Economic crisis hits tourism sector

Source: Economic crisis hits tourism sector – The Zimbabwe Independent August 5, 2016

ZIMBABWE’S punitive tax regime, coupled with de-industrialisation that has forced the economy to rely on imports and devaluation of regional currencies against the United States dollar, have rendered the country an expensive and uncompetitive tourist destination, latest figures show.

By Taurai Mangudhla

Despite various attempts by the country’s leading hospitality groups to lure clients through African and Rainbow Tourism Group promotions and discounts that even topped 69%, latest Zimbabwe Tourism Authority (ZTA) figures for the first quarter of 2016 show national hotel room occupancy has slid by two percentage points in the period under review, with people preferring cheaper lodges or to sleep across the borders.

The national average hotel room occupancy rate, ZTA said, decreased from 38% in the period January to March 2015 to 36% during the same period in 2016.

RTG’s highest discount was cost reduction on its New Ambassador Hotel’s double rooms by 56%, while the Cresta Group gave a 63% discount on its Cresta Oasis double rooms. Meikles Hotel was rather modest at a peak discount of 35%, while African Sun gave a 70% discount on its Crown Plaza rooms for bookings of at least three nights.

“These promotions resulted in increased utilisation of accommodation facilities by domestic tourists in Harare more than in other regions. Even with such promotions, Harare experienced a 1 % decline in the first Quarter of 2016 compared to the same period in 2015,” read the report.

“This was attributed to the current harsh economic climate which has resulted in government, private sector and NGOs implementing austerity measures to reduce operating costs. For example, government banned the Harare municipality from holding meetings in hotels as a cost-cutting measure.”

This comes as Zimbabwe’s Tourism minister Walter Mzembi is having a tough time convincing government to scrap a 15% tax on accommodation for foreign visitors, which he says makes the country a more expensive and less competitive tourism destination.

The country’s political situation characterised by spontaneous protests has worsened the problem and is mainly responsible for Zimbabwe’s poor ranking in the 2015 World Economic Forum Travel and Tourism Competitive Report. The travel and tourism report ranked Zimbabwe in May among the worst tourism destinations in the world at number 115 out of 141 countries.

Furthermore, an impractical pricing system with high hotel and transport rates is also a setback to Zimbabwe’s tourism at a time the sector battles to deal with other challenges such as heavy police presence on the highways and rampant corruption.

In Africa, Zimbabwe ranks 15th behind South Africa, Seychelles, Mauritius and Kenya which are ranked first, second, third and fourth respectively.

The ranking is based on what is called the Travel and Tourism Competitive Index which has four sub-indexes.
The first sub-index is the enabling environment which captures the general settings — business environment, safety and security, health and hygiene, human resources and labour market as well as ICT readiness — necessary for operating in a country.

According to the report, although there was an increase in tourist arrivals into the country — from 387 557 recorded in the first quarter of 2015 to 450 572 during the same period in 2016, representing a 16% growth from all source regions except for Oceania — not all of the arrivals ended up in hotel occupancies.

The regulator said a sizeable number of tourists, especially those from mainland Africa, resort to very cheap sources of accommodation in lodges as well as friends and relatives.

“That’s why the disparity in terms of occupancies vis-a-vis tourist arrivals. Observations have also shown that many foreign tourists visiting the Victoria Falls are entering through Kazungula and Victoria Falls border posts for single night stays and day trips, largely showing that they are avoiding to stay in Zimbabwe,” said ZTA. “It means Zimbabwe is a secondary destination to them. If this phenomenon increases, it will further affect the performance of the sector as Victoria Falls is the hub of foreign tourism.”

To swing the pendulum, robust marketing programmes by Zimbabwe in key source markets are required. Unfortunately, ZTA said, this is going to be very difficult as the authority gets over 90% of its funding from tourism levy collected by operators whose businesses are shrinking.

“Also with the deepening harsh economic environment in the country, the contribution of the domestic market is likely to decrease drastically. In turn, this is going to further affect the ability of hotels to maintain good standards in their facilities as domestic market contributes significantly to their businesses (averaging 35%),” ZTA said.

In terms of regions, Victoria Falls had the second highest room occupancy rate but experienced a two percentage points decline in the first quarter of 2016. This negative growth was a result of reduced utilisation of accommodation by foreign tourists (the resort town’s occupancy is usually dominated by foreigners) as can be seen from the clientele mix

Compared to other regions, Beitbridge recorded four percentage points up from the figure recorded during the same period in 2015. This was as a result of reduced capacity through the closure of Holiday Inn Express hotel, which was the second largest hotel after Beitbridge Rainbow Hotel, contributing 24% of hotel rooms in Beitbridge. This closure resulted in hotel rooms available decreasing, causing the occupancy percentage to increase.

Mutare/Vumba and Masvingo recorded the worst growth of -7% each compared to the rest of the regions. This negative growth was attributed to the harsh economic environment prevailing in the country that has adversely affected domestic tourism, which is the tourism backbone of these two regions.