Tourism performs well in Q3 amidst challenges

Home Business Tourism performs well in Q3 amidst challenges

Staff Reporter

Windhoek-The most recent tourism figures from the FNB/FENATA Travel Index indicate that during the third quarter of 2017 the index contracted by 5.7 percent in real terms. This decrease, however, was an improvement from -20 percent and -16.2 percent recorded in the previous two quarters as the industry enjoyed its peak season, underpinned by strong increase in tourist numbers and higher seasonal demand.

According to Josephat Nambashu, an analyst at FNB, an increase in tourist numbers was further pronounced in bed occupancy rates during the third quarter.

“The average bed occupancy rate for the quarter was at an all-time high and 2.7 percent higher when compared to the corresponding average rate registered during the corresponding period a year earlier. The local currency recovered some lost ground through the third quarter and thus trips from America and Europe were only 3.4 percent more expensive than they were this time last year due to foreign currency translation and a further 7.0 percent on account of tourism inflation,” said Nambashu. He noted that while the tourism sector performed well in the third quarter, immutable challenges exist within the industry that cannot be overlooked.

“Businesses therefore need to be ready and flexible to adapt to the industry changes. Barring any other developments, there remains two areas that can act as quick fixes. Firstly, boosting international marketing of the country as a niche tourism destination to the rest of the world. Secondly, finding alternative streams of revenue as government consolidation erodes the revenue base of several accommodation sites and conference facilities.”
When looking at the survey results of the FNB/FENATA Index, he advises, that despite the Tourism Business Survey findings for Q3 reflecting a general pattern of decline in domestic tourism as associated with economic stagnation, respondents remain stubbornly optimistic of the future outlook.

“Over the past three months, business performance was fairly up to expectations, with the index posting a healthy 27 percent increase when compared to same period last year. Respondents also have a generally positive outlook for the industry’s growth over the next quarter, with 75 percent stating that it will be either good (51 percent) or very good (24 percent).”

Financially, 66 percent of the tourist vendors surveyed saw an increase in revenue during the past quarter and an optimistic 47 percent anticipate increases in the subsequent quarter.

On staff related matters, some 45 percent say they had kept their staff capacity unchanged over the last quarter and a similar level increased their workforce. However, future employment prospects remained worrisome, with nearly 56 percent of the respondents expecting no change in their staff capacity over the next three months.

Nambashu added that price increases are the answer to combating inflation and the ever-increasing operational costs for 74 percent respondents, but how such increases will affect the ability to compete in the long run is a worry for some.

“As operating expenses increase, most businesses recover increased costs by increasing their menu prices. However, many businesses fear that rising prices will make their goods and services uncompetitive on a global scale,” said Nambashu.

Moreover, the tourism sentiment index, which reflects future expectations, shows that there has been a considerable drop in positive sentiment since the first quarter of 2017. However, industry remained optimistic about the quarter ahead with (75 percent) of respondents confident about their business, echoing relatively strong year-end results. Operators and lodge owners are the most optimistic sectors with 74 percent expecting to build on growth seen in the last quarter of 2017.

Top challenges in the industry include the general economic slowdown, coupled with lack of quality accommodation and crime – these dominate as concerns for tourism businesses. “While only a few respondents pointed to waning government support for business events bids, a significant number highlighted crime-related incidents and a lack of exhibition facilities as key areas of concern. Many businesses also feel that tourism demand will be dampened by the impact of the government’s policies to cut expenditure in the short to medium term.

“Lastly, skilled labour remained as an impediment to businesses, with 26 percent of respondents citing this as a key issue,” said Nambashu.

In addition to the top issues surveyed, other business challenges named by respondents included consumer confidence, aviation access, utility costs, dilapidating road infrastructure, and the general slowdown in the business levels from the corporate sector and individuals.