Tourism: Turbulence in the Air

By Murli Dhar

The global economic downturn is continuing. In such a context, one has to expect that our economic sectors exposed to international markets will not do as well as they have done in the past. Though the situation is not so bad overall, the tourism sector or, more widely defined the hospitality sector, is facing the consequences of increased competition from a global market which is hardly progressing. Despite compensating improvements across different source markets, the net overall effect is one of tepid growth.

Data for the first 6 months of 2012 show that this sector will grow only marginally during the current year as compared to 2011; the number of incoming tourists in 2012 is estimated at 960,000, down by 0.5% from 965,000 in 2011; tourist receipts at Rs 42.5 billion for the year are expected to be marginally less than the Rs 42.7 billion realized in 2011. In simple terms, growth is stalling. Hotel room occupancy was on average lower at 62% in the first half of 2012 (65% in 2011).

This decline in numbers is not affecting all our hotel establishments engaged in the sector uniformly. Competition for clients is affected by both the international market conditions and distribution of incoming tourists among local establishments falling in different categories. Competing tourist destinations worldwide are carving out a better share out of the reduced total market supply by cutting prices or improving packages. Those destinations which are more flexible and adaptable have been doing well despite the reduced traffic flow from countries hit by the economic downturn. At the local level, the almost stagnant level of arrivals means that establishments are making all the efforts it needs to pull up clients to themselves. This means there is taking place a shifting of clients among establishments by offering better bargains.

Tourism contributes around 10% to our GDP; the sector has 113 registered hotels with a total supply of 11,800 rooms. On a combined basis, hotels, restaurants, travel and touring provide total direct employment to some 28,000 employees. The numbers employed in the sector are fewer than those in Export Oriented Enterprises, with a total of 55, 000, including 18, 500 expatriate workers, but the EOEs contribute a lower share, around 6.5% to our GDP. In view of the narrow market reach of both the sectors, being concentrated upon Europe, it is important to keep up their dynamics in the current disturbed international market condition.

We have not done much by way of market diversification. This is because our enterprises are conservative enough to stick to their traditional markets when the going is good. They rarely take risks enough to plunge into unknown territories or delve into the potential of other markets, other products, longer lifelines. It is not surprising therefore that one of the star performers of the tourist sector of the yesteryears from the eastern part of the island has started shedding its workforce, faced with the current tumult affecting the sector. Two major high-end groups are in the red.

In circumstances such as this, it has been customary to cast the blame for under-performance on the government’s insufficient international advertising/campaigning, inadequate rupee depreciation to prop up hotel incomes or Air Mauritius’ failure to tap sufficiently source markets or all of these together, never on the shortcomings on the product development or the price at which it is being offered relatively to our location in the world market. The reality is that taxpayers have been contributing their fair share consistently to keep the tourism sector in sufficient visibility on international markets, that the rupee has gone down enough for higher import prices to start hitting consumers’ pockets seriously and that, despite several managerial and strategic target market changes at the level of Air Mauritius, the company’s bottom line has gone into the red for quite some time now with its share price having tumbled below Rs10 this week, a far cry from its Rs30 plus only years back.

So, how do we get out of this situation? How do we breathe new life in our tourism sector? One thing is certain: we cannot allow the Mauritius product to become a run-of-the-mill product, which any other tourist destination can easily vie successfully against. For the good of all operators, its uniqueness should be reinvented by arresting savage physical development of the island and by changing negative attitudes of certain local service providers in the sector. We have to make considerable efforts to drive out once again the pristine beauty of our original offer. We have to continue to be somehow different from others so that others don’t undercut our share in the global market.

There is a changing market demand out there with different sorts of demands for a good price. We have to go out and meet this market because the market – especially those parts of it we have not served so far – does not always come out to meet us. It goes to those who sell at their doorsteps their advanced product by improving what is on offer all the time. This ever-adapting product is the result of the collective undertaking of all stakeholders, the general public, taxpayers, hotel keepers, transporters including ground transport and airlines. Nothing much is achieved by way of progress, especially in the current turbulent economic environment, by pitching one set of stakeholders against the other. The enemy is not within; it is without.

It is part of our economic history that when the going is not proving good enough, we start heading for infighting, casting the blame on one or other economic agent from within. We forget that when we made inroads into textiles, finance, ICT, etc., in the past, we collectively embarked on external markets by putting all our ingenuity into product lines that did not exist in our panorama before. At present, we are facing times of adversity when nearly every sector of our outputs is under threat to perform better if only to maintain itself in the markets we have gained by dint of hard work. Were the efforts directed therefore to make the cake grow, there would be more to share for all and the opportunity a real one to better distribute the fruits of those efforts seamlessly across a broader sweep of economic agents from across the entire spectrum.

Have we not made good this year the lower number of tourists coming from Europe so far by tapping on closer regional markets which have grown? This kind of temporary uptick can be consolidated by cultivating with care alternative markets helping us overcome current shortcomings from traditional markets. The objective should always be to make things better for all in the long term on as widespread and participative a basis as possible. This should help enhance the much-needed local value-addition as genuine as possible and hence keep alive the attractiveness of the local product. Efforts to share the current pain in a spirit of fairness towards all will make us overcome difficulties that are showing up at present. We should target the long term with a concerted action on the part of all.

* Published in print edition on 25 August 2012