Islands feel the pinch as global recessi on sets in

Samisoni Pareti


After a remarkable three percent growth last year, South Pacific tourism is bracing for a slower if not negative growth this year, thanks largely to the impact of the global financial crisis and the influenza A(H1N1) pandemic.
In its May 2009 Pacific Economic Monitor, the Asian Development Bank (ADB) warns islands countries that sustained growth in tourism from their largest source markets—Australia and New Zealand—is over.
“Arrivals from these primary source countries are now declining,” said the ADB monitor.
“This will contribute to a slowdown of growth in the Pacific region in 2009.

China market worth developing Pacific Islands destinations should promote themselves as a group if they want to break into the huge Chinese outbound tourist market, says Samu Savou, the Pacific Islands Trade Commissioner based in Beijing. “If you market yourself as individual countries, you will be lost in China,” Commissioner Savou told Pacific tourism operators at a seminar in Novotel Nadi last month. “You need to do it as a group.” Figures he released at the seminar showed that by 2010, little over 40 million Chinese will travel out as tourists. Ten years later in 2020, the prediction is that outbound Chinese tourists will near 100 million. “Your target should be the frequent travellers not the first-time travellers out of China,” said Savou. “First-time travellers prefer to travel nearby. In fact, figures are showing that 89.7% of all Chinese travellers prefer to holiday around Asia. Then it’s to Europe, then the Americas. “Just 1.3% come our way to Oceania, and that also include Australia and New Zealand.” The trade commissioner believes the Chinese market cannot be developed overnight as a source market for the islands. For now, islands operators must work to make holidaying in Oceania easier and more comfortable for Chinese visitors. “The visa issue is a big problem,” said Commissioner Savou. “Because of the lack of direct air service from China to the South Pacific, most of them will need to transit through Australia or New Zealand. “And although Chinese don’t need a visa to travel to the islands, Australia and New Zealand do require them to apply for a transit visa, so that’s an obstacle.” He said Air Pacific’s proposed flights to Hong Kong from December would help. Islands countries, the Fiji national said, should also work on a foreign exchange agreement with China. For now, no Pacific islands currency can be bought in China so Chinese visitors will either have to change their money first into American or Australian before they come. Savou strongly feels the Pacific has something unique to offer Chinese visitors, and the huge market is worth all the investment. “They won’t come here for shopping or for luxurious living and cuisine. “Chinese will come to the islands because of our pristine environment and our unique cultures. “So many times we undersell ourselves, we shouldn’t do that as we have something special to offer.”

“Tourism dependent economies face the prospect of an economic contraction.”
This assessment was confirmed by the Pacific Financial Technical Assistance Centre (PFTAC) of the World Bank and the International Monetary Fund.
Addressing a Pacific tourism seminar in Fiji last month, Matt Davies, PFTAC coordinator, said Gross Domestic Product growth of both countries—Australia and New Zealand—had declined by the beginning of this year.
Both business and consumer confidence in Australia have also dipped even right up to the first quarter of 2009.
These have bottomed out, however, in New Zealand, although unemployment for both countries, Davies said, had increased.
In New Zealand for example, the unemployment rate in March 2009 jumped by a little over 4%, although it was worse for New Zealand workers with some Pacific ethnicities.
Unemployment rate for them for the same period rose by more than 12%. With more people without jobs and the economies of the islands’ main tourist source markets in trouble, planes are flying half empty either way.
Out of all the airlines servicing the islands, Air Pacific, Fiji’s international carrier, had been opened with its figures.
Gloomy scenario: Airline chief executive John Campbell told the Fiji media in June that for the two months of April and May this year, Air Pacific carried 20% less passengers than the same period last year.
He predicted the depressed situation would remain right after June, and the numbers he hoped would tell a less gloomy story by the second half of 2009.
Papua New Guinea’s airline Air Niugini recently announced plans to amalgamate its Kuala Lumpur service with its flights to Singapore, citing reduced demand on the direct Port Moresby-Kuala Lumpur leg.
Destination-wise, the two biggest players in the region are said to be feeling the brunt of declining growth in their source markets; Fiji and French Polynesia.
Said the ADB Pacific Economic Monitor: “The decline in departures from Australia has affected the Fiji Islands the most.
“Flooding and Fiji’s political developments have added to the weak demand from a slowing Australian economy.
“New Zealand tourism to the Pacific started to weaken in late 2008. Departures to Fiji, Tonga and Vanuatu are down compared to last year.
“This decline has been partially offset by higher tourism numbers to the Cook Islands and Samoa.”
The same story is being seen from other Pacific tourism source markets in Asia and North America.
This downturn, the ADB is saying, started in late 2008 and will continue this year.
“Japanese departures for Australia and New Zealand declined by around 20% in 2008 and was still down by about 16% year-on-year as of March 2009.    

Backpacker: The way to go An authority on backpacker tourism in Australia believes backpacking holds huge potential for islands destinations in the Pacific. Dr Jeff Jarvis of Monash University says even as the global economy goes into deep recession, thousands of young people are backpacking their way around exotic destinations. “You have at your doorstep on the east coast of Australia 559,000 high yield and highly mobile travellers,” said Jarvis. “Australia’s east coast is now commercialised and travellers are looking for the ‘new’ place. “With budget airlines now linking the islands to both Australia and New Zealand, the potential is huge.” A niche, he believes, is Australia’s international student market, where in a year up to 400,000 foreign students travel there for studies. During study breaks or when they return home, most of these students look for newer destinations to visit. The Pacific islands, said Dr Jarvis, should tap into this and probably re-introduce the ‘Pacific Pass’ which allows backpackers to visit multiple islands destinations. Figures produced by the Melbourne academic showed that whilst backpacker tourism raked in A$0.6 billion into the Australia economy in 1989, this grew to $3.2 billion in 2008. In that year, 559,000 backpackers visited Australia, spending in one year a total of 40.7 million nights. Seen against total visitor arrivals, backpackers, Dr Jarvis said, made up 10% of total tourist arrivals in Australia, 24% of international visitor nights and 20% of total yield. Dr Jarvis said he would love to see Jetstar fly into the South Pacific as this may send airfares crashing. Using air tickets on sale for August 2009 travel as examples, the backpacker expert said a Brisbane-Nadi ticket is being sold for A$269 while a ticket on Air AsiaX from Melbourne to Malaysia was going for A$225. A Sydney to Vanuatu ticket was being sold for A$269, and Sydney to Samoa A$429 while Jetstar was promoting a A$249 one way flight from Melbourne to Bangkok.

“Departures from the US to Oceania also declined by about 7% last year and early numbers for 2009 confirmed a continuing decline of around 10%.”
The ADB numbers are being felt on the ground in the islands.
Tourism offices in the Cook Islands, Fiji, Samoa, French Polynesia and Vanuatu did not respond to email questions about the status of their industry to-date.
Star performer: However, a tourism operator in Fiji who’s also chairman of Tourism Fiji, Patrick Wong, confirmed the reduced number of visitors seen in Fiji up to March this year.
“The visitor arrival number has recorded below 2007 and 2008 figures for the same period,” Wong told a local newspaper in early June.
“The first quarter of 2009 recorded numbers lower than 2007.
“It is likely our targeted visitor arrivals will be revised and we will focus on the numbers achieved in the year 2007 as the base year to compare our 2009 performance with.”
In March especially, major hotels and resorts in Fiji were reporting 30% to 40% room occupancies.
Several operators had to send workers home while others worked on reduced hours.
But even within the dim numbers, some bright spots could be determined.
Vanuatu, for instance, was singled out by the ADB Pacific Economic Monitor as a star performer.
“The apparent diversion of tourists from the Fiji Islands to other major Pacific destinations is providing some economic relief for these other economies,” said the monitor.
“Vanuatu, in particular, is appearing to benefit from a switch in destinations by Australian tourists.”
Speaking to Pacific journalists in Fiji and Papua New Guinea on a telephone link-up to the ADB Pacific office in Sydney last month, the bank’s senior economist and one of the authors of the May monitor, Dr Craig Sugden, said other islands nations needed to emulate Vanuatu’s “Pacific Blue solution.”
This is a reference to the doubling of airline seat capacity from Australia to Vanuatu through budget airline Pacific Blue.
“Visitor arrivals over the first four months of 2009 were 19% above the level of the same period of 2008,” the monitor said about Vanuatu.
“This is despite an overall decline in tourist departures to the Pacific.
“The entry of new international air services and increased foreign investment are key factors behind Vanuatu’s growth.”
For Samoa, tourism earnings in March, the ADB said, were 27% higher compared to the same month last year and early estimates suggest an increase in remittances.
Tourists from New Zealand seemed to be fuelling this growth.
In fact, Pacific Pulse, the electronic newsletter of south-pacific.travel, the regional tourism body based in Suva, says for April, New Zealand visitors to Samoa increased by 23%.
These visitors were classified as those on holidays, visiting friends and relatives or on business travel.
Tourist arrivals from Australia and neighbouring American Samoa also increased.
As for the Cook Islands, recovery has been slow after a 3.1% drop in visitor arrivals last year.
The decline was mainly attributed to the large fall borne in high spending segments of the market, like the US, Canada and Europe, the ADB Monitor said.
Rising visitor arrivals in early 2009 gave some hope of a better outcome than originally forecast, it added.
Figures released by the bank show New Zealand as the driver of tourism growth in the Cook Islands for now as departures for the Cooks from Australia remained flat by the first quarter of the year.
Subsidy good: For the island’s finance minister, Sir Terepai Maoate, the NZ$5 million subsidy his government gave Air New Zealand in order to keep the Rarotonga-Los Angeles service running seemed like a good investment.
“Government has supported the promotional programmes of Air New Zealand and Cook Islands Tourism and a lot of us believe we are doing well,” Maoate told ISLANDS BUSINESS in Fiji last month.
“But for me I’m very cautious about things. Although I support the [subsidy] which is why we are where we are today, I still question where will we be tomorrow and the next few months or even the next year.”
Maoate said the Cook Islands is committed to Air New Zealand although his government wouldn’t mind if Wellington decides to refund the subsidy, like it has offered to do for Samoa and Tonga.
He said it pays to have a strategy, which included introducing a fiscal stimulus package that benefitted several industries including tourism.
“We pulled out $3 million to go into our supplementary budget six months ago.
“That has been dispersed to our pearl industry as a revolving fund and over $1 million given directly to the tourism industry for promotions, even to help out with accommodation and those sorts of things and the domestic airline.
“We have also lined up so many events with regards to say sports.
“We are having the Pacific Mini Games and following immediately after that is the Under 20 world netball and after that, there will be rugby sevens and following that a paddle championship.
“Remember when everybody else was down by 2% in visitor numbers, ours went up 4% in November last year and that actually gave me the encouragement to get our facilities like the sports stadium and other facilities upgraded for these games.”
In Tonga, tourism arrivals were higher than expected in early 2009.
However, the ADB says tourism receipts are in decline with the nominal value down 3.9% on a year-on-year basis last March.
Figures are hard to come by from the northern island republic of Kiribati. But according to Pacific Pulse, visitor numbers to Kiribati in the first quarter of 2009 increased 11.03%.
The biggest increase of arrivals was recorded in March. Bulk of the visitors came from Australia, the US, Japan and other Pacific islands.
The huge slowdown recorded in the logging industry in Solomon Islands as reported by the ADB Pacific Economic Monitor was not reflected however in the country’s fledgling but growing tourism sector.
Solomon Islands Visitors Bureau general manager Michael Tokuru told Pacific Pulse that for the first quarter of 2009, visitor numbers grew 44% to 4273 compared to 2973 for the same period last year.
Good growths, Tokuru said, were seen in tourism and business visitors.
After a 7% growth in real GDP last year, the Papua New Guinea economy is slowing down as the impact of the collapse in international commodity prices catches up.
Tourism is still a minor industry here, but for the first four months up to April this year, PNG visitor arrivals grew by 2%.
Pacific Pulse says growths were recorded in visitors from Japan, Europe, Germany, New Zealand, North America and Asia.
How tourism in the islands is performing in the context of the global financial crisis is just how south-pacific.travel did say it will perform.
Greater focus: For Tony Everitt, CEO of the tourism body, greater focus on their closest source markets and special interest markets would be the way to go for islands destinations.
“Pacific Islands will do well to focus scarce resources in sectors of the global tourism market that are less affected by the economic downturn,” Everitt said in response to our emailed questions.
“Australia and New Zealand continue to look like they will be recovering early (Australia has even avoided recession so far) and we should work to develop mainstream markets there.
“Special interest markets globally like backpackers and cruise also continue to perform well. Retired people and people yet to enter the workforce don’t need to worry about losing their jobs.
“Emerging markets of China and India also continue to out-perform traditional Northern markets. We are leading a tourism delegation to India in August/September and China in November to further capitalise on these opportunities.
“The Shanghai Expo 2010 is also well placed to assist our promotions.”
Everitt agreed with the current thinking that for Pacific islands tourist destinations, China should be a long-term opportunity.
Skills and patience will be required to develop the yield-yielding part of the Chinese market, said Everitt.
“But the return on this development investment will be worthwhile over the long-term. We will enjoy working closely with the PIFTO (Pacific Islands Forum Trade Office) Beijing to this end. Backpackers appear to hold real opportunity. There are about 600,000 per annum backpackers visiting Australia and also about 400,000 international students studying there at any one time.
“Our ability to lure more of these to the Pacific Islands will be key.”
Everitt also agreed with the assessment of the ADB Pacific Economic Monitor, that the dip in tourist numbers will pick up by the year’s end.
“There are some encouraging signs in global economic markets.
“IMF thinks that whilst 2009 will be tough, there could be return to modest growth from next year.”
The re-bounce to Fiji tourism particularly should be strong, provided it manages the spread of A(H1N1) pandemic in the island nation.
Bookings from September are showing signs of a pickup and with Pacific Blue launching direct flights to Nadi from Melbourne and Adeilade, the numbers should only go up.
In addition, American carrier Continental Micronesia now plans to fly into Fiji from both Guam and Honolulu.
When this happens, it will re-connect the Fiji market to Japan through Guam, and boost seat capacity in the Honolulu-Nadi sector.
Fiji tourism is also eyeing the phenomenal growth expected out of Guam when over 17,000 US military personnel and their families relocate to the northern Pacific island from Okinawa, Japan, beginning 2014. Construction work in Guam is due to start next year.
Continental Micronesia has reportedly told Fijian civil aviation authorities it wants to launch its Fiji service by December. That is also the same time Air Pacific plans to begin its Nadi-Hong Kong flights, opening up another route to Asia and Europe.