Tourism sector loses steam

Tourism activity increased by 1.5% from the previous quarter on the back of higher seasonal demand as the industry moved towards its peak season in August as suggested by the recent FNB/FENATA Travel Index issued by FNB Namibia’s Namene Kalili.
Said Kalili,“The annualized growth was 13.2% higher than last year’s figure and although the industry continues to grow through 2014, the growth rate has begun decelerating. This coincided with a drop-off in tourists from Europe and America. But fortunately for the industry, the increase in tourist numbers from Asia and Africa more than made up for the drop-off in American and European tourist numbers.”
The Index indicated that the local currency also recovered some lost ground through the second quarter and thus travels from America and Europe were 3% more expensive due to foreign currency translation and a further 1% on account of tourism inflation.
The Index which measures tourism activity in the country suggested that the tourism sector continued to adjust to increasing competitive environment and thus elevated capital expenditure to remain competitive and ward off new entrants from international operators looking to enter the Namibian tourism market.

Looking forward, Kalili advised that business performance was expected to strengthen by 10% as the industry moved into its peak season with tour, activity and bed and breakfast operators very optimistic about third quarter business performance, which is underpinned by a strong increase in tourist numbers during the third quarter.
He added that tourist numbers continued to increase through the second quarter, after a  disappointing first quarter and also an improvement from the same period last year.
Revenue out turn increased quarter on quarter on account of higher tourist arrivals. Year on year comparison also indicates improvement in revenue out turn and expectations despite a fall off in tourist numbers from high spending source markets.
Again revenues are expected to improve slightly in the third quarter on account of higher tourists numbers dampened by lower tourists spend. “Hotel, lodge and activity operators pencilled in improved revenue expectations during the third quarter, while revenue expectations in the air charter and vehicle rental space was neutral on account of rising operational costs that compressed margins during the second quarter. Capital expenditure peaked during the first quarter and has subsequently tapered off in the second quarter and is expected to move sideways in the third,” he said.