How to make the tourism sector more competitive

What you need to know:

  • Tourism, which is Tanzania’s leading foreign exchange earner, has in recent times been facing challenges that might affect its growth.

Dar es Salaam. Tourism stakeholders remain optimistic about the future of the sector but want the government to harmonise regulatory issues and players to be more creative.

Tourism, which is Tanzania’s leading foreign exchange earner, has in recent times been facing challenges that might affect its growth.

Challenges

In 2016, the government introduced an 18 per cent value-added tax (VAT) on tourism services and increased the visa charge for business travel.

In July 2017, fixed-rate concession fees were introduced for hotels in the national parks – some as high as $59 per person per night.

Actors in the sector say these issues were impeding the sector’s growth.

In 2017, room revenue decreased by 5.5 per cent, according to PwC’s Hotels outlook: 2018–2022 report which covers Tanzania, Kenya, South Africa, Nigeria and Mauritius. The report shows that room revenue dwindled to $206 million (Sh463.5 billion) last year, compared to the previous year’s $218 million (about Sh545 billion).

The report associates the drop with the introduction of the VAT.

With the impact of the VAT amendment now having been more or less absorbed, some hotel properties are still trying to recover from the introduction of the fixed-rate concession fee.

“We look for the market to rebound beginning from mid-2018, though, as more flights, a strong economy and new hotels provide a boost to the market,” reads a report in part.

The report also reveals that hotels and tourism still show signs of continued growth over the forecast period.

According to the report, tourism remains an important part of each economy, with continued investment in each country seeing additional hotel rooms coming on line over the next five years.

But Tanzania Association of Tour Operators (Tato) chief executive officer Sirili Akko says cutting bottlenecks was inevitable if the potential of tourism was to be fully exploited.

“Tourism is overregulated. This is probably because it is one of the most cross-cutting sectors,” notes Mr Akko.

“As a result, the sector is affected by interdependent regulatory bodies which sometimes experience communication breakdown among themselves,” he says.

He says, this should be addressed if the government is to achieve its goal of attracting more tourists from 1.3 million last year to over 2 million in two years to come.

If high operational costs, which obviously add to the burden of visitors, remain there, the plan will end up in documents, according to Mr Akko.

“The key thing is that for every transaction done by tourists in Tanzania, government earns the lion’s share of the benefits before any other beneficiary,” notes Mr Akko.

“We hope that government is working around the clock to support full realisation of the sector’s potential,” he says.

Hyatt Regency Hotel sales and marketing director Denis Glibic was in puzzle on why the introduction of VAT to tourists and introduction of concessional fees to guests can be a threat to tourism industry.

He is optimistic that the future of tourism is bright on the condition that operators become more creative and explore new markets and retain the existing ones.

“Creativity and innovation are importance if tourism sector is to grow,” notes Mr Glibic.

Recently, Repoa strategic research director Abel Kinyondo suggests that tourism products be diversified, marketing be enhanced, infrastructure be improved and service costs be cut, to attract tourists repeatedly.

In 2016, the number of repeated tourists visiting Tanzanian sites declined to 45.3 per cent of the total arrivals from 47.4 per cent a year before.

In its totality, tourist arrivals in 2016 reached 1.28 million compared to the previous year’s 1.14 million.

“This implies that we have won promotion to get new visitors but failed to retain them,” notes Dr Kinyondo in the past interview with BusinessWeek.

Marketing

The government for its part is positive that the future is promising, banking its hopes on the ongoing campaigns of identifying and marketing tourist attractions located in the Southern circuit.

They include national parks (Katavi, Kitule, Mahale, Udzungwa mountains, Mikumi and Ruaha), Game reserves (with Selous being the largest), rift valley Lake Nyasa as well as areas of cultural interest.

Mr Deograsias Mdamu, the tourism department director, in the ministry of Natural Resources and Tourism said the government was now improving infrastructure in the said areas.

According to him, every September, the government has a tradition of conducting a promotion campaign dubbed ‘Karibu utalii kusini’ covering the regions of Mbeya, Songwe, Mpanda, Rukwa, Ruvuma and Iringa.

“Such initiatives which go hand in hand with improvement in infrastructure are geared towards promoting diverse attractions, to bring them to the global attention,” notes Mr Mdamu.

He his confident that the challenge of multi-regulatory bodies will soon be addressed, banking his hopes on the blueprint, the document which was prepared after thorough consultations with various private sector associations and World Bank officials before getting approval from the cabinet in May this year.

The document is expected to set a stage for a raft of amendments to laws and regulations governing the conduct of business in Tanzania in a view of improving business environment and attract more investors.

According to tourism players there are about 38 fees and charges in the sector.

However, according to PwC, tourism to the African continent has proven to be resilient in the face of economic and political uncertainty, impacts of droughts and other regulatory changes.

This is an industry that is reactive to the smallest change in political, regulatory, safety and sustainability matters, according to Pietro Calicchio, Hospitality Industry Leader, PwC Southern Africa.