Role of tourism in
Introduction
TOURISM plays an important role in the global economy. According to the World Travel & Tourism Council (WTTC), global travel and tourism contributed 10.3 per cent to global gross domestic product (GDP), or about $US8.9 trillion ($F18.4t) in 2019. The industry is estimated to have supported 330 million jobs which accounted for 10 per cent of total jobs worldwide.
According to the United Nations World Tourism Organization (UNWTO), there were 1.5 billion international tourists in 2019, and the main source markets were China, Germany, the United States (US), the United Kingdom (UK) and France. For our region, major sources markets include Australia, New Zealand (NZ), the US, China and Continental Europe.
Tourism in Fiji
The tourism industry has been fundamental in Fiji’s economic development, despite initially starting as a port for refuelling ships and aircraft travelling between North America, Australia and New Zealand. Over time, visitors started staying in Fiji for an extended holiday rather than just an overnight stop.
The Tourist Bureau was established in the early 1920s, while international flights commenced in the 1960s, which led to the development of the hotel industry around the country. In the 1980s, the industry surpassed sugar to become the country’s largest foreign exchange earner. In 2004, the number of visitors exceeded the half a million mark, and by 2010, tourism had become a billion-dollar industry.
Tourism is one of the largest drivers of growth in the Fijian economy. It is estimated to have contributed (directly and indirectly) around 34 per cent ($3828.0m) to GDP in 2019, providing around 90,700 jobs that represented 26.3 per cent of total employment, according to the WTTC. Additionally, the RBF estimates that in 2019, the tourism industry contributed around $1 billion in government tax revenue – both directly and indirectly - and more than $2b in foreign exchange earnings.
The tourism industry and COVID-19
Early last year, after the declaration of the COVID-19 pandemic, governments around the world implemented border closures and restrictions on international travel, which negatively impacted the industry, as global travel came to an almost complete halt. The majority of tourism-dependent
Source: VARIOUS SOURCES
countries took a hit, and Fiji was no exception.
On account of the importance of tourism in the Fijian economy, the border closures led to an estimated 19 per cent economic contraction last year, the largest on record. The pandemic induced travel restrictions crippled the domestic economy as visitor arrivals (VA) declined by a massive 83.6 per cent. Given the economic interlinkages, government revenue (-38.5 per cent) and tourism earnings (-84.8 per cent) also contracted. Consequently, businesses began to scale back or shut down operations completely, which led to a rise in unemployment and reduced hours and incomes. This had a rippling effect on other industries through reduced consumption and investment spending.
Given the significant share of tourism in the economy and the inflexibility to transfer factors of production to non-tourism sectors over the short to medium term, the economic growth outlook for 2021 onwards is majorly dependent on the resumption of international travel and the ensuing pickup in the tourism industry
Based on the assumption that travel resumes in the second half of 2021, the projected rebound in the domestic economy will be contingent on the appetite for travel
Source: VARIOUS SOURCES to Fiji. Consequently, in November 2020 the Macroeconomic Committee (MC) formulated three different scenarios.
The expected rebound in all three scenarios is led by tourism and supported by related sectors, which include the wholesale and retail; transport and storage; manufacturing; information and communication and construction sectors.
However, the likelihood of quarantinefree international travel resuming this year is quite slim as efforts to open up tourism bubbles with New Zealand and Australia have so far proved futile given the continued cases of new infections in these countries and the associated risks. Nonetheless, if borders do open in the latter part of this year, then a small economic recovery can be anticipated. However, if borders remain closed throughout the year, then another economic contraction - although marginal - is most likely.
The outlook for 2022 onwards is also dependent on the opening of borders and the appetite for travel from major source markets of Australia and New Zealand, along with the success of the vaccination programs in North America and Europe. In either case, returning to the 2019 level of visitor arrivals should take a few years. The Macroeconomic Committee is scheduled to meet next in early June to discuss and approve a revised set of GDP growth projections.
On March 6, 2021, Fiji received the first batch of vaccines from the COVAX1 facility, a total of 12,000 doses.
The majority of frontline workers spanning the health, border, hotel and other service-related personnel will be receiving the doses. On March 29, Fiji received an additional 100,000 vaccines from the Government of India that would allow the rollout to extend beyond frontline workers on to our most vulnerable citizens.
However, various concerns surrounding the efficacy, likely side effects, and the emergence of different variants of the virus could impede the timely administration of the vaccine, further delaying the opening of borders.
Nevertheless, the local containment of the virus along with the progress on the domestic vaccination program to date is positive for the nation. Moving forward, the swift and safe administration of the vaccines and an adequately resourced public and private health system will play a huge role in the reopening of borders for international travel. The resumption in tourism activity will help reduce the significant spike in unemployment. Also the associated rebound in GDP, will raise government’s revenue and assist in reversing the rise in the public debt trajectory.
Why is safeguarding Fiji Airways important?
In 2019, the aviation industry contributed around 3.6 per cent towards global GDP ($US2.7t). However, because of the significant decline in international travel, the industry has taken the biggest hit. Previous epidemics and crisis also caused a sharp decline in air travel demand that quickly bounced back. In contrast, according to the International Air Transport Association (IATA), the effects of COVID-19 will be more far-reaching with a slower recovery rate.
Before the pandemic, Fiji Airways used to cater to around 80 per cent of total passenger movements, recording consecutive billion-dollar revenues in 2018 and 2019. In 2020, passenger movements declined drastically, revenues dipped while certain fixed costs remained. To combat cash flow constraints, the company took drastic measures by terminating employment contracts and renegotiating loan repayments.
As the pandemic crippled both local and international airlines across the world, governments provided financial support to the airline industry as part of economic stabilisation packages. Fiscal support provided to major global airlines is tabulated below.
Source: VARIOUS SOURCES
In a similar manner, the Fijian Government guaranteed a $455m loan to ensure that Fiji Airways ably meets its financial obligations while passenger revenue was constrained.
Ensuring that the national flag carrier Fiji Airways remains unscarred from the crisis is essential for economic recovery after the pandemic.
Safeguarding the national carrier will ensure that Fiji has greater control over attracting tourists in terms of seats available and competitive pricing when borders reopen. This will be essential to pave the way for a quick recovery to the 2019 level of visitors and sustained growth from thereon.
Without a financially viable national carrier, Fiji will be at the mercy of foreign carriers’ schedules, seat availability, and pricing, all of which may impede the industry’s quick recovery.
Latest industry developments
On June 5, 2020, Government launched the Love Our Locals (LOL) campaign to boost bookings and keep businesses open, people employed, and families supported throughout the pandemic.
Tourism Fiji spearheaded the initiative that successfully ran throughout 2020.
While the campaign is not expected to offset international tourist arrivals and spending trends, it is anticipated to somewhat provide a cushioning effect to local operators.
The Fiji Hotel and Tourism Association stated that members reported high weekend occupancy rates.
To further support the industry, government in the National Budget 2020-21 implemented some tax reforms to provide some relief to the industry and ensure it remains competitive when borders reopen.
These included removing the Service Turnover Tax, reducing Departure tax by $100 and reducing the Environment and Climate Adaptation Levy to 5 per cent (from 10 per cent).
Furthermore, government is planning to provide additional incentives to attract visitors when borders open through stipend provisions and rebate packages.
On June 19, 2020, Fiji Airways unveiled the Travel Ready program to better prepare the industry for travel resumption.
This included creating a new on-board role of medically qualified Customer Wellness Champion and a detailed guideline from pre-flight to on-board procedures to ensure COVID-19 protocols are adhered to and maximum customer experience enhancement.
Other avenues that the industry has begun to leverage include the Blue Lanes Initiative, which entails safely opening up to foreigners who would like to arrive via boats and yachts through strict COVID-19 protocols.
A total of 100 yachts arrived under this initiative last year, and in March 2021, Savusavu was added as the second Blue Lane Yacht port.