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FNB/FENATA travel index declines

25/01/2018
by Kelvin Chiringa
Business

 

According to FNB analyst Josephat Nambashu, during the third quarter of 2017, the FNB/FENATA travel index contracted by 5.7% in real terms.

 This decrease, however, was an improvement from -20.0% and -16.2% recorded in the previous two quarters as the industry enjoys its peak season, underpinned by a strong increase in tourist numbers and higher seasonal demand.

The analyst said the 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% 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% more expensive than they were this time last year due to foreign currency translation and a further 7.0% on account of tourism inflation. 

When looking at the survey results, Josephat 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 27.0% 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% stating that it will be either good (51%) or very good (24%),” he said.

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

On staff related matters, some 45% 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% of the respondents expecting no change in their staff capacity over the next three months.

Price increases are the answer to combatting inflation and the ever-increasing operational costs for 74% 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.

Tourism sentiment index (reflecting 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%) of respondents confident about their businesses, echoing relatively strong year ending results. 

Operators and lodge owners are the most optimistic sectors with 74% expecting to build on growth 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% of respondents citing this as a key issue,” Nambashu said.

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.

Josephat said in conclusion 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,” he said.