Economic Forecast Neglected Tourism

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RE: Letter in Response to Article, ‘GDP Growth Expected to Slow’ by Mr Martin Mwinga in the Friday, December 21, 2007 edition
(It is a pity that you close your newspaper over the holiday season exactly when people are on leave and now have time to really read the newspaper and see your advertisements!)

It is with much surprise that I noted Mr Mwinga’s article mentioned above takes no notice of the number two income-generating sector of Namibia’s economy, the Travel and Tourism Industry. It is impossible to credibly evaluate Namibia’s 2007 economic performance and outlook for 2008 and not include travel and tourism. When I read the well-researched piece by the esteemed economist, Mr Mwinga, I learned a lot about projections for other economic sectors of Namibia. His work on the other sectors is well done. But, unless I missed a paragraph somewhere, I was struck by the absolute lack of any mention whatsoever of the word ‘tourism.’ There was no mention of tourism’s major and pivotal contribution to the Namibian economy, nor was there any analysis of tourism’s economic impact in 2007 and projected impact in 2008.

The leadership of the tourism sector represented by the professional tourism associations works constantly to encourage Government, the media, other captains of industry in other economic sectors and the education and training community to pay attention to the tourism sector. Mr Mwinga, the industry representatives know how the business of tourism works; you know the economic analysis and formulas for projections that can give indicators of performance and can put that information into a national and global context.

Let us work together more. There is a lack of tourism awareness in Namibia and Fenata has committed itself to addressing this deficit.

To be fair, there is some reason for this oversight. Travel and Tourism is rather myopically, relegated to a line item on hotels and restaurants in the national accounts. This is the global situation, not just unique to Namibia.

Our sector is cross-cutting and can be tedious and difficult to accurately capture, quantify and predict future trends.

I am sure that Mr Mwinga is very aware (as are other researchers trying to project and advise within their sectors) that Namibia’s data collection system and available statistics on all aspects of economic performance are wanting.

Many decision-makers do not adequately prioritize and value data collection and analysis, ergo insufficient consistent government funding for statistics and training bursaries for interested students to take up this field, is a constant challenge.

With the September 2006 launch of the Tourism Satellite Account (TSA) and the June 2006, Tourism Investor’s Roadmap, Namibia has now quantified the impact on the economy of the travel and tourism industry.

May I urge Mr Mwinga to contact the Namibia Tourism Board (NTB – researchmarta@namibiatourism.com) or the Ministry of Environment and Tourism, Directorate of Tourism to get these landmark documents? Please ask the NTB for electronic copies of the UN World Tourism Organization (UNWTO) Quarterly Tourism Barometer which gives the global and regional statistical review of tourism receipts and economic performance. Also, please go online to the World Travel and Tourism Council (WTTC), authors of Namibia’s TSA for updates and statistics on global and regional travel and tourism trends.

Might I also encourage Mr Mwinga to contact the Fenata office (fenata@mweb.com.na) for research work, speeches, reports and other information prepared by Fenata which can also offer additional tourism data and information. He can also contact the Hospitality Association of Namibia (HAN – gittap@hannamibia.com ) for their quarterly occupancy reports which, while limited, do offer valuable statistical indicators of overall performance in the accommodation sector.

In particular, please request our updated Fenata reference list (December, 2007) recently utilized in a recently prepared research work on Sustainable Tourism that will cite a wide range of tourism information sources.

The Tourism Industry is those businesses and jobs that are directly providing products to tourists. Hotels, Tour Guides, Tour Operators, Travel Agents, Activity Providers and all whom they employ are in the tourism industry. The Tourism Economy is the wider downstream beneficiary of the tourism industry.

Mr Mwinga please take note: the TSA reports that N$5.2 billion was generated in the travel and tourism economy in Namibia. The WTTC reports that this is over 14% of the GDP.

Namibia has experienced an average tourism growth rate of between 7 – 9%. In fact, the TSA projects that if tourism continues on its current path of development, by 2016 travel and tourism could reach over 22% of Namibia’s GDP (depending of course on the growth levels of the other sectors). One can then forecast, with some confidence, the possible expected level of contribution of tourism to the GDP for 2008. It is critical to note that over 71,000 jobs are calculated to be directly generated by the travel and tourism economy. That is 17.9% of the jobs in the entire country.

Currently, Namibia is experiencing an increase in tourist arrivals. The industry reports a shift in the traditional peak season (usually June – September), to include increased occupancies and bookings for May – November, with some facilities fully booked through January.

The Namibia Tourism Board (NTB) recorded a tremendous 7% increase in occupancy in May, 2007 over the same period in 2006. Some Fenata associate members are reporting bookings for 2008 increasing up to 25% over 2007 bookings and actual occupancies exceeding by 10-15% occupancies of the same time last year.

New lodges and other tourism facilities are under construction or have been recently opened. Current members of the sector are expanding existing facilities or renovating and improving their products to meet market demands. Investment by the private sector in marketing has increased and long waiting lists exist for space on Namibia’s country stands at the International Travel and Tourism Trade Fairs.

As the private sector pays its own way at these events (the NTB coordinates all stand design and activities and buys its own stand space), operators can spend up to N$60,000 per person from their own budgets for the costs of attending these fairs.

Sadly, we do not have figures for the amount of new investment in the sector in 2007. Fenata hopes that this statistic will begin to be captured by the Ministry of Trade and Industry’s Investment Centre along with NTB, at some point in the near future. 2007 arrivals statistics and analysis from MET will only be available in late 2008. Most importantly, Fenata has seen some indication from the available data that the kind of tourist arriving in Namibia seems to be slightly shifting from the normal, mid-market German base. For decades Namibia has been well-established in the German-speaking European travel market and with mid-market self-driving travellers from South Africa. These two groupings are the mainstay of tourists who come to Namibia and will probably stay in the majority. However, there are interesting indicators of percentage arrival increases in the higher-spending, long-haul travellers who have more disposable income, and are seeking niche travel opportunities.

This means that the type of product on offer must also begin to shift so that Namibia provides more of a range of products to meet the demand. Tourists in the higher-spending category want more service and that means more training is desperately needed in Namibia.

The simplest accommodation can take on the aura of a Queen’s Palace if the SERVICE offered is regal. These upper-market segment tourists want rooms with their idea of ‘luxury’ and they are willing to pay for it. This means the industry wishing to attract this part of the client base, must place more priority on maintenance and modernization of their facilities. These particular tourists want better and more diverse menus and they want more activities while on holiday.

Most significantly, they also want to leave a positive environmental footprint and want more cultural tourism products. Some non-scientific surveys related in various articles and reports seem to indicate that these higher-spending overseas tourists want to experience cultures, food, dance, music and stories when they come to African destinations like Namibia. MET and NTB are beginning the process of a tourism exit survey to capture some of this important information.

Namibia is a long-haul travel destination and as such is vulnerable to rising aviation fuel costs. The impact of the rising fuel costs, inflation rates, mortgage meltdown on disposable income in the US, parts of Europe and Asia, have yet to be felt in the tourism sector (for now), but Fenata is watching this global situation carefully. Travel and Tourism is a luxury. When things get tough economically for the travelling public, holidays are the first casualty.

While some Namibian industries suffer at the weak South African Rand, tourism benefits to a certain extent as long as savvy operators have hedged their brochure prices in the right direction. A cheaper Rand means that overseas travellers from hard currency economies can have a holiday for relatively less than otherwise.

The tourism industry operates 12-18 months in advance. By the end of 2007, most Fenata members have already booked 2008 and are taking bookings and making marketing arrangements for 2009. Getting rooms at the key tourism iconic spots for June – September, 2008 will be nearly impossible, even in January 2008. Drastic changes in the exchange rate can affect the profitability of the sector. If the Rand strengthens precipitously, then this can affect pre-bookings.

Air access to Southern Africa is a major difficulty, particularly as the region prepares for the World Cup (WC) 2010. Namibia’s overseas routes to the UK and Germany are a major part of the reason for the current boom in the tourism industry. Quite simply, if the tourists cannot get to the product, it doesn’t matter how beautiful the product is, they will not come in sufficient numbers. Air Namibia’s re-emergence and increasingly valuable position as a necessary part of the tourism economy in Namibia is encouraging.

Mr Mwinga must take note of the potential investment by the Millennium Challenge Account (MCA) currently pending for Namibia. While nothing is promised and no final figures have been agreed, the investment could be more than USD$200 million with between USD$60-80 earmarked specifically for tourism. These funds could become available in early 2009, if the programme proceeds as it is currently.

Tourism in the World and in Africa
For now, tourism worldwide is booming.

“From January through April 2007, international tourist arrivals worldwide rose by over 6% to 252 million, representing an additional 15 million arrivals compared to the same four-month period in 2006.” Most impressively, a UN study states that worldwide tourism receipts reached US$735 billion in 2006. This represents a $57 billion US dollar increase (over 2005) in receipts from international tourism worldwide.

In 2006, Africa added $3 billion USD to its income from tourists increasing to $24 billion or 3% of the total worldwide receipts from tourism over 2005.

While these numbers seem small, Africa has had the ‘strongest’ relative increase in receipts in the world at +10%.

In Sub-Saharan Africa, Travel and Tourism Capital Investment is expected to have reached USD 12.9 million or over 11.6% of total regional capital investment.

Sub-Saharan Africa boasts 40.7 million arrivals in 2006 over 38.3 million in 2005 (UNWTO).

In addition, “Africa’s 4% of global international arrivals (and 3%+ of international receipts from tourism) is a success, given the marginalization of Africa in the global economy with less than 2% of global exports.”
International tourism to developing countries is significant and increasing: more than 40% of global tourism arrivals take place in the developing world. These are the reports which can offer encouragement to investors considering Namibia as a profitable option.

The UNWTO has reported that in 2006, June-August were the worldwide ‘peak season’ months for travel and tourism .

Of course, this is due to the fixed holiday season in Europe and North America, currently the main sources of worldwide tourism (although in 2005, 31 million Chinese tourists travelled the world, and in 2006, this number increased to 35 million).

Tourism in Namibia
Knowing the performance of the tourism sector in general will add relevance to the conclusions on the importance of sustainable tourism in Namibia. The Namibian Travel and Tourism economy’s contribution should have risen from 16% in 2006 to 22.9% by 2016. In addition, Namibian Travel and Tourism Capital Investment is estimated at N$1.3 billion or 12.3% of total investment in 2006. By 2016, this should reach N$3.25 billion or 12.9% of the total.

The MET reported that in 2006, 833,345 tourists visited Namibia. This figure is a 7.1% increase over 2005 arrivals, of 777,890. In 1993, more than 254,000 tourists arrived in Namibia. Tourists from Belgium and Portugal increased over 40% from 2005 while tourists from Spain and France increased over 20%. Most importantly, UK arrivals increased 17.91% (reiterating the importance of Air Namibia’s role in tourism development with their direct flights into our primary source tourism markets) while tourists from Scandinavia increased 15.47%.

Italian tourists, who generally arrive in Namibia over a short 6-8 week period from mid-July to the end of August, increased their arrivals by 9.92%. The bedrock of tourism in Namibia, German-speaking Europe, is an important ‘bellwether’ to gauge the health of the Namibian tourism product. In 2006, German arrivals increased 11.4% over 2005.

Tourists to Namibia primarily arrive by road. In 2006, over 73% of tourists arrived by road. However, tourists from the primary and secondary source markets generally arrived by air with the exception of the South Africans and Angolans. Namibia’s primary source markets are German-speaking Europe, UK, Angola and South Africa. Secondary markets include Italy, France, the Benelux, Scandinavia, the Netherlands and the USA. Guests arriving in Namibia are classified into various categories that identify their purpose of visit: Visiting Friends and Relatives (VFR), Holiday/Leisure, Business, Returning Nami-bians, Same Day Visitors, and ‘Other’ (which can include diplomats and students). In evaluating the possible financial impacts of arrivals in Namibia, Fenata targets the Holiday and Business categories of travellers as they are more likely to consistently use tourism products on their trip to Namibia and can influence the profitability of tourism accommodation and activities enterprises.

In 2005, 321,773 holiday and business travellers arrived in Namibia. In 2006, that number had grown to 405,904. Reports from the private sector seem to indicate an increase for 2007 of 10-15%. The leisure tourism figure is more valuable to the private sector as it is the likely number of potential clients for utilizing their tourism industry products. In 2003, 214,000-382,000 tourists are estimated to have visited protected areas during their tours to Namibia. 45% were domestic tourists, with 37% from overseas (mainly Europe) and the remainder from within Southern Africa.

According to the TSA, 7 of the 11 most visited sites in Namibia are national parks, protected areas, or natural landmarks.

The TSA also lists that the number of tourists visiting community-based areas/lodges grew from 30,000 in 1999 to 70,000 in 2002 and to approx. 90,000 in 2004.

Finally, domestic tourism cannot be overlooked. NTB reported in 2007, that nearly 33% of all accommodation bookings in one quarter of 2006 were from domestic tourists. During the off-peak season efforts to increase opportunities for local travel have increased as the larger players in the industry recognize this lucrative market segment.

Some chains offer permanent price reductions for Namibian nationals and other schemes for local discounts. Others offer packages at holiday and festive seasons only as lucrative overseas bookings dominate their target markets. Some accommodation providers of campsites, self-catering units, hotel pensions, and bed-and-breakfasts specialize in domestic travellers in particular.

While this review is lengthy, it is not comprehensive. Its conclusions can be summarized in a sentence: In general, most enterprises in the tourism industry did reasonably well in 2007 and forecasts favour a more productive 2008. Any cataclysm (like 9/11 or an Ebola outbreak), dramatic increases in fuel costs, excessive/heinous crime reports, and drastic ‘negative’ fluctuations in the exchange rate can affect this forecast. Again, I encourage Mr Mwinga to please contact the NTB and MET’s Directorate of Tourism for ongoing tourism awareness information so that the next economic forecast can be inclusive of all aspects of Namibia’s economy.

Jacqueline W. Asheeke, CEO Fenata
– Fenata is an umbrella Association representing the 11 private sector tourism associations and enterprises

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