Tourism performance better but low occupancy remained challenging in first quarter

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Staff Reporter

Windhoek-“According to the latest figures, the tourism sector had a tough first quarter to the year. Based on the FNB/Fenata Travel Index, growth in real terms subsided to -20 percent quarter-on-quarter as the stronger currency coupled with low occupancy rates drove down the index. Inflation in the sector remains rampant at 13 percent for the quarter as various operators aim to remain abreast of global pricing patterns. International arrivals recorded notable improvement during the first quarter – of 4.3% q-o-q – beating prior expectations.

While the downturn in the index was expected for the first quarter, the trend should continue on the downside if the rand remains on its current path of recovery,” states Daniel Kavishe, market research manager in the latest FNB/Fenata Tourism and Travel Index.

According to the latest survey, business performance dipped marginally since December, with 12 percent of the respondents stating that business was poor. However, when compared to a year ago, the business performance indicator increased from 3.3 to 4.6. The improvement during the quarter was mainly because of an increase in the number of tourists (evidenced in the international flight arrivals) compared to the same quarter last year.

49.4 percent of the respondents stated that they received an increased number of tourists compared to 2016Q1. The respondents were mainly lodge owners and tour operators who believed this year the industry would grow faster than last year, based on an improved first quarter performance.

Overall, respondents felt the second quarter of the year would show strong and robust growth. The sentiment index, which captures future expectations, was at an all-time high recording 3.6 on the back of 17 percent q-o-q growth in business performance expectations.

Revenue expectations have also lifted for the quarter to 4.0 from 2.7, mainly on the back of an increased number of tourists. The respondents expect a 5 percent increase in tourists during the second quarter as compared to 2016Q2.

The latest labour force survey showed that there has been an increase of 63.5 percent in the accommodation and food service activities, which relate to the tourism sector.

According to the survey, respondents are more bullish of their employment prospects since the final quarter of 2015. Currently, over 30 percent of the respondents stated there will be an increase in the workforce during the second quarter of the year as the market stabilises.

The concern among respondents remains the high turnover in the sector followed by poor service delivery from staff. The malignant problem in the sector needs to be addressed effectively in case the tourism sector suffers substantial setbacks.

Tourism sector’s
biggest challenges

Kavishe elaborates: “The overall challenge during the first quarter was the poor occupancy rate within the sector. The first quarter is deemed as off-season in the tourism sector and as such most vendors rely on government conferences to support their businesses but this has not been the case this year due to government running a tighter budget. Government is also once again under fire for the lack of strategic importance of the tourism sector, according to the respondents. Moreover, dated laws are decreasing the ease of doing business and have become counter-productive for several sectorial developments.”

A pertinent theme has been the fluctuation of the currency that makes securing business in the accommodation sector difficult. Tour operators stated that current strengthening of the exchange rate has led to declines in their activities. Furthermore, the increase in the prices at accommodation sites has meant that there has been meaningful reduction in bookings for tours. The influx of French tourists has increased demand for qualified tour guides who have an affinity for the language, and these are presumably not readily available in the market.
Crime is on the increase and this is affecting the tourism sector negatively as robberies targeting tourists are on the increase.

In conclusion Kavishe stated that the tourism sector remained resilient over the course of 2016, but the marked slowdown in the economy has invariably affected the sector.

Significantly, fewer bed nights were sold to domestic tourists during the first quarter, as disposable income came under pressure and accommodation prices rose.

“With the rand expected to depreciate over the remainder of the year, coupled with higher tourist arrival numbers, we anticipate a slightly better tourism season in 2017 compared to last year. This, however, is largely contingent on currency volatility and the price of accommodation relative to neighbouring countries. The sentiment index bodes favourably, thus leaning towards improved trading activity and revenue flows for the sector. Additionally, we have seen an uptick in coastal property prices, a positive sign for the unpredictable tourism sector.”

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