Windhoek-The latest FNB/FENATA Travel Index indicates that the tourism industry contracted by 7.5 percent (real terms) for the final quarter of 2016.
According to FNB’s market research manager, Daniel Kavishe, “Despite improvements in the bed occupancy levels, load factors remained dire, contracting by 6.7 percent quarter-on-quarter (q-o-q). The increase in flights did not have a corresponding increase in passenger numbers and hence load factors contracted of 6.7 percent quarter-on-quarter (q-o-q).
“Furthermore, the Namibian dollar appreciated during the quarter, hence pushing the index lower, since 54 percent of the bed nights sold, were sold to non-CMA residents and a stronger domestic currency erodes their purchasing power in Namibia. Based on our indexed data, bed occupancy rates were 32.3 percent higher q-o-q.”
On an annual basis, The FNB/FENATA Travel index grew by 1.6 percent, supported mainly by the growth in the third and second quarter. Nominally, the growth was much higher at 11.3 percent, with hospitality inflation making up the difference.
High food, utilities, fuel and transport costs have pushed up hospitality inflation to 9.6 percent. Regarding performance in the fourth quarter, Kavishe said it tended to be a subdued but was lifted by the range of conferences during that period e.g. the investor conference. According to the respondents, business performance increased during the fourth quarter.
Compared to last year 4Q2015, the business performance indicator improved from 2.9 to 5.7 after 20.1 percent of the respondents recorded very favourable business performance/activity during the quarter. This was reflected in increased tourist arrivals where 36.0 percent noted good arrivals at their respective establishments, while a further 4.0 percent recorded very good tourist arrival numbers.
Looking forward, the sentiment index improved to 2.3 compared to last year’s measly 0.88 score, gaining 1.4 pts q-o-q. The sentiment index Incorporates future employment, future revenue and ultimately business confidence for the sector.
Accordingly, 23.0 percent of the respondents expect to increase employment levels during the first quarter, while 34.5 percent of the respondents believe that the revenue for the period will be “good”.
“As with many industries in Namibia this year, the tourism industry also faces a number of challenges”, states Kavishe. “Most operators have noticed the impact of the slowing economy on their respective businesses, particularly those that rely on government for conferences, seminars or workshops.
“These activities often supply consistent revenue streams, but with government cutting back, several businesses have, and are expected to experience a slump in operations.
Furthermore, delayed payments from the public sector exerted pressures on business cash flows after government departments failed to meet their financial obligations in due time.”
Further challenges included the fact that there is currently a great deal of uncertainty from NEEEB and the Investment Promotion Act. Hunting operators were particularly concerned about the outdated regulations and the notably long turnaround times to issue new hunting quotas and permits.
General staff related problems continue to feature as major bottleneck in the sector with high staff turnover, inexperienced staff or poor service delivery by staff employed at the various institutions. Tighter liquidity within the financial sector and economy at large has made it difficult for some respondents to access finance for construction geared at expanding operations or simple renovations.
Coupled with ballooning water and electricity bills, respondents have argued that managing costs in the sector is becoming increasingly challenging. Other pertinent challenges faced by the industry are poaching, increased crime levels across various establishments and invariably the persistent drought as well as the current road system which is unsafe across the country and in some places in poor condition.
“Despite the challenges faced, industry pundits remain bullish on the tourism. Other than South Africa that features once more as Namibia’s largest competitor, respondents feel that Namibia’s tourist offering is differentiated within the region with aspects such as affordable packages, a stable political environment and interest from none traditional tourist countries. Vendors are hoping that the new airlines will improve volumes of tourists to Namibia,” Kavishe concluded.
In summary, one respondent summed about the industry, “Nobody must get complacent. Tourists always have alternatives. We must remember the tourists do us the favours coming here not the other way around.”
A stronger rand, according to some of the respondents, may offset the current boom in tourism. The increase in demand for Namibia, according to them, has largely been a result of a weaker currency. If this changes, tourism sector will likely again undergo a substantial dip in operations.