Reinventing Tourist Trade in Vietnam

Pham Ngu Lao Street, Southeast Asia’s most famous “backpackers’ alley” for low-budget travelers, runs for only seven blocks. But among its small hotels, Internet cafes and coffee shops, tourists find a microcosm of the free-market forces that are reshaping Vietnam.

A decade ago, Pham Ngu Lao was a residential street, its quiet broken only in the early morning by buses unloading farmers from the Mekong Delta who came to sell produce in the city’s markets. The street’s only two hotels, the shabby Hoang Tu and the Vien Dong, offered peasant peddlers the most primitive of overnight accommodations for less than $1. Foreigners wanting a room were turned away.

Today those same hotels--renovated and spiffed up--and more than 100 guest houses and “mini-hotels” in the area are in fierce competition, cutting prices and raising standards to attract customers as Vietnam makes an aggressive pitch to join the rest of Southeast Asia as a major tourist destination.

“Competition got tough when all the guest houses started opening,” said Phan Kim Hai, day manager of the 109-room, state-owned Vien Dong. “We had to be more profitable, and we knew we had to upgrade and offer better service and facilities. We completely renovated. Now we’re too expensive for a lot of backpackers, but we’re running at 50% occupancy and making a good return on investment.”

Although the Vien Dong has gone upscale with its $60-a-night rooms (which tourists often can negotiate down to $30), Pham Ngu Lao Street remains a throwback to the mid-1970s, when backpackers could wander through Thailand, Indonesia and Myanmar (then called Burma) for months on a shoestring budget. A good meal here still only costs about $1, a clean room with air conditioning goes for $6 to $8 a night, motorbikes rent for $5 a day.

When the government approved general use of the Internet last year, Nguyen Han borrowed $20,000, bought 12 computers and opened an Internet cafe, one of six on backpackers’ alley. She charges $1.30 an hour for Internet access and says she keeps her competitive edge by constantly upgrading the equipment.

She worries, though, that rents will get too high when a new project is completed: Hong Kong investors have cleared a stretch of Pham Ngu Lao’s north side for a luxury commercial complex. Some of the shops and cafes that cater to backpackers already have moved to side streets.

If anyone deserves credit for founding Pham Ngu Lao as a backpackers’ alley, it is probably An Ngoc Tran, now 53, who spent 18 months in a reeducation camp for having held a low-level U.S. Embassy job during the Vietnam War and survived the latter part of the 1970s selling vegetables and cold water she chilled in an old Sears refrigerator.

When Vietnam moved toward a free-market economy in 1989, she was convinced that the country would become a popular tourist destination and that her neighborhood, located a few blocks from the city’s commercial center, would be a perfect refuge for low-budget travelers. She persuaded the Hoang Tu hotel to let her put up a tour desk in its lobby.

Her first customers were a Dutch couple. Then a trickle of German, Israeli and French backpackers--even an occasional U.S. war veteran. She spoke English and offered good service, and word spread quickly. Ann’s Tourist Co. soon became Vietnam’s first privately owned tour company to receive a government business license.

For the first tourists in 1989, Vietnam was no French Riviera. They needed special permits to travel anywhere, police officers knocked on hotel doors at night to ensure that tourists were in their rooms, and no Vietnamese dared to casually chat with a foreigner on the street.

Vietnam has long since loosened up, and today the Communist government is eyeing the tourist industry--which employs 150,000 people, supports 11 university tourism-training courses and is a major source of foreign exchange--as a cornerstone of economic growth. The industry has been bolstered in the last three years by the opening of luxury beach resorts in Da Nang and Nha Trang and a dozen five-star hotels here and in Hanoi.

Although Vietnam’s tourist figures are inflated because they include large numbers of Chinese traders who cross the border on foot for a day’s business, the government says the number of visitors has grown from 250,000 in 1990 to 1.5 million in 1998. Its target for next year is 2 million foreign visitors.