FHTA Tourism Talanoa: Why We Must Be Cautiously Optimistic

FHTA Tourism Talanoa: Why We Must Be Cautiously Optimistic

FHTA, 22 July 2022 – To face uncertainty is to face the unfamiliar. It is how we overcome it that dictates how prepared we are to face the unknown.

This becomes a pattern of learning experiences that then translate to resiliency that communities, businesses and countries can draw on to mitigate the bad times you know could take place, often when you least expect it.

Fiji’s tourism industry knows a little something about overcoming uncertainties having only just climbed out of a 2-year deep abyss only eight months ago, and regardless of which part of the industry’s varying segments you are from, your resilience was tested to the maximum. And then some.

Last Friday night, despite full houses across Fiji’s accommodation providers, activities, airlines and other businesses, many ears were tuned in expectantly to hear the National Budget Address at Parliament House.

There is always some trepidation and great expectation amongst the private & public sectors, civil society, agencies, institutions, commerce and service providers because this announcement determines future budgets, business plans and confirmation of whether large projects can be completed in the short or long term.

More importantly, it can mean the confirmation of long-awaited resource planning and even salary increases.

Fiji’s 2022/23 National Budget certainly provides more private sector confidence with the announcement that the numerous taxation and fiscal policy measures that were introduced in prior national budgets would continue with a few minor changes. The Budget’s medium-term fiscal strategy noted that the overall tax structure had been left generally unchanged to provide policy consistency to the private sector and the tourism industry – just what had been asked for. It goes on to explain that the restructure of the tax regime in the last 2 years was considered “important to rebuild the competitiveness of the tourism industry, make the tax system simpler and help rebuild private sector confidence to assist with the post-COVID-19 economic recovery”. And it is widely agreed that such a strategy has worked well to both help revive the tourism industry and support domestic demand.

Building private sector confidence is currently a critical part of fiscal strategies being worked on by global economies far larger than this little Pacific Island paradise, given the external forces impacting every economy.

And having these fiscal strategies remain in place for a few years to come, provides added layers of confidence to plan longer term, consider growth and expansion and review prior plans to put investments and new ventures on hold.

Suddenly, and after a few years of consistent short-term planning only; longer-term planning can commence with more focus.

The tourism industry, having just reopened in December 2021 after almost 2 years of closure with limited to no revenue streams, has worked closely with the Government to recover successfully from the global pandemic, natural disasters and global economic pressures.

Navigating and emerging out of these multi-pronged crises has required great fortitude and showed that innovation and agility could and did, provide the outstanding results of reopening our borders safely as one of the first Pacific Island countries to do so at the time, while simultaneously bringing thousands of our people back into much-needed employment.

Post budget overviews have noted that the Fijian economy is estimated to have contracted by 4.1% in 2021 and that the domestic economy is expected to grow conservatively by 12.4 per cent in 2022 after three consecutive years of decline.

Also that this was expected on the back of tourism recovery arising from visitor arrivals of 205,529 in the year to June 2022, which was 50.4 per cent of arrivals over the same period in 2019.

The current strong pace of tourism inflows is also expected to continue, with visitor arrivals now projected to reach 55.0 per cent of 2019 levels by the end of 2022.

With the economy projected to grow in 2023 and 2024 by 9.2% and 5.0%, respectively, tourism businesses and their supply chains can relook at diversification opportunities that were resorted to during border closures that would offer better safety networks during future shocks.

Inflation has been rising since the second half of 2021, as pandemic-induced imbalances compounded by the war in Ukraine have led to substantial hikes in food and fuel prices. Annual headline inflation was 5.1 per cent in June 2022 following 5.0 per cent inflation in May 2022.

The Fiji Hotel & Tourism Association (FHTA) has applauded the range of initiatives announced that will continue to enhance and support private sector-led recovery efforts.

These include improving the ease of business, that in turn improves productivity and reduces the cost of doing business.

As well, recognising the need for continued efforts in government agency digitization projects, increasing support for resources, overdue immigration policy changes and refocusing on infrastructure development where it is needed most, can only further boost private sector confidence.

The industry is acutely aware of the current need for private sector business confidence especially now, coming off a once-in-a-lifetime perfect storm of crisis upon crisis.

Visitor numbers might be currently high, but there is widespread nervousness about another COVID variant re-emerging, the Russia-Ukraine war further disrupting trade and driving prices further up, our usual climate-based risks that never quite go away and even the impending Fijian elections.

It is not appreciated that hotel room occupancy annually can average just 60% and that the tourism high season – during which occupancy can move to 90-100%, only lasts around 4 months of the year.

In between the high season and low season, the “shoulder season” might sit at 60-70% depending on the region (because different regions attract different markets that prefer to travel at different times), while the low season can drop occupancy to 30-40%.

Factor in school holidays and whether it is hot or too cold in those markets and how well our destination marketing is doing, and we have the main driving factors for holiday seasonality, demand, room rates and holiday specials.

We must consider spreading the risk of having a too high dependency on one main industry that is so often impacted by so many outside economic and weather-related influences.

Tourism businesses and the comprehensive supply chain businesses inextricably connected to the industry will be better able to continue their recovery momentum with renewed confidence based on this Budget’s promise to create certainty by retaining almost all of the current tax structure and address overdue economic growth obstacles.

There is still some recovery to get through, and further investment opportunities to get going, while we create more jobs and focus on competing more fiercely as a preferred travel destination.

We are cautiously optimistic that tourism can get back on track, bar all the other worrying issues we know sit just off our sparkling blue horizon like a cloud we’re wondering could either drift off and leave us alone, or get closer and darker.

Best be prepared either way.

By: Fantasha Lockington – CEO, FHTA (Published in the Fiji Times on 22 July 2022)