Islands Business - WE SAY: Tourism facing its biggest challenge

‘Economic events are always cyclic and downturns are probably the best time to regroup, reassess, strategise and get ready for the coming upswing. Though all ideas should be welcomed, the region’s tourism sector would be ill-advised to consider quick fixes and one size fits all solutions. This is because different islands markets are at different stages of their development in the tourism sector. The more experienced the brand, the greater would be the challenges’

Tourism—the life-blood of the fragile economies of the Pacific Islands—has taken impressive strides in the past few years, with growth rates in many islands countries outstripping those at which the collective regional economy has been growing.
For most Pacific Islands, tourism is one of the top two largest revenue earners—the other being remittances. Over the past many decades, it is tourism in the main that has driven foreign direct investment in the islands, brought in big capital investments in both hospitality and civic infrastructure, helped create direct and indirect employment and has propelled entrepreneurship at the individual and community levels.
But like almost all business sectors across the world, tourism in the Pacific Islands is now facing what could well be its biggest challenge in recent decades. The global economic meltdown has mauled the tourism sector almost everywhere with over half a million jobs expected to go by the end of this year in the United States alone. This is in addition to jobs lost in the transportation sector in which dozens of airlines have been grounded since the middle of last year.
Tourism arrivals forecasts have been revised worldwide and are expected to be lower by as much as 20 to 25 percent in some markets. In our neighbourhood, Australia expects arrivals to decline by 5 percent and New Zealand by 10 percent. The South Pacific’s leading tourism market, Fiji, is already benchmarking arrivals for this year based on 2007 arrival figures.
Statistics show that the extent of the impact of the downturn on individual island’s market bears a direct relation to the impact of the global financial downturn on their respective source markets. For instance, Hawaii as well as the Western Pacific island markets of the Commonwealth of the Northern Marianas, Palau, Guam, the Federated States of Micronesia and the Marshall Islands have been hit far worse than the islands of the South Pacific.
This is because the biggest source markets for Hawaii and the Western Pacific islands are the United States and Japan—countries that have been hit in a major way compared to the source markets of the South Pacific Islands like New Zealand and Australia.
The far milder impact of the financial crisis in these Anzac countries because of better banking practices and stricter fiscal discipline has been well documented. The impact of the downturn, therefore, has been far less here than in other western countries. But financial markets and their linkages being global in the nature of their interconnectedness, they have not been able to escape unscathed—and are by no means in a comfortable position.
The impact, however, has undoubtedly been less than in the United States and Europe. And that is what brings some hope of a possible quicker recovery in these markets and by extension to the markets that are dependent on them—the tourism sector of the southern Pacific Islands.
Because of less efficient reporting systems throughout the islands, the actual extent of the impact of the downturn on the tourism sector has so far been hard to compile. For remittances, too, this has been the case. It is not yet known to what extent the increase in unemployment in Australia and New Zealand has affected the flow and volume of remittances to the islands.
The current year is expected to be one of the worst years for tourist arrivals in the islands. Regional tourism organisation south-pacific.travel’s conference in early June, therefore, could not have come at a more opportune time.
The conference will discuss threadbare the issues that face the tourism sector as a result of the global financial downturn and hopefully throw up strategies to ride the wave of recovery which is widely expected to begin towards the end of this year through the next two or three years.
Economic events are always cyclic and downturns are probably the best time to regroup, reassess, strategise and get ready for the coming upswing. Though all ideas should be welcomed, the region’s tourism sector would be ill advised to consider quick fixes and one size fits all solutions. This is because different island markets are at different stages of their development in the tourism sector. The more experienced the brand, the greater would be the challenges.
Fiji has been the leading South Pacific tourism brand for over two decades now and despite the political problems at regular intervals, its market has blazed an impressive trail. But its prima donna status has been more recently challenged not so much by its internal politics as by the emergence of new tourism markets in the vicinity that have positioned themselves differently—notable among these being Samoa, Vanuatu and the Cook Islands.
These three countries especially—and to a lesser extent Papua New Guinea and the Solomon Islands—have upped their tourism promotion budgets in recent years running campaigns, establishing offices in their source markets and working closely with airlines and tour operators which has seen a steady rise in tourist arrivals in their individual destinations.
The downturn is sure to affect the momentum they have painstakingly and expensively built up in the past few years. These countries would have to deal with the challenge of stemming the decline caused by the downturn and work on strategies that would help rebuild the momentum. This would require both creativity and funding.
The more developed markets like Fiji and French Polynesia would not only have to deal with stemming the effects of the downturn but also contend with rising competition from the likes of Samoa, Vanuatu, Cook Islands and other emerging tourism markets in the region. The challenge for the leaders therefore is far bigger and would require much more imagination and funding.
What will be needed in abundance is new ideas in creating sub-brands with ruboffs from the country’s main tourism brand, bringing in new varieties of destination types and appealing to new segments of tourists, according to their age and interest profiles. This needs to be accompanied by equally imaginative financing avenues—a separate challenge in this credit-squeezed environment.
It is hoped the conference would help throw up meaningful ideas that could be built into viable strategies to ride in sync with the surging tide of global recovery whenever it begins to happen. There is too much at stake in tourism—the industry and islands governments must work as one to face these multiple challenges creatively and most purposefully.