Jun 01, 2020 Last Updated 1:05 AM, Jun 1, 2020

The future of tourism

  • Jun 02, 2020
  • Published in May

The end of breakfast buffets and garlanding on arrival. The rise of virtual travel experiences. The longing for solitude and simplicity. This is just a sample of the travel predictions being debated across the globe as we look to post-COVID tourism.

But how well is the Pacific positioned to respond to potential changes, and what is the current status of the industry?   

“I understand one of the greatest challenges that we have is uncertainty,” Fiji’s new tourism minister, Faiyaz Siddiq Koya told Fiji tourism industry participants in a webinar recently.

China, which has reopened for domestic tourism, has closed buffets, increased distance between tables in restaurants, has all staff wearing personal protective equipment, closed gyms and indoor swimming pools and switched off air conditioning, reports McKinsey’s China-based analysts. Magazines and newspapers are no longer available on flights, and food and beverages are packaged and bottled.

McKinsey predicts young travellers will return to international tourism first, not traditionally the Pacific’s strongest visitor dynamic, although it does provide an opportunity to further develop niche markets, such as adventure tourism.

Associate Professor of Tourism Futures at Wellington School of Business and Government,  Dr Ian Yeoman has identified a number trends which could characterise travel in the future, including the desire to connect with family and friends, the search for simplicity, the end of expensive, frivolous or environmentally-destructive expenditure and a move towards community and collectivism.

The Pacific is well placed to capitalise on several of these trends when borders open up, as long as we can differentiate ourselves from other destinations.

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The Fiji Parliament will be today asked to urgently grant a government guarantee for  a loan to keep Fiji Airways afloat, as the adverse impacts of the COVID19 pandemic begin to bite on the national airline.

Attorney General and Fiji's economy minister Aiyaz Sayed-Khaiyum says the airline needs a loan of up to US$227.5 million, about FJ$455m. 

This afternoon parliament will consider the following motion:

"Hon. Attorney General and Minister for Economy Civil Service and Communications to move that Parliament approve

 (a) that the Government guarantee the Fiji Airways borrowings consisting of a mix of domestic borrowings up to FJ$191.1 million and offshore borrowings up to US$117.1 million with a total limit of approximately FJ$455 million valid for a period of three (3) years effective from 30 May 2020, and; (b) that Fiji Airways be exempted from paying a guarantee fee." 
 
The motion is expected to go before Fiji's parliament when  the session reconvenes after their lunch break, and with the ruling Fiji First Party's majority, the motion is expected to be passed.
 

It comes as a total of 758 employees of Fiji's national airline, Fiji Airways, have been terminated effective from today in the wake of the adverse impacts of the COVID19 pandemic which has grounded the airline's fleet.

Those being sent home reportedly included all Fiji Airways cabin crew, representing about 51 per cent of total workers in Fiji Airways. Others who have lost their jobs are all of Fiji Airways' 79 expatriate pilots, and eight expatriate executive managers. 
 
Airline CEO and Managing Director Andre Viljoen is among the five executive managers that retain their jobs, alongside six local executives.
 
While termination letters were sent out to affected employees today, MD Viljoen had broken the news in his weekly newsletter to staff last Friday (22/5).
 
He also confirmed that remaining staff will undergo a permanent pay cut of 20 per cent effective 1 June 2020, which he said would see staff working between two to five days per week. They will only be paid for actual days or hours worked.
 
The termination will result in savings of 50 per cent in company's payroll costs, he added.
 
"For months now, we have been negotiating daily with financial institutions and aircraft lessors for new debt financing and payment deferrals which will allow us to stretch the cash reserves we have, during a period of zero incoming revenue," wrote Viljoen to staff.
 
"Simply put, our revenue has effectively dried up, but our monthly fixed costs and financial obligations remain."
 
Like other airlines, Fiji Airways had grounded its fleet of eleven aircraft, which comprises two Airbus 350, four Airbus 330, and five Boeing 737, while its domestic subsidiary Fiji Link operates three ATR planes and three Twin Otters.
 
*This story was updated at 2.56pm Fiji time to reflect details of the parliamentary motion.
 

A new report on the impact of the COVID-19 pandemic on the Pacific’s tourism industry and recovery strategies has recommended immediate wage support, microgrants to industry operators and changes in the tax regimes as key to helping the industry to rebuild.

The Pacific Tourism Organisation (SPTO) commissioned the report, which looks at the impact of the virus on  tourism in Cook Islands, Niue, Tonga, Samoa, Solomon Islands, Vanuatu and Fiji.

SPTO Chief Executive Office, Chris Cocker says while one size doesn’t fit all, the report aims to give the industries a framework so they can develop individualised recovery plans.

“I am telling you now that I think most of them either wouldn't have a clue how to develop the recovery plans because this is the first time. We've never experienced anything like this in the world, and in the Pacific, to the magnitude of a crisis like this.”

Cocker says while economic stimulus packages in some nations have responded to the needs of the industry, there are also some actions that can be taken regionally, such as digital marketing.

“Scenario planning could be done sub-regionally,  because for example Micronesia has the same source markets which is Asia and also North America. Then you have the Polynesian ones where New Zealand is very strongly focused. Melanesia has Australia as their source market.”

The cruise ship sector has also been decimated by the pandemic, as a number of ships acted as incubators for the virus. The Ruby Princess for example has been linked to almost 700 cases of COVID-19 across Australia, and 21 deaths, after it docked in Sydney in early March after a cruise to New Zealand.

Cocker says the cruise industry has “thrown the ball back in our court.”

“It all depends on the member countries in the Pacific opening their borders and how well they will be able to handle things like hygiene, and also preventive measures and protocols in this case. I think that is another shady area that a lot of our members will still be cautious in approaching.”

As for lobbying to include Pacific Island nations in the so-called Australia-New Zealand Pacific travel bubble, a stepped approach is best.

“I'll be frank… as  a regional organisation, in terms of economic recovery [we] definitely would welcome the Australia-New Zealand-Pacific bubble to bring in tourism revenues etc.

“But from our perspective I see it as a complicated situation because we've got 20 Pacific Island countries who are very diverse…It will probably be on a sub-regional basis in this case but I also think from my position our goal is to provide advice and guide them. So our position is we welcome it, but in a cautious and incremental way in this case. The health and safety of our people is top priority and paramount.”

The Fiji National Provident Fund is eyeing good bargains in the assets-for-sale space, as the coronavirus pandemic coughs up distressed companies either looking for cash or offering themselves up for sale.

FNPF CEO Jaoji Koroi said while the pandemic will affect its overall investment returns, considering its exposure to overseas share markets as well as the now crippled tourism sector locally, there are also buyout opportunities that the fund will explore.   

 "One of the key advantages of the fund is that it is a long term investor. We're here for the long term so, of course the first few years (of recovery) will be a problem but this is also a good opportunity to pick up good assets.  A lot of assets will be there at discounted prices so we're preparing our cash flow based on that too, with that (buying discounted assets) in mind," Koroi told Islands Business in a press briefing in Suva today.  

As Fiji's only national forced-savings pension fund for workers, the FNPF, via government regulations, has played a central role in coming to members' rescue in events of natural disasters, including the current coronavirus pandemic, which has been declared a natural disaster in Fiji.  

With over F$710 million is cash and term deposits in its balance sheet, the Fund said it has enough liquidity to pay out members eligible for its COVID-19 assistance, attend to its normal members services as well as to invest.

"Cash is king during these times so if you have cash, you get the opportunity to look for good assets," Koroi said.

The Fund is expecting the impact from the statutory reduction in employees and employers' contributions - announced by government as a form of relief for workers and businesses in its COVID-19 response budget last month - and the current unemployment scenario in Fiji to begin reflecting in its cash flow from next month.

"Based on what we're receiving for March and February collection, we're still meeting our target, which is about F$50million per month of contributions. We'll be receiving the April contributions in May so that will start to reflect the reduced contribution rates as well as the unemployment now. We're factoring that into our cash flow moving forward," Koroi said.

Also on the casualty list is the Fund's offshore investments, particularly its stakes in the global stock markets, which are currently experiencing historic lows as major economies enter recession territory as a result of the COVID-19 crisis.

"We have an exposure there of around F$70million, all in the Australian market. We've seen a reduction of around 23 percent in the value of that. We're booking that on a daily basis so the impact is really flowing into the income statement, so, on a daily basis, the impact of those losses are in our books. It used to be F$70million, now it's about F$50million," Koroi said.

FNPF has a diversified offshore investment portfolio and owns shares in other unlisted securities such as in the BSP Bank in Papua New Guinea, which Koroi said have performed well and will offset losses in its stock market investment.

The fund is also expecting a big dent in its tourism investments, which represent around 16 per cent of its total investment portfolio.

Koroi said it is using the current stand-still in tourism to refurbish its hotels, among them the Sheraton and Westin hotels in Denarau. Also on the cards is a new contract with an international hotel management chain to manage its Suva-based Grand Pacific Hotel.

The Fund is however expecting positive results from its investment in government securities, particularly its returns from government bonds, which comprises around 40 per cent of its total investment portfolio.

Koroi assured members that their retirement fund is safe as it has in reserve more than what is required of it by law to reserve and to remain solvent.

"We're a long term investor so we're able to ride the lows and highs of every economic cycle," he said.

FNPF so far has over F$7.4 billion in total assets and $6.1billion in members' funds.

 

 

Fiji is looking at a potential loss of F$1.4 billion (US$608 million) in tourism earnings as global travel grinds to a halt by the ongoing coronavirus pandemic.

This is according to a recent assessment by the ANZ Bank on the pandemic's impact on major tourist destinations in the Pacific - Fiji, Cook Islands, Samoa and Tonga, four economies that rely heavily on tourism.

"Fiji now stands to lose nearly 602k visitors by air this year (-67% y/y). This translates into a FJD1.4bn (US$566m) loss in tourism receipts which will subtract 12ppt from nominal GDP. Vanuatu’s economy is expected to decline (-13.5%), as are Samoa (-18.7%), Cook Islands (-60.4%) and Tonga (-7.9%)," ANZ's economists wrote in the bank's Pacific Perspective report dated March 25, 2020.

Based upon a likely scenario that zero tourists will come to their shores at least for the next three months, these countries are in for huge shocks.

"Fiji’s tourism earnings totalled FJD2bn (17.2% of GDP) in 2019, Samoa received SAT528m (23%), Vanuatu VUV21bn (19.3%), Cook Islands NZD384m (73.3%) and Tonga TOP135m (10.4%).

We now predict nearly 602k visitors won’t be coming to Fiji this year. For Vanuatu, Cook Islands, Samoa and Tonga, we estimate visitor arrivals could decline -84.2k, -141.1k, -146.9k and -34.3k, respectively, in 2020. Our analysis revealed that Fiji stands to lose FJD1.4bn in tourism exports and FJD3.8bn in gross output. This will subtract 12ppt from nominal GDP. Vanuatu’s economy is expected to decline (-13.5%), as will Samoa (-18.7%), Cook Islands (-60.4%) and Tonga (-7.9%)."

Huge job losses are also expected, with Fiji potentially looking at a casualty swathe of 75,000 jobless or 75% of total workforce.

Vanuatu and Samoa may lose 21,000 and 7,000 jobs respectively.

The report further advised that the economic fallout of the pandemic can be minimised via "decisive, targeted, right-sized and timely fiscal and monetary stimuli."

"Governments are likely to need a fiscal stimulus of at least 10% of GDP, although the Cook Islands will need something closer to 50%," it said.

"With the stimulus spend, GDP and employment contraction can be limited to the -2% to -3% range, as opposed to double-digit declines without the additional support. Monetary stimulus, in the form of cheap central bank loans to businesses willing to undertake capex, could also be explored."

As countries all over the world attempt to keep their economies afloat via mostly debt-funded relief packages, the four Pacific economies are advised to first tap locally for financing options before looking to multilateral donors.

"We believe governments have some headroom to borrow more from the domestic market. Superfunds could absorb some of the government security issuances, and shortfalls can be underwritten by the central bank," the report's authors wrote.

With thousands already out of work across the Pacific as a result of the pandemic, the bank has joined others is offering respite to affected customers.

Yesterday, it announced loan repayment deferral for up to six months for its Fiji customers after it received 1,100 requests for hardship assistance in one week alone.

"This is going to significantly help Fijian people and the broader economy to manage over the long term through the pandemic,” said ANZ Fiji Country Head Saud Minam.

"ANZ received more than 1100 requests for hardship assistance in the first week since the Fijian Government announcement. We’ve already contacted more than 270 of these applications and will increase our contact with customers this week.”

ANZ operates in 11 Pacific countries: Fiji, Samoa, Vanuatu, Tonga, Cook Islands, Kiribati, Solomon Islands, Timor Leste, Papua New Guinea, Guam and American Samoa.

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