lack f turists participatin (beynd the Turist Survey). - lack f actual examples t illustrate the findings during the presentatin; - participants in wrkshps and interviews shuld have been infrmed earlier; and mre fully abut the study prcess; and - sme team members are t junir t cnduct such a research study. - sme findings are still unclear r based upn a single surce f infrmatin that has nt been validated; and - there is an inadequate explanatin f strengths and weaknesses f each sub-sectrs in the turism value chain 23

31 3.3.2 PACA hst and VPSSP prgramme ffice Da Nang The Da Nang Turism Department was the hst f this rapid participatry value chain analysis. The cntributin f the Department is vital fr the success f nt nly tw weeks executing the each f the tw missins but als the fllw-up f implementing the prpsals. Fr the PACA exercise, the Turism Department played imprtant rle in almst all the steps frm planning, sharing helpful data and infrmatin, supprting in crdinating and inviting lcal enterprises and authrities t the interviews and wrkshps, assigning staff t jin the team. It was bserved that the hst was mtivated t implement PACA exercise and the cntributin f the Department was crucial; hwever, the result wuld have been even better if the assigned staff had been mre senir and able t dedicate themselves fulltime t the tw-week exercise. Alng with the Turism Department, Da Nang VPSSP prgramme ffice played a key rle in arranging and preparing lgistics t make sure that all the interviews and wrkshps were wellprepared. Tw dedicated staff frm VPSSP had t manage a huge amunt f wrk frm listing the stakehlders, sending invitatins, and getting their cnfirmatin via phne. Within a shrt perid f time, 8 wrkshps and abut 40 interviews had been arranged and mre than 150 peple were cntacted. The nly pssible cmment t make their wrk mre efficient is that a list f all related stakehlders with their detailed cntacts shuld have been ready a little while befre the exercise actually started. Then the invitatin letter and further infrmatin culd have been prvided t the lcal stakehlders earlier t enable them t be better infrmed and prepared t jin in Final assessment f pre-assessed prpsals Rich qualitative and quantitative data and infrmatin gathered frm the field wrk cmbined with pre-cllected empirical data prvided a gd basis fr the team t finalize the Da Nang turism value chain map, analyze strengths and weaknesses f each link, and then generate rbust prpsals. The minutes f wrkshps and interviews were, at the beginning, available nly in either Vietnamese r English which limited the accessibility f nn bi-lingual speaking team members. This illustrates the imprtant need fr all team members t be able t digest the findings frm all the interviews and mini-wrkshps and empirical analyses prir t generating the prpsals. This was nt systematically achieved in the very tight timescales prevailing during the first missin in Nvember In rder t analyze the strengths and weaknesses f Da Nang turism, the value chain was divided int nine categries: tur peratrs, transprtatin, accmmdatin, restaurants, entertainment, shps, attractins, supprt institutins, and related sub-sectrs (see Figure 12 belw). This apprach allwed the team t dig deeper int each link f the chain and having the brad picture f hw thse links interact as well. T address the strengths and weaknesses f Da Nang turism taking frm the value chain analysis, mre than 150 prpsals were cllected frm bth lcal stakehlders and the team. Then by using Paret rule and assessing the prpsals n three criteria (realistic and viable, suitable fr quick implementatin, and apprpriate t prduce visible effects) 25 prpsals were finally selected. During the prcess f analyzing the turism value chain and assessing the prpsals, it is crucial t have the cntributin f all the team members with their industrial expertise and lcal knwledge. The cmplexity f the turism value chain made the timing f the tw-day results wrkshp t tight even when the team had innvative effrts t shrten the prcess. 24

32 Therefre, at the final stages f Paret-ing and assessing the prpsals, nt all the members culd manage t participate and cntribute. This had the unfrtunate effect f making the crucial decisins made in selecting the priritized list f prpsals and the turism develpment strategy highly dependent upn external cnsultancy expertise. There is nthing inevitable abut this utcme and sme effrts were made in prcess design t avid it. Hwever, the undesirable mdel f using a brad-based study team t underg training; cllect data and present findings but t be absent frm the ne r tw crucial decisin-making meetings during the study prcess is a real danger Cmparisn with previus research techniques This study is prbably unique in cmbining rapid participatry LED research methds with mre cnventinal value chain appraches. As part f an extensive review f the turism and pverty reductin literature review 10, nly ne participatry turism value exercise was identified fr a small twn in Nrth-East Brazil 11. Hwever, this Brazilian study almst entirely fails t fllwthrugh n its participatry prmise s stakehlders in Da Nang are invlved in a prcess that is unique in terms f research methds. In the past many quantitative turist studies fcused n the macr-ecnmic level with turism satellite accunts r cmputable general equilibrium (CGE) mdelling r input-utput analysis t answer essentially macr-ecnmic questins abut the cntributin f turism t brader macrecnmic grwth and develpment. Many f these studies particularly CGE, input-utput and Scial Accunting Matrix (SAM) mdels fcused strngly n inter-sectral linkages between turism and the rest f the ecnmy. They have nly recently started examining distributinal issues. Cnventinal value chain appraches have als cnsidered inter-sectral linkages and, mre recently, adpted a sharper fcus n hw the pr can access value chains. By cntrast, there is a strng strand f turism analysis that fcuses upn the micr-level, ften with a qualitative anthrplgical epistemlgy. Fr instance, the literature has vast numbers f case studies f turist attitudes r behaviur and their interactin with the indigenus culture in ne specific area r htel. These appraches have had a strng fcus n pverty issues but have tended t give inadequate cnsideratin t issues relating t grwing turism and the impact f turism n the rest f the ecnmy. In the past, turism Master Plans have ften neglected t adequate either place turism within the larger ecnmic cntext r t prvide an adequate treatment f pr-pr turism issues. There are sme indicatins that sme recent Master Plans are adpting a mre prgressive apprach. The findings f this turism value chain exercise in Da Nang will prvide useful evidence fr the Department f Turism t feed int their current turism Master Planning prcess. The figure belw suggests that, at the frefrnt f turism develpment studies, there is smething f a cnvergence twards the Nrth-East quadrant f the graphic. In ther wrds, turism researchers using a number f different research methds are seeking t adapt them t better meet the challenge f understanding the linkages between turism and the rest f the ecnmy, n ne hand, and als t learn mre abut the links between turism and pr peple. 10 Mitchell, J & Ashley, C (June 2007) Pathways t Prsperity: Hw can turism reduce pverty? A review f the pathways, evidence and methds Study fr the Wrld Bank 11 Slb, B & Wilde (2006) Turism and sustainability in Brazil the turism value chain in Prt de Galinhas 25

33 Figure 12 Evlutin f turism research methds The fcus n the turist destinatin in this case Da Nang as the spatial unit f analysis has a lng-standing pedigree in turism develpment studies. Hwever, apply value chain and lcal ecnmic develpment research tls t the turist destinatin are rather less cnventinal. The destinatin fcus in this study is imprtant because it is a gegraphical area that has meaning fr a wide range f stakehlders in the private and public sectr. In ther wrds, fr the turism value chain, the destinatin is clearly a sensible scale f analysis. The synergy f participatry appraches with mre rapid survey techniques has a number f distinct advantages ver previusly applied research techniques. First, lcal stakehlders in Da Nang were clearly nt cmfrtable with a research technique relying purely n cllecting the views f lcal peple. This phenmenlgical psitin - that the perceptins f peple generate the mst valid data - is a respectable philsphical psitin in the scial sciences. Hwever, the team respnded t calls t explre the justificatin and empirical basis fr the views expressed by stakehlders by supplementing the interview data with mre quantitative data frm fficial statistics and htel manager and turist surveys. Secnd, the ppsite view t the ne expressed abve - that the nly data with validity is empirical and quantitative data is als questined by this study. An verly empiricist apprach - that ignres the imprtance f lcal participatin, capacity building, wnership and perceptins will prduce finely wrded research publicatins but is a very blunt instrument t precipitate change n the grund. ODI has sme experience f generating elegant analysis at the turist destinatin level, which has precius little prspect f implementatin Ashley, C and J Mitchell (2007) Assessing hw turism revenue reach the pr ODI Briefing Paper 21 26

34 The cmbinatin f rapid participatry techniques with rbust empirical data cllectin is regarded as a mdel apprach. Where the emphasis f a particular study is ptimal will depend upn the special characteristics f the study area. Finally, the design f this prcess t include a significant element f pst-study external supprt has cnsiderable intuitive appeal. It may be premature t assess whether this has been successful after nly the tw key study missins in Nvember 2006 and April 2007 and facilitated supprt between the tw missins. In additin, it is really difficult t attribute changes in plicy r practice t specific interventins by external actrs. Let us examine a cncrete example t illustrate this cnundrum. Between the first study missin in Nvember 2006 and the secnd missin in April 2007, sme very significant changes had taken place in the turist sectr in Da Nang. By far the mst imprtant f these was the decisin by the state t act mre assertively in the supply f turism develpment land n the cast (specifically, gvernment made it clear that it wuld take actin against investrs harding turism land that has received develpment apprval). The impact f this change in the regulatry framewrk has been dramatic and, by April 2007, develpment was underway n six castal resrts in Da Nang. Our scenari mdelling exercise suggests that this change may be the single mst imprtant event that will avert the cllapse f turism in Da Nang. The questin remains: what precipitated the change in gvernment practice between the tw missins f this study? The study team wuld like t believe that this research prcess had sme impact; thers may see the similar timing f the tw events as entirely cincidental. In truth, we d nt knw the impact f this study prcess, if at all, and therefre cannt supprt the self-cngratulatry assertin that the VPSSP interventin culd have saved turism in Da Nang Lessns learnt fr future applicatins The preparatry phase f the study and lgistical and administrative supprt is critical fr success in a rapid appraisal study prcess. This study reached a remarkable number and range f lcal stakehlders. In particular, the credibility f the study team was enhanced by the Department f Turism hsting the exercise and the Department f Planning and Investment accmmdating the VPSSP. This institutinal credibility is very imprtant when, fr instance, arranging interviews with htel senir management at which sensitive financial infrmatin is being sught. Hwever, imprtant stakehlders were missed during the first missin and there is always rm fr mre prfessinal cmmunicatin and briefing f stakehlders scheduled t participate in the study. Fr instance, the systemic prblem f inadequate attendance at the mini-wrkshps culd have been mitigated by adequate briefing f participants as part f the invitatin and fllw-up telephne calls t assess the likelihd f attendance. Team selectin is ne f the mst critical issues because it builds a bridge between the methdlgy and practice. In this rapid participatry value chain analysis the team faced three disadvantages. First, the lack f senirity f the lcal team members frm Turism Department and Turism Assciatin led t weak lcal knwledge. Secnd, because team members culd nt dedicate their full-time t the study prcess, prgressin was delayed due t team fragmentatin. Finally, it is difficult t maintain such a brad and diverse study team thrughut a multi-missin study. The invlvement f the bulk f the team ended in Nvember The pst-missin implementatin supprt and the fllw-up missin in April This was partly due t cnflicting demands n 27

35 team members. As is als quite nrmal in a transitinal cntext, things change. In the five mnths between the tw missins, half f the Da Nang-based nn-cnsultant staff had changed their jbs. The rapid transitin frm the cllectin f a huge amunt f primary data t the generatin f prpsals during the first missin raised the challenge f making sure prpsals were adequately based upn the empirical base f the earlier research. The difficulties f achieving this are multiplied when ne is perating in a bi-lingual envirnment with data being generated acrss a large study team withut a frmal quality cntrl prcess in peratin. The merit f the fllw-up missin in April was that it culd acknwledge, and remedy, these deficiencies. This study was undertaken in a dual medium envirnment, Vietnamese and English. The participatin f translatrs in all interviews, meetings, wrkshps and training is cnsidered essential fr effectiveness. It is als critical t demnstrating a genuine respect fr the lcal culture. The cmbinatin f participatry and mre quantitative empirical appraches t the cllectin f data was cnsidered effective. Participatin is imprtant in terms f cllecting a large vlume f data quickly; enhancing capacity; building a calitin f stakehlders interested in change at the destinatin; and understanding the key cncerns f lcal decisin-makers. Empirical analysis is critical t allw triangulatin f findings t check that what stakehlders believe t be the case, is actually true. Quantitative data als allws researchers t identify issues that have nt been raised by lcal stakehlders, but, nnetheless, culd be f strategic imprtance. The ability f data analysis t allw researchers t identify the tw critical strategic issues facing turism in Da Nang in the turism develpment strategy is an example f this benefit. This study is able t demnstrate the empirical basis f the prpsals generated. In additin, the study has generated a level f interest and enthusiasm fr change at a lcal level which is very unusual and places a serius respnsibility n the shulders f all participants. 28

36 4. DIAGNOSIS OF THE TOURISM SECTOR IN DA NANG 4.1 The turism value chain map The study team mapped stakehlders participating in the Da Nang turism value chain by identifying imprtant stakehlder grups n Mescards during the hypthesis wrkshp. These stakehlders were then gruped int categries, as illustrated belw. At the centre f the map are turists and the radial categries include, fr instance, the accmmdatin sectr, restaurants, transprtatin and a wide variety f supprting institutins. Figure 13 Turism stakehlders mapped in Da Nang The value chain map in Figure 14 verleaf illustrates hw imprtant the rle f value chains as a way f rganising a highly cmplex reality. 29

37 Figure 14 Da Nang Turism Value Key: Nn-Turism Sectrs Turists Direct Service Prviders Supprt Institutins 30

38 4.2 Turism demand Turism statistics in Da Nang are very detailed. There can be few places in the wrld where public authrities hld data n the numbers f freign and dmestic turist arrivals frm tur agents (meaning peple travelling n rganized turs, but als thse arriving by ship, air and cach) and the number f htel bed nights and even data n htel revenues frm mnthly htel returns. As with all turism statistics thugh, users shuld maintain a healthy scepticism abut the reliability f the data and always seek tw (and preferably three) independent surces f data s we can triangulate ur estimates. The gal here is t present figures where we can give an indicatin f the reliability f the figures. Whilst the base turism data in Da Nang is impressive, the way it is aggregated and presented is nt. In fact the aggregatin f turist numbers cllected frm the survey f htel accmmdatin n the ne hand and tur agents n the ther which are clearly nt mutually exclusive categries and therefre include significant duble-cunting is misleading and des need t be crrected. Interestingly, the Eurmnitr Travel and Turism in Vietnam f 2005 listed the lack f accurate and timely statistical infrmatin abut the Vietnamese turism industry as a majr impediment t investrs and a serius negative grwth factr fr the industry. The Department f Turism uses the number f turists arriving in Da Nang as the key indicatr f turist demand in the City. The annual average grwth in the number f turist arrivals has been 11.9% fr dmestic and 5.7% fr internatinal turists, respectively frm 2001 t 2006 and in 2006 sme 774,000 turists visited Da Nang an increase in 17.3% cmpared with the previus year 13. Figure 15 Turists staying at least ne night in Da Nang, 2000 t Internatinal Turism Dmestic Turist Da Nang Peple s Cmmittee Department f Turism (2007) Reprt n Turism Operatin Activities 2006 and Actin Plan

39 Surce: Department f Turist Statistics, annual summaries f mnthly htel returns The danger f cncluding, in the light f these increasing arrival numbers, that turism demand is buyant in Da Nang is serius. This is partly because it masks a very serius prblem f turism demand in the City. It als takes ne f the greatest weaknesses f turism in Da Nang - the fact that huge numbers f turists visit the City fr a very shrt time and cntribute virtually nthing t the lcal ecnmy and presents this as a psitive feature f turism. Figure 15 presents the number f turists staying at least ne night in Da Nang. These figures fail t capture turists wh visit Da Nang but d nt stay the night (fr instance many tur itineraries fr cach and cruise ship turists, pass thrugh the City and stpping fr an hur at the Cham Museum and an hur at the Marble Muntain craft village befre mving n t Hue r Hi An fr the evening). Ntwithstanding data cncerns, tw striking trends are apparent frm the Figure. First, internatinal turism in Da Nang is in the dldrums in terms f the number f vernight visitrs implying a dramatic lss f share in this buyant natinal market. Since 2000, when internatinal turist arrivals t Vietnam have increased by ver 40% the number f internatinal visitrs spending at least a night in Da Nang has stagnated at arund , with a gently declining trend f -0.5% per year since Secnd, the nly reasn nt t be very cncerned by the declining internatinal turist arrivals culd be having abslute faith in the dmestic turist sectr t make gd feeble internatinal perfrmance. This bullish view f dmestic turism might have had sme credibility in the past (althugh the future scenari exercise indicates even this is misplaced), but that evaprated in At a time f strng turism grwth in Vietnam, dmestic vernight arrivals t Da Nang drpped by 18% - frm t This dismal demand picture was als cnfirmed in the hstel survey, s there is n evidence f reducing demand fr htel beds being mitigated by any increase in hstel bed ccupancy. Figure 16 Turists bed-nights in Da Nang, Internatinal Turism Dmestic Turist

40 Surce: Department f Turist Statistics, annual summaries f mnthly htel returns Turism in Da Nang is therefre in an extremely uncmfrtable psitin. Visitr numbers and bed nights ccupied are drpping and the recent increase in internatinal turism has cmpletely bypassed Da Nang. Anther reasn fr questining a strategy f cmplacency abut the freign turists (justified by ptimism in the capacity f dmestic turists t drive turism grwth) beynd the fact that dmestic arrivals statistics are pr in Da Nang, is that the destinatin cannt affrd t lse ut n upmarket visitrs. Our analytical wrk in Da Nang fund the Gvernment Statistics Office expenditure survey t be accurate in all respects except it rather under-estimated htel expenditure in Da Nang (easy t d in a destinatin with nly tw upmarket htels). The survey indicates that the average dmestic turist in Da Nang in 2005 spent $37 per day and the average internatinal visitr spent $93.5. This means that, taking int accunt the slightly shrter dmestic LS and the much lwer daily spend, nearly three dmestic arrivals are needed t cmpensate fr each internatinal turists nt attracted t Da Nang. Taking a dmestic-fcused apprach t increasing the size f the turism value chain in Da Nang is likely t be much slwer than an apprach which includes the expands internatinal and upmarket dmestic turism. Figure 17: Turist expenditure fr turists in htels in Da Nang and Vietnam average, Internatinal - Da Nang Internatinal - Vietnam Dmestic - Da Nang Dmestic - Vietnam 5 0 Htel Transprt Shpping Other Surce: Gvernment Statistics Office (2005) Turist Expenditure Survey 2005 Internatinal Turism 33

41 The results f the survey f turists suggest a significant number f internatinal turists, wh spend time in Da Nang d nt stay vernight. The bulk f the internatinal turists interviewed at the Cham Museum and railway statin were nly in Da Nang fr lng enugh t visit the Museum visit r a similar amunt f time t make their rail cnnectin. Expenditure by these turists in Da Nang is typically a few dllars n a taxi, museum ticket r cl drink. Bx 2 Results frm the survey f turists Average expenditure f turists making a day visit t Da Nang is very lw, averaging US$12 As sn as turists stay at least ne night in Da Nang, daily expenditure increases mre than fur-fld t US$53 per day (fr dmestic and internatinal turists cmbined) this is because the majr items f expenditure fr turists are accmmdatin and fd. The underlines the imprtance f a strategy targeted at getting day trippers t Da Nang t stay even just fr ne night; The average length f stay in Vietnam f turists interviewed was 20.4 days. The average length f stay in Da Nang in the survey was 1.4 days nly rising t 2.1 days if the daytrippers were excluded (cmpared with figures f 1.7 days and 1.6 days fr internatinal and dmestic vernight visitrs frm Turism Department figures). This crrbrates the very shrt length f stay data in Da Nang, within the cntext f rather lng visits t Vietnam; All internatinal turists interviewed were als visiting Hue and / r Hi An a number f dmestic turists in Da Nang were nt visiting either f these cultural destinatins. Develping the relatinship between Da Nang and these ther tw destinatins is an imprtant aspect f the future fr Da Nang turism; Expenditure n suvenirs and craftwrk is very lw in Da Nang, abut $3 per turist per day. Interestingly, these are the figures reprted by turists wh have ften spent very significant sums n craft wrk in Hi An. One cuple interviewed reprted craft expenditure in Hi An during a tw day trip f US$ This indicates the scale f the missed pprtunity in Da Nang; and Many freign turists have negative perceptins f Da Nang as a turist destinatin. Cmmnly-raised cmments included the dirty beach ; and the industrial character f the City. Surce: Survey f 38 turists at the Cham Museum and Da Nang Railway Statin The centrality f the Cham Museum in any strategy t encurage freign turism in Da Nang is clearly illustrated that, in 2005, almst tw-thirds f all freign visitrs visiting the City paid a visit t the Museum. Put bluntly, mre freign visitrs t Da Nang see this Museum (abut

42 000 r 95% f the ttal f visitrs in 2005) than see a htel (sme in the same year). Whilst these lst internatinal turists bviusly represent a lss f ptential revenue t Da Nang, they als represent an pprtunity. If Da Nang culd retain fr a single night the internatinal turists that currently already pass thrugh the City withut staying vernight - this wuld increase the internatinal bed nights significantly withut any additinal arrivals. Figure 18 Internatinal turists and day visitrs in Da Nang, 2000 t % 80% 60% 40% 20% 0% Other Eurpean Other Asian Expatriat Vietnamese France Japan Gerrman USA Surce: Department f Turism statistics Like Vietnam, Da Nang has a very diverse internatinal turist sectr in terms f regin f rigin. Of internatinal visitrs whse rigins are knwn, sme 42% are Asian and 42% Eurpean; and ne-fifth are American. This represents a healthy mix f very different surce turist markets. Dmestic Turism Cntrasting with the internatinal sectr, the dmestic turist sectr in Da Nang has, until recently, been buyant. Gvernment statisticians suggest that htel data are the mst reliable way t estimate dmestic turism numbers. Even when visiting friends and relatins, it is cnsidered quite nrmal fr Vietnamese turists t stay in htel accmmdatin which suggests that htel data is likely t be a reliable measure f dmestic turism. Significant grwth in the rder f 16% per year - was realized until the dwnturn in The rapid recent grwth in internatinal turism in Vietnam shuld nt blind us t the vulnerability f this industry. In the past five years, terrrism, natural disasters and health scares (SARS and Avian flu) have highlighted the vulnerability f a turism strategy fcused upn internatinal visitrs in Asia. The ptential medium-term risks inherent in a reliance upn lnghaul travellers with a rapidly increasing recgnitin f the envirnmental csts f cheap aviatin are als significant. In additin, Vietnam is blessed with a seasnality pattern where the dmestic summer peak (when metrplitan Vietnamese flee the heat f Hani and HCMC fr the cast) 35

43 perfectly cmplements the internatinal winter peak seasn. Occupancy is an imprtant issue fr turism in Da Nang fr several reasns. First, aggregate ccupancies in Da Nang are wrryingly lw. Htel returns in 2006 suggest sme ccupied bed nights in a destinatin with beds (implying sme 1.19m bed-nights available each year). This equates t an average rm ccupancy f 60%, r less t the extent that turists share rms. The htel surveys suggest rm ccupancy figures f arund 55%, the fficial rm ccupancy figure fr Secnd, with the majrity f csts f running a htel fixed, the viability f htels is very sensitive t ccupancy figures, particularly when falling frm an already lw base. Finally, there is a significant increase in the supply f htel accmmdatin ver the next three years which will nt assist the adverse demand cnditins. These are sund reasns fr seeking t develp dmestic turism as an imprtant asset fr Da Nang turism. Dmestic turism in Vietnam is grwing much faster than internatinal turism even thugh Vietnam is ne f the mre dynamic emerging turist markets internatinally. In 2004 nly 24% f the Vietnamese ppulatin tk a hliday. This represents a rapid increase frm the crrespnding figure f 11% fr The fact that Vietnam is ne f the mst rapidly grwing emerging ecnmies in the Wrld and three-quarters f the ppulatin are currently nn-hliday takers, illustrates the ptential fr future dmestic turism grwth. During the value chain analysis it became increasingly clear that the tendency t equate dmestic turism with lw-end activity (and the crllary f internatinal turism with upmarket activity) is becming increasingly bslete. The htel surveys and Department f Turism statistics reveal that, already, abut 30% f turist demand in the tw mst upmarket htels in Da Nang is frm dmestic turists. This relates t htels with average daily rm rates f $95 and n preferential pricing plicy fr either Vietnamese residents r natinals. The cnverse is als true, nly 26% f the ttal freign bed nights in Da Nang in 2006 were spent in these tw upmarket resrts. This suggests that a cnsequence f expanding upmarket accmmdatin in Da Nang is likely t attract the dmestic elite as well as increasing internatinal turists. 4.3 Turism supply Da Nang has 101 htels with rms and beds abut 2.7% f the natinal bed stck. The average size f 33 rms per htel is very clse t the natinal average. Until 2000, htels were verwhelmingly state-wned but a rapid expansin f private htels, tgether with sme restructuring f gvernment htels (the equalisatin prcess thrugh which many htel wrkers have purchased discunted equity in their wrkplace), has created a mre diverse accmmdatin sectr. Currently 67 f Da Nang s htels are fully private, 19 are partly (generally majrity) Statewned and nly 15 are fully State-wned. 14 Department f Turism (2007) Reprt n Turism Activities 2006 and Actin Plan

44 Table 5: Da Nang htel stck Categry f Htel: 100% Statewned Partly Statewned 100% privatewned Ttal Htels Rms Htels Rms Htels Rms Htels Rms 5 Star Star Star Star Star Standard Other Ttal Surce: Turism Department augmented with a telephne questinnaire t clarify wnership issues T this htel accmmdatin shuld be added the estimated rms in the 200 hstels in Da Nang. Whilst hstels are seen by many as the lcatin f scial evil and nthing t d with turism a survey f ten hstels revealed that 49% f visitrs were turists (generally business turists, such as vendrs visiting Da Nang t cllect supplies frm whlesalers). Mst f the remaining visitrs were street vendrs wh cannt be defined as turists because they are being paid at the destinatin making them migrants. Even at an average ccupancy f 46% and average rm rate f $2.7 (cmpared with $9.73 fr private htels and $14.38 fr state managed htels), the estimated annual turnver f the hstel sectr represents abut 6% f ttal accmmdatin expenditure in Da Nang and 15% f pr-pr flws. A number f prblematic issues are raised by this data: The internatinal market in SE Asia generally requires htels that are 3+ Star r higher at ne end f the spectrum r backpacker type accmmdatin at the ther. Da Nang has 37

45 little f either. With less than 10% f htel rms in the 4 and 5 Star categry and a hstel sectr which is hidden away the htel stck is nt apprpriate fr the internatinal visitrs (and, increasingly, als upmarket dmestic visitrs); Whilst the State has an interest in ne-third f htels, this amunts t 45% f htel rms because State-wned htels are larger than private htels. It is unusual in a mixed ecnmy t have the State directly cmpeting with the private sectr in the prvisin f cmmercial services because this can prvide negative incentives fr the private sectr t invest (the argument is that public investment crwds ut private investment). The fact that the State has interests in 60% f 3 Star htel rms is a particular cncern because it is the upgrade and marketing f these establishments that hld the key t increasing capacity fr internatinal visitrs befre new capacity n the cast cmes n stream; and The prepnderance f private htels (70% f all private htels and half f all private rms) belw the 1 Star categry suggests that finance may well cnstitute an imprtant barrier t entry fr entrepreneurs in the accmmdatin sectr. The financing cnstraint culd explain the classic Vietnamese style ecnmic structure bserved acrss the whle ecnmy with a small number f large state dminated enterprises (average f 46 rms per htel), a emerging small business in the private sectr (average f 26 rms per htel) and a multitude f survivalist enterprise (200 hstels with abut 9 rms each). T get a clearer picture f the accmmdatin sectr, detailed surveys were made f twenty htels and ten hstels during the tw missins. This survey generated a number f imprtant findings, utlined in Bx 3. Perhaps the mst remarkable finding is that the private sectr accmmdatin sectr nt nly exists, but is thriving. Many face nerus financing csts; cmpetitin with state-run htels; an adverse enabling envirnment and, an inability t access the castal land fr turism develpment that is identified in the Master Plan fr Da Nang. Ntwithstanding these prblems, many private sectr htels appear t be perating prfitably. High financing csts reflect the generus spread enjyed by banks between the bank base rate f interest and the rates at which they n-lend t custmers. These spreads are large fr asset-based finance n the debt t equity ratis allwed by financiers in Vietnam. Als, the lngest repayment perid available t hteliers is five years - an extremely shrt perid ver which t purchase an asset with a useful ecnmic life f 30 years r mre. Finally, the prvisin fr depreciatin seems t be very large by internatinal standards at arund 20% f ttal csts The inability f gvernment t make any prgress n implementatin f the castal turist develpment area since designatin in the Da Nang Master Plan f 2004 has seriusly undermined the ability f turism t attract internatinal and tp-end dmestic turists in the City. All stakehlders are in agreement that the beach is Da Nang s mst imprtant natural turist asset, and yet Da Nang has nly tw htels n the cast that are able t utilize the asset. 38

46 Bx 3 Htel and hstel survey findings Upmarket 4 and 5 star htels are labur-intensive and emply nn-restaurant staff per htel rm. The cmparatr fr state managed, ther private htels and hstels is 0.5, 0.3 and 0.2 full time equivalent staff per rm respectively. This implies a nn-restaurant htel wrkfrce f sme wrkers in Da Nang. Seasnality and wnership structure significantly influence ccupancies. Weighted average private htel rm ccupancy varied frm 54% in the lw seasn t 86% in the high seasn an annual average f 70%. The crrespnding ccupancy figures fr the state managed sectr are 41%, 81% and 61% respectively. Despite clear seasnal patterns f ccupancy, there are nt majr swings in the rm rates. Weighted average rm rates nly increase abut 10% during the high seasn. Only 19% f private rms and 40% f state-managed rms were bked thrugh a tur peratr and rates ffered t peratrs were nt discunted cmpared with rates ffered directly t the public this suggests an imprtant independent turist sectr where hteliers are nt behlden t tur peratrs and can successfully negtiate reasnable rm rates with peratrs; Abut three-quarters f guests are dmestic, with the remainder split fairly evenly between ASEAN and nn-asean turists. This accrds reasnably well with the statistics fr htel bed nights frm the Department f Turism, that 74% f bed nights are dmestic and 26% are internatinal. Dmestic turists are a higher share f the ttal in the mre expensive state-managed htels and the much cheaper hstels; Average rm revenue per night was estimated at $17.67 fr state managed htels and $14.44 fr private htels, except the tw upmarket beach htels where average rm rates are sme $95 and hstels with average rates f $2.70 per night. Nn-managerial grades earn an average f sme $68 per mnth in private htels and $85 in statemanaged htels. Management grades earn an average f $145 per mnth and $105 in the private and state sectr respectively. This differential between management and nn-management grades is significantly lwer than has been bserved elsewhere in the develping wrld. Several htel managers mentined skills shrtages amngst htel staff and the upward pressure f the tightening labur market n wages. Staff csts cmprise abut 20% f ttal csts and reprted pwer and utility csts are significantly higher in the private sectr (28% ttal csts) than in the public sectr (14% ttal csts); There is little evidence f gvernment supprt in the develpment f private htels indeed hteliers seemed relieved when gvernment is nt bstructing develpment; and The cst structure f private htels is dminated by very large financing and depreciatin csts which typically make up 40% the ttal htel csts in the private sectr. State-managed htels carry virtually n debt n their balance sheets. Surce: Htel survey

47 In Nvember 2006 it was reprted that the nly activity in the 670Ha designated castal turism develpment area has been the clearance f 13.5Ha f land in anticipatin f develpment. In the absence f prgress in the area designated fr castal turist develpment, there was sme activity in an area that is nt designated fr develpment n the Sn Tra peninsular. Five Vietnamese investrs have received develpment licences as belw. Table 6: Resrts n the Da Nang Peninsular with develpment licenses Prject name: Physical scale Investment Hai Buy Resrt 100 rms $19.4m Savic 150 rms $9.7m Bien Dn 50 chalets rms and restaurants $3.2m Tien Sa Resrt 200 rms $12.8m Sn Tra 250 $32.3m Ttal 750 rms $77.4m Unlike the area designated fr castal turist develpment in the Master Plan, there was develpment activity n tw f these resrts in Nvember Resrt develpment n the Sn Tra Peninsular in Nvember

48 The change by April 2007 was striking. In respnse t gvernment making it clear that develpment licenses that are nt implemented within the specified timescale will be relinquished, there is nw demnstrable implementatin f six large, upmarket cstal resrts between Sn Tra and Marble Muntain. The turism strategy exercise underlined the imprtance f the additin f appraching 910 upmarket castal htel rms n the viability f turism in Da Nang. Particularly imprtant is the freign wnership and management arrangements fr these resrts that will supprt the distributin channels t achieve reasnable ccupancy rates fr these htels. The man-made cmpetitive advantage f Da Nang is the gd air transprtatin accessibility which psitins the City as the gateway fr Central Vietnam 15. One f the mst bvius ways that Da Nang can increase it s length f stay is t explit its psitin nt nly as the transprtatin gateway t Central Vietnam but as the accmmdatin hub between Hi An and Hue s turists stay in Da Nang and visit the ther centres n a day trip basis. Air links frm the tw metrplitan areas t Da Nang are critically imprtant fr the health f the turist sectr bth dmestic as well as internatinal. In fact, given the shrter length f stay fr dmestic than internatinal visitrs and the distance f the tw main dmestic surce markets frm Da Nang, it is pssible that the air link between Hani and HCMC n the ne hand, and Da Nang n the ther, is mre imprtant fr the dmestic than the internatinal sectr. This air link is currently ttally dependent upn Vietnam Airlines the state-wned airline cmpany which is grwing fast with revenues fr 2005 prjected t tp $1bn. There is a perceptin that Vietnam Airlines service is expensive and unreliable. Previusly Pacific Airlines als flew int Da Nang, but this service has been suspended. In any case, the crss-wnership between the tw airlines militates against cmpetitin n price r service quality criteria. The sale f a 30% stake in Pacific Airlines t a Qantas in April 2007 is ptentially highly significant because, Qantas have justified this acquisitin in terms f their crprate gal f develping lw cst carriers in the SE Asia Regin. This sale culd sharpen cmpetitin in the dmestic market in Vietnam 16 which wuld be very psitive fr a destinatin such as Da Nang. The cncern is that, given the extent f crss wnership between Vietnam Airlines and Pacific Airlines, this injectin f freign capital and expertise might nt stimulate cmpetitin between the tw airlines. 4.4 Supprting structure Strengths and Weaknesses Turism Assciatin: The fficial representative f lcal turism actrs is Da Nang Turism Assciatin, which was established in 2005 and fficially perated in 2006 with 70 members, including htels, transprtatin cmpanies, and tur peratrs. The mandate f the Assciatin is t: prmte lcal turism, prvide training t members, sharing gd practices and advcating plicies. Turism Assciatin has ne fulltime staff. Hwever the Chair and Vice Chair manage tw large htels in therefre are nt able t dedicate much time fr Assciatin wrk. 15 Bye, G (March 2002) The Turism Secr in Vietnam: Challenges and Market Opprtunities 16 Business Mnitr Internatinal (2006) Vietnam Turism Reprt Q

49 As a result, Turism Assciatin has nt yet implemented any significant activities fr its members. Imprving cmmunicatin amng members and amng cmmittee bards is a pririty fr the Assciatin t be able t plan and implement activities t supprt its members. T address this issue, the team prpses supprting the Turism Assciatin t create a website, which will serve as a cmmunicatin channel between members and frm the membership t turists. The Turism Department: Currently, the mst active and als the main supprt institutin fr lcal turism enterprises is Da Nang Turism Department. The Department has respnsibility t manage and develp lcal turism. Under the Department, the Turism Management Divisin is cnducting the management tasks, while the Turism Prmtin Centre plays a key rle in implementing activities t prmte the lcatin and develp the City s turism. All the lcal htels and tur peratrs are sending reprts n their current business situatin t the Department every mnth. The Department is als respnsible fr classifying sub-tw-star htels and verifying the standards f all the htels in Da Nang. Althugh receiving limited budget frm the Peple Cmmittee and Viet Nam Administratin f Turism, the Department has been implementing a series f activities t supprt lcal turism such as: destinatin prmtin via delivery brchures, prvide infrmatin n lcal turism via the website, magazines and ther turism infrmatin utlets, participating in turism Marketing dmestically and internatinally and training fr lcal turism enterprises t imprve their staff skills. Hwever, the effectiveness f the Turism Department is limited due t limited resurces and capacity. A typical example is the misleading presentatin f the rich statistical data cllected by the Turism Management Divisin. Imprving the statistical data prcessing and presentatin may prvide mre reliable surce f infrmatin fr the leaders t make turism plicies and strategy and ther stakehlders wh may cncern. Mrever sme f the supply-side supprt initiatives may, whilst well-intentined, distrt the cmpetitiveness f the lcal business develpment service market. Als, enterprises are currently reprting t the Turism Department and ther gvernment authrities n a mnthly basis which takes time and effrt. A system which shares infrmatin between gvernment authrities may save time and mney fr the enterprises. Because f the imprtant rle f the Turism Department, mst f the prpsals are directly r indirectly related t the Department. Universities and Training Centres: Da Nang has fur universities and clleges which have vcatinal prgrams n turism. Furthermre, the Turism Department and sme lcal training centres als prvide curses n turism. Hwever, the quality f the training prvided by thse rganizatins is perceived t be lw quality by the lcal turism enterprises. The training is seen by htel managers as verly-theretical and graduate trainees are nt able t meet the practical requirements f their jbs. Lcal turism enterprises currently send their staff t ther cities such as Hue, Vung Tau, and H Chi Minh City - r invite trainers frm thse cities t Da Nang. The training n turism at a management level has nt been prvided by any lcal university r centre. 42

50 Hwever, the quality f lcal turism vcatinal training is imprving. Lcal universities, clleges and training centres are actively seeking cperatin with lcal turism enterprises t redesign training methd and cntent t fit with practical requirements. Trainees are spending mre time wrking in the field (htels r turs), and curses are designed tward meeting specific requirements f each custmer. The Vietnam Natinal Turism Administratin has just annunced their intentin t establish a Turism Cllege in Da Nang in This is a critical weakness because, as the turism develpment strategy illustrates, if Da Nang des nt have an adequately trained wrkfrce, either turism investments will be deterred r migrant labur will leak the benefits f the turism value chain away frm Da Nang. 4.5 Surprises During the interviews and wrkshps with turists and lcal stakehlders f Da Nang turism, the team had encuntered sme findings which were surprising. And they are: That turism in Da Nang is in serius truble in terms f falling arrivals and ccupancy figures which threaten the viability f the destinatin; The rapid grwth, and mre recent dwnturn, in dmestic turism and the fact that it accunts fr ver tw-thirds f ttal Da Nang turism revenue; Internatinal turism has languished in the last five years and Da Nang is lsing market share rapidly; The City has a great seasnality pattern with demand patterns fr different surce markets cmplementing each ther evidenced by a dmestic peak in summer and freign peak in winter; The whlesaler Metr Cash & Carry dminates the fd supply chain t the turism value chain; In the past, the City has failed t develp the designated castal turist area r take advantage f the beach. The speed at which this situatin has turned arund with a mre assertive regulatry stance by gvernment is striking; The City lacks shpping and entertainment facilities fr turists; In the view f sme freign turists: Da Nang beach is dirty and bring ; Fr the freign market, Da Nang has functined mre like a transprtatin hub t Hue and Hi An than a destinatin in its wn right; Cham Museum is the nly attractin in Da Nang t many freign turists; It takes 6 mnths fr htels t get their classificatin apprved. 43

51 4.6 Quantificatin f the turism value chain The Da Nang turist value chain is quantified belw t illustrate the quantity f ecnmic value generated by each f the functinal areas f the turism value chain. This is partly t allw plicy makers t understand: the impact f turist expenditure in the nn-turism ecnmy; which areas f turist expenditure have the ptential t be increased; and hw successfully the pr are accessing different cmpnents f the turism value chain Accmmdatin Accmmdatin expenditure can be estimated frm three different surces. First, the Department f Turism cllect infrmatin mnthly n htel incme (disaggregated int rm, fd, shpping and ther categries) which is, in effect, a Census rather than a sample because data is cllected frm all 101 htels. This suggests that the htel accmmdatin revenue in Da Nang in 2006 was $9.2m. This figure will be inaccurate nly t the extent that htel returns underestimate revenue t minimize their tax liability. There is sme evidence f rather serius under-reprting f htel incme t the Department f Turism. If the $5.4m revenue in 2006 and assciated bed-nights received by the tw upmarket beach resrts in Da Nang are excluded frm the htel ttal, this leaves just $3.7m revenue t cver the remaining bed-nights in 2006 implying just $5.6 per guest per night, which are much lwer rates than reprted in the htel surveys r by turists themselves. The secnd surce is the Turist Expenditure Survey 2005 prduced by the Gvernment Statistical Office and based n questinnaires cmpleted in htels in Da Nang by sme 438 freign and 798 dmestic visitrs t Da Nang in July This suggested internatinal and dmestic self-arranging (meaning turists nt n a package tur wh wuld nrmally nt knw the cst f the different cmpnents f their tur) turists spent $24.9 and $8.9 per night n accmmdatin. Multiplying the unit csts by the ttal number f internatinal and turist bednights in Da Nang in 2006 generates an estimate f htel expenditure last year f $8.8m. This culd be lwer than the revenue figures htels reprt because 2005 expenditure data is applied t Als, bth estimates f accmmdatin expenditure exclude the funds generated by the 200 hstels in Da Nang. 44

52 Figure 19 Lcal linkages frm the $41m Da Nang turism value chain Pr-Pr Impact Accmmdatin $14.1m Sme nn-managerial & nn-catering staff with wages f abut $2.7m each year (19% pr-pr) Transprt $7.8m Sme 750 taxi drivers & switchbard peratrs, plus cycls drivers in Da Nang with wages f $1.2m per year (16% pr-pr) Fd $7.1m Sme restaurant, bar and café staff earning $0.99m each year farmers supply $0.5m prduce t turism sectr annually. Cmbined pr-pr flw f $1.5m (21% f retail expenditure) Shpping $6.2m Almst tw-thirds f spending in the craft sectr supprting crafterrs. Pr-pr flw f sme $3.4m (54% pr-pr) Other htel spending $3.3m Massages accunt fr abut half nn-rm htel expenditure. 320 wrkers earn sme $1.3m annually (39% pr-pr) Sightseeing $2.4m Da Nang has sme 260 registered guides earning $0.9m per year (38% prpr flw) Entertainment $0.9m Very limited entertainment expenditure in Da Nang Surce: Study team calculatins The methdlgical issue with surveying the spending habits f turists wh culd be spending $10 a night fr a basic htel r $120 fr an upmarket beachfrnt htel is that it is necessary t stratify the sample t make sure that it is representative f the whle ppulatin f turists. It is nt clear, with turists self-cmpleting questinnaires that this was dne which culd accunt fr the lw average spend figures. 45

53 Frm the infrmatin we have frm htel surveys, it seems likely that the Turist Expenditure Survey included very few turists frm upmarket htels. T illustrate this pint, if the accmmdatin expenditure f internatinal visitrs at the Furama Resrt is spread acrss all internatinal turists (assuming the 82% f freign bed nights utside the Furama are accmmdated fr free) it still results in an average freign turist accmmdatin expenditure f $22 per night nt far ff the $24 figure in the Expenditure Survey. In ther wrds, accepting the Expenditure Survey figures requires us t assume that ut f the 101 htels in Da Nang, nly ne presents freign turists with a bill, which is implausible. The third surce f infrmatin n htel revenues was prvided by the Htel and Hstel Surveys frm htel management themselves. In ur value chain estimates belw, therefre, we assumed that: the infrmatin prvided by the tw upmarket htels themselves, and crrbrated by Department f Turism, is crrect; the infrmatin in the Turism Expenditure Survey relates t all ther htels; we need t add in the revenue frm the survey f ten hstels which is nt captured by either the expenditure survey r the mnthly Turist Department returns. This equates t ttal estimated revenue f $14.1m in Applying the nn-managerial staff t rm ratis and wage rates cllected frm the Htel and Hstel survey suggests sme staff wrking in the accmmdatin sectr earning an average f $107 per mnth a pr-pr benefit flw f $2.7m, r 19% f turist accmmdatin expenditure Transprt Transprt spending by turists is very high in Vietnam. Our best estimate frm the Turism Expenditure Survey frm daily figures f $11.6 and $10.2 fr dmestic and internatinal turists respectively generating a ttal expenditure estimate fr 2006 f $7.9m. These expenditure figures are nt dissimilar frm the Vietnamese average - s are prbably rbust. Our taxi survey indicates that the 309 public taxis in Da Nang accunt fr abut 70% f this turnver. Turists make up an estimated 60% f taxi passengers, split fairly evenly between dmestic and internatinal turists. All the main taxi cmpanies in the City perate a system where tw drivers wrk frm ne vehicle s each driver wrks a very lng day fifteen times a mnth. Average daily revenue was $47, 55% f which ($27) was retained by the taxi cmpany t cver the cst f the vehicle (taxi cmpanies have a sliding scale f lwer % retentin with increasing turnver t incentivise taxi drivers t maximise revenue). In additin, an average f $12 was paid daily fr petrl. This resulted in a calculated incme f $135 per driver per mnth and a stated incme f 101 per mnth. This incme was attributed t the 700 taxi drivers. 46

54 A wage f $93 was estimated fr the 47 taxi switchbard peratrs. Cmbined this amunts t a wage f $1.2m per year. Da Nang has abut 70 cycl (cycle rickshaw) drivers wh, it is estimated, earn an average f abut $2 per day. Department f Turism figures suggest htels charge turists nearly $0.5m fr transprt, presumably fr htel transfers. It is therefre estimated that pr-pr benefit flws are $1.2m a year, equivalent t sme 16% f ttal expenditure n transprt Fd The Turist Expenditure Survey 2005 estimates that the average freign and dmestic turist spends $14.6 and $6.0 n fd and drink daily. Applying the 2006 bed-night figures, this implies a ttal retail turist spend f $5.7m. Department f Turism statistics indicate $5.1m spending n fd and drink in htels during Htel surveys prvided a basis fr estimating retail fd sales, staffing and fd and beverage purchasing patterns. The fur mst prminent turist restaurants in Da Nang were surveyed (Phi-Lu, Apsara, Hannakin and Kim D) t btain the same infrmatin frm the nnhtel sectr. A rapid survey f ten f the rughly infrmal sectr pavement cafes in Da Nang was undertaken t establish the extent t which they serve the turist market. In the twn centre abut 7% f infrmal sectr restaurant turnver is turist-related s we cautiusly estimated just 2% f turnver f pavement cafes acrss the City as a whle. Hwever, even this small % implied turist-related retail sales f $1.3m a year, a reflectin f the scale f catering taking place n the streets f Da Nang. We estimate that, taking int accunt all htel, frmal sectr restaurant and infrmal sectr cafes in Da Nang, turism-related retail sales in 2006 were abut $7.1m. Sme emplyees and entrepreneurs earned just under $1m in wages during the year. In additin t the wages f nn-management staff wrking in catering, the imprtance f the agricultural supply chain fr lcal farmers was als estimated. Fd and beverage purchases cnstitute an average f abut 34% f the value f fd sales (a higher % fr mre basic utlets and a lwer % fr upmarket utlets), which equates t $2.4m whlesale purchases. On the basis f interviews with restaurants (in and utside htels and the Metr whlesale utlet) it was estimated that 75% f all frmal sectr fd purchases are frm Metr (the ther 25% being frm City markets that are well cnnected t the agricultural hinterland) and that the whlesaler purchases 10% f its stck frm the lcal area. Assuming farm-gate prices are sme 50% f whlesale prices; this suggests that lcal farmers may receive less than $0.5m frm supplies int the turism value chain each year. 47

55 Hwever, given that agricultural utput per farmer in Da Nang is nly $358 per year, even $0.5m f lcal fd prcurement culd generate a livelihd fr farmers (r tw-thirds f the number f peple wrking in htels). Als, whilst there is a legitimate debate abut whether a htel wrker earning $100 a mnth is pr, agricultural supply chains d tend t target large numbers f the prest peple in the lcal ecnmy. Cmbining benefits t nn-management restaurant and café wrkers and lcal fd supplies, sme $1.5m r 21% f retail fd and drink sales accrue t the pr Shpping The Turist Expenditure Survey 2005 estimates that freign and dmestic turists spend $22.8 and $4.9 daily n shpping respectively in Da Nang suggesting ttal shpping t the value f $6.2m in In the cntext f Vietnam, these figures are gd, particularly fr internatinal turists (with cmparable figures f $12.7 and $4.7 fr freign and dmestic turists respectively). Hwever, internatinal turists in neighburing Hi An spend an average f $42.4 per day n shpping yet almst exactly the same as Da Nang turists n almst all ther categries f expenditure. This suggests that the absence f an abundance f gd retail utlets fr the internatinal market is lsing the Da Nang ecnmy abut $3m per year. Examining what the $6.2m is spent n in Da Nang is revealing. Just taking int accunt the Marble Muntain stne carving and the leading silk clthing retail utlet in Da Nang, it is estimated that $3.9m f this ttal sme 63% - is spent by turists n craft gds which prvide a livelihd fr almst crafters and is prfundly pr-pr. That the turism-generated craft supply chain creates ne-third mre jbs than htels in a City with a curiusly invisible craft sectr is striking. Interviews with stallhlders in the Han Market suggested that even nn-craft turist retail expenditure is abut 19% pr-pr as a result f stall-hlder incmes and lcal prcurement practices. On aggregate, it is estimated that $3.4m, r 54% f ttal shpping spending, flws t pr peple in the frm f retail wages r craft incmes. This figure is likely t be cnservative as the craft supply chain was nt explred in detail. Fr instance, the livelihds generated by the silk prductin prcess (silk wrm farmers, silk weavers, etc) upstream f the garment fabricatin at the retail utlet were nt taken int accunt in this analysis Other spending In mst turism value chain analyses Other spending is a rather small residual categry mentined at the end f the analysis. In Da Nang Other spending is mre prminent. This is partly because it is s significant estimated frm the Turist Expenditure Survey at $4.00 and $7.00 per day fr dmestic and internatinal turists respectively. 48

56 This equates t a ttal f $3.3m in 2006 almst half ttal spending n fd and drink. In a number f state-managed htels Other revenue is as much as a fifth f ttal revenue. The secnd reasn fr drawing attentin t Other htel expenditure is that much f it relates t massage services, with imprtant pr-pr and gender implicatins. In the analysis it is assumed cnservatively, n the basis f htel interviews, that half f Other expenditure is spent n massage services and that massage wrkers typically pay 25% f their takings t the htel in which their premises are based. Wrking n the basis f turnver and staffing infrmatin prvided by htels with massage facilities, it is estimated that sme 320 massage wrkers in Da Nang each have a grss turnver f sme $8 750 per year. Taking the amunt retained by massage wrkers as the pr-pr benefit flw, this equates t abut 39% f ttal retail expenditure n Other services. This estimate is based n the cnservative assumptin that nne f the nn-massage Other expenditure has a pr-pr element. This is a rbust assumptin fr expenditure like telephne charges in htels, but less s fr labur-intensive services - like laundry services Sightseeing The Turist Expenditure Survey which is $1.47 and $10.6 fr dmestic and internatinal turists respectively suggests a ttal spend n sight-seeing in 2006 f $2.4m. The difference in spending patterns between dmestic and freign turists is striking and reinfrces the validity f a strategy t try and increase the number f freign turists in Da Nang. There are sme 265 registered tur guides in Da Nang with an average revenue f $288 per mnth (fluctuating between a high seasn f $450 and lw seasn f $125 per mnth). This suggests ttal annual revenue f abut $09m, which represents abut 38% f ttal retail expenditure n sightseeing Entertainment Entertainment spending is very lw in Da Nang with daily spending f $0.7 and $3.40 fr dmestic and internatinal turists respectively nly slightly belw the natinal average fr Vietnam in the Turist Expenditure Survey. This implies a ttal spend f less than $0.9m in 2006, with a little f half f the expenditure being made by internatinal turists. Given the small scale f entertainment expenditure, n specific analysis was undertaken t assess its pr-pr effects. 49

57 4.7 Assessment f results f the turism value chain analysis This analysis has a number f implicatins fr the turism sectr in Da Nang. These include: 1. the size f the turism value chain in Da Nang is significantly larger than previusly thught, at abut $42m in This represents a cntributin f 5.7% t the ecnmy f Da Nang. The main reasn fr turist spending being larger than fficial statistics suggest is that significant expenditure by turists is taking place utside the fficially-defined turist sectr f htels, restaurants and transprt (fr instance, craft shps, and infrmal sectr hstels and cafes); 2. the turism value chain is currently abut 60% dmestic and 40% internatinal, even thugh freigners spend at least 2.5 times each day as dmestic turists. Whilst there are real advantages frm balancing freign turism with dmestic demand, the increasing dminance f dmestic turism in Da Nang reflects the failure t grw internatinal turism despite rapid grwth natinally and in ther destinatins in the regin. Reliance n the lw-value dmestic sectr, as the future fr Da Nang is risky because it is premised n every larger numbers f relatively lw-yield turists in a cntext where numbers are currently falling; 3. althugh dmestic turist demand has been buyant until recently, it has nt been able t cmpensate adequately fr the failure f Da Nang t attract upmarket turists (whether dmestic r freign). The imprtance f this is reflected in the fact that nearly 40% f ttal accmmdatin spending in Da Nang is generated by tw upmarket htels with the rest being generated by sme 100 frmal sectr htels and 200 hstels. The failure t develp upmarket resrts n the cast has seriusly held back grwth f the turist value chain in Da Nang; 4. linkages between the turist sectr and the pr are strng with at least 26% f turist expenditure in Da Nang accruing t nn-managerial wrkers and entrepreneurs. This figure cmpares favurably with existing, admittedly few and far between, internatinal benchmarks; 5. Da Nang turism has strng pr-pr linkages fr several reasns. First, the direct linkages frm turism t the pr (wages paid t wrkers in turist sectr as htel and restaurant wrks, taxi and guides) accunt fr ver half f all pr-pr benefit flws. The imprtance f direct flws reflects the labur market cnditins f lw unemplyment and high demand fr labur that increase returns t labur. Indirect linkages accunt fr just under half f pr-pr benefit flws and reflect the imprtance f turist expenditure n craft and massage and, t a much lesser extent, the dwnstream linkages between turism and the lcal agricultural sectr. 50

58 5 TOURISM DEVELOPMENT STRATEGY 5.1 Intrductin Turism in Da Nang is in truble. Our analysis illustrates that turism activity has a value f $42m a year, which represents just under 6% f the City ecnmy, ne-quarter f which (sme $11m) is directly received by the pr. Hwever, wrrying trends are evident. Internatinal turism has been in the dldrums fr many years but, since 2002 there has been a sharp decline in internatinal bed-nights averaging abut -7% per year based n the Department f Turism statistics. The study team initially thugh that languishing internatinal turism was unfrtunate but wuld always be mre than cmpensated by surging dmestic turism demand. There are three weaknesses t this argument: The Achilles heel f many seaside resrts is a high level f seasnality that drives dwn ccupancy figures and can threaten destinatin viability. A strength f Da Nang turism is the cunter-cyclical dmestic and freign turist seasns and this is t imprtant an asset t be given up withut a struggle; Turist expenditure surveys shw, nt nly that internatinal turists spend at least 2.5 times as much as dmestic turists, but that als a higher prprtin f expenditure is made n items such as sightseeing and retail expenditure that have strng linkages with the lcal ecnmy and pr peple within it; and In 2006 fficial returns frm the Department f turism shw a dramatic drp in dmestic turism in Da Nang bth in terms f numbers f vernight guests (-19%) and bed nights (-11%) Fr this strategic sessin the key issue identified was hw t grw the turist sectr and increase linkages with the lcal ecnmy. The perspective taken was that f ur client department, the Prvincial Department f Turism. The time frame initially adpted was ten years. Hwever, given the rate f change in Vietnam, a five year time hrizn was adpted fr the analysis f alternative futures fr Da Nang turism. 51

59 Bhudda verlking Da Nang City frm the hills 5.2 Framewrk Table 7 utlines variables that members f the study team regarded as the driving frces t achieve turism grwth and linkages with the lcal ecnmy. These driving frces were selected n the basis f a ranking as t their imprtance and uncertainty. In summary, fr turism revenue grwth, key factrs identified were the length f stay, daily turist expenditure, arrival numbers and investment in apprpriate turist prduct. Issues relating t the quality f the wrkfrce, the availability f quality craftwrk, excursins and entertainment facilities were als highlighted. It is nt pssible t quantify the relatinship between imprved quantity and quality f lcal turist infrastructure such as turs and entertainment areas and turist demand because many different variables affect demand simultaneusly. Hwever, the example f differential craft expenditure by internatinal turists in Hi An and Da Nang des illustrate the cst, in terms f revenue frgne, f failing t supply gds and services required by turists. Fr increasing linkages between turism and the rest f the ecnmy the key drivers identified are craft and the agricultural supply chain. These variables were then input int a cmputer spreadsheet mdel which was designed t measure the significance f these different drivers fr turist develpment in Da Nang. 52