Vietnam is fast becoming Southeast Asia’s hottest holiday destination.

Just over 21 million people visited Vietnam in 2025, a 20% jump from the year before, according to government statistics. Last year, Vietnam surpassed Thailand as the most popular destination for Chinese tourists, drawing 5.3 million visitors, ahead of the 4.5 million headed to Thailand. The government now hopes to generate 1.1 quadrillion Vietnamese dong, or $41 billion, from tourism this year.

“Vietnam’s location puts it in a prime position for tourism development, and its potential is bolstered by its cultural heritage,” Mai Van Chinh, one of the country’s deputy prime ministers, said at a tourism forum last September, praising the country’s “diverse cuisines, beautiful landscapes, and gracious people.”

It’s not just the traditional hubs of Hanoi and Ho Chi Minh City that are popular. Travel to the island of Phu Quoc and the northwestern town of Sa Pa more than doubled in 2025, according to data from Klook, an Asian travel platform. “Tourists are seeking out nature-driven and culturally distinct destinations beyond the major cities,” says CS Soong, Klook’s vice president of corporate development.

The conversation over Vietnam’s economic potential focuses on its manufacturing sector, exporting electronics, apparel, and other goods to markets all over the world. Yet tourism, which contributes almost 10% of GDP, shows the country can compete on the services side, too.

“Vietnam is competing with Thailand and Malaysia to become the top destination in the region,” says Le Hong Hiep, a senior fellow at the ISEAS–Yusof Ishak Institute in Singapore.

Though Southeast Asia is better known as a destination for backpackers seeking entertainment and lodging on the cheap, Vietnam might be ready for a different kind of traveler.

“Backpackers do not spend much,” Le says. “The government is trying to attract tourists who can spend more and stay longer in the country.”

That means business, luxury, and medical travelers. Vietnam’s health ministry expects the medical tourism industry to grow from $700 million in 2024 to nearly $4 billion by 2033. Conference travel is also expanding, with Mordor Intelligence forecasting the industry will grow from $7.8 billion today to $10.3 billion in 2031.

One reason for Vietnam’s travel boom is, quite simply, that it’s easier to get there. Last year, Vietnam allowed nationals of a dozen countries, including Belgium, Hungary, and Switzerland, to stay in the country for 45 days without a visa; now, 39 countries get some kind of visa-free access.

“If visa restrictions are lifted, that’s beneficial for any travel location,” says Alexandra Murray, vice president and regional head of Southeast Asia for Hilton, the U.S.-based hotel group. “Tourists can be more spontaneous in their travel plans.”

Vietnam’s airlines are also making an aggressive play for international expansion. Vietjet, the country’s leading private airline, is launching new flights from China, Japan, and Singapore, and is considering new routes from Europe. Vietnam’s traveler pool is expanding beyond traditional sources like Singapore and South Korea; Klook data suggests that now Filipino and Indian travelers are driving regional demand, while long-haul tourism from the U.S., Australia, and New Zealand is also accelerating. Still, China and South Korea remain the two biggest sources of tourists to Vietnam by a large margin, with Russia a distant third.

Hanoi is channeling money toward expanding infrastructure in tourist hotspots. For example, the government has invested over $830 million for a new airport in Phu Quoc, helmed by Sun Group, a local conglomerate, and the Changi Airport Group, the firm behind Singapore’s world-leading aviation hub. This, and other investments, are being made ahead of the 2027 APEC Summit, taking place on the island.

Foreign companies aren’t getting left out. Vingroup recently signed an agreement with U.K. hospitality company IHG Hotels & Resorts to bring four brands to Can Gio, a coastal district in Ho Chi Minh City. Sun Group also deepened its partnership with Hilton last year, with plans to develop five hotels encompassing over 2,000 rooms across Phu Quoc, Da Nang, and Quang Ninh.

“Lots of great construction contracts have been awarded,” Murray says. “It’s like nothing I’ve seen in any other country, not even in the Middle East. It’s strategic too, so Vietnam can cement its place in Southeast Asia as an up-and-coming place to invest in.”

“Local companies are building more hotels in major cities, but they need to partner with foreign operators so they can market themselves as international hotels to attract foreign tourists,” says Le of the ISEAS–Yusof Ishak Institute.

But while aggressive growth is important in the short run, it’s crucial for Vietnam’s tourism industry to pursue sustainable, long-term gains. “It’s not just about growing tourism across Vietnam, but how to do so sustainably,” Le explains. “We want repeat tourism arrivals, so the focus is on how to improve the quality of services so that travelers will stay longer, spend more, and come back.”

Thailand’s struggles with tourism are indicative of how the industry can go wrong. The COVID pandemic torpedoed the country’s tourism industry, and political instability and fears about crime have kept some tourists, particularly from China, away. Thailand is also scaling back its visa-free program, with visitors now getting to stay for only 30 days, down from 60, to better attract “quality tourists” instead of those trying to take advantage of a lengthy Thai sojourn.

“Vietnam observed how places like Bali and Thailand suffer from over-development and overtourism,” says Vu Minh Khuong, a practice professor at the Lee Kuan Yew School of Public Policy. “We’re also learning by doing, and care a lot about international best practices,” Vu adds.

It’s possible the surge of tourists eventually peters out. That will leave the country with a lot of underused hotels and airports. “At some point in the future, Vietnam may face the same problem as Thailand—where tourism infrastructure is abundant, but there’s a struggle to fill rooms,” Le says.

This article appears in the June/July 2026: Asia issue of Fortunewith the headline “Asia’s new tourist hotspot.”