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Tourism needs break from pandemicAt least 8 000 jobs lost Thirteen months after Covid-19 hit Namibia, local tourism companies are still reeling from the impact of the global pandemic. The outlook for tourism is extraordinarily uncertain. – Bank of Namibia
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Jo-Maré Duddy – While the majority of local tourism companies are optimistic that they will live through the Covid-19 pandemic, one in four believes it will be difficult to hold on and one in ten feels their prospects to survive are bleak.
The latest data by the Namibia Statistics Agency (NSA) shows its index for regional and international arrivals in February was 81.4% lower than February 2020. Its index for rooms’ occupancy rate is 56% lower year-on-year and the index for beds’ occupancy rate is down 53%.
Figures released by the Hospitality Association of Namibia (HAN) indicate that members’ occupancy for the first quarter of 2021 is down to below 20%, compared to the 33% achieved in the first three months of 2020 and 40% in 2019.
A survey conducted by the Bank of Namibia (BoN) concluded that the majority of companies do not expect tourism activities to recover in this year. They anticipate a gradual up-tick and said business should start recovering in 2022.
However, even if business starts picking up, the responding companies don’t expect an improvement in their revenue. “Most of the money, in the form of prepayments or deposits received from those customers who postponed their visits, was already spent in 2020 by the business on sustaining their operations,” the BoN says in its 2020 Annual Report which was released recently.
SCARY STATS
Nearly 53% of the 128 HAN members targeted by the BoN responded to its survey – 67% of these were SMEs with an annual turnover of less than N$10 million, largely comprising of bed and breakfast establishments, guesthouses, lodges and small hotels.
Although the response rate was low, 27% of respondents are large and have many tourism establishments under their umbrella or groups, the central bank says.
Of the respondents, 64% said they were optimistic about their prospects, 25% said they were not and 11% said they were not optimistic at all.
The BoN survey paints an ominous picture of the damage the virus inflicted on the sector.
At the beginning of 2020, Namibia targeted between 1.5 million and 2 million overall tourist arrivals. According to the BoN, Namibia recorded 38 674 international arrivals last year – 177 034 or 82% less than in 2019. Regional arrivals fell from 270 180 to 49 304.
Tourism in Namibia on average contributed 2% to the gross domestic product (GDP), while between 2013 and 2019 it contributed on average N$4.49 billion per annum in foreign earnings, according to the BoN. Preliminary data released by the NSA shows hotels and restaurants – a proxy for the performance of tourism – last year contributed around N$2.55 billion to the GDP in nominal terms.
From 2014 to 2019, hotels and restaurants’ annual growth averaged 4.6%. In 2020, real annual growth plummeted to -33.1%.
Prior to the pandemic, travel services were the third biggest contributor to Namibia’s export earnings, according to the BoN. In the country’s balance of payments, travel services mainly consist of expenditure by tourists on accommodation, food and local transport services.
“The policy measures in response to the pandemic severely impacted earnings from travel services, which resulted in the country losing about N$3.2 billion in export revenue during 2020, with receipts down to N$1.9 billion compared to N$5.1 billion received in 2019,” it says.
JOBS, INCOME HAEMORRHAGE
Due to a lack of timely statistics, assessing the pandemic’s impact on employment, especially in the informal market, is “quite difficult”, the BoN says. However, over 80% of businesses which responded in the bank’s survey, said they had to reduce staff numbers last year.
About half of the businesses that made some of their employees redundant, managed to do so to a fairly limited extent, reducing their staff number by less than 25%, according to the BoN. At the opposite extreme of the spectrum, however, 15% of the businesses reduced their staff on a “severe scale”, by more than 75%.
The central bank estimates that about 30% of employment opportunities in the formal sector were sacrificed. This means 7 830 people lost their jobs.
“The loss of jobs in the sector is likely to be much worse should informal job losses data be available,” the central bank says, adding: “The full impact will depend on how long the Covid-19 pandemic persists.”
The tourism sector is labour intensive and provides many jobs for low-skilled workers, together with higher-skilled jobs, the BoN points out.
According to the latest labour force survey, the sector in 2018 employed about 11% of the total workforce, making it the second largest contributor to employment. About 31% of employment in the sector was formal, while the remaining 69% was informal.
In an effort to curb operational costs, companies also reduced working hours, which resulted in lower wages and salaries.
Some 87% of businesses who took part in the BoN survey said they reduced wages and salaries. Of these, 49% cut wages and salaries by between 26% and 50%, while 13% slashed it by more than 75%.
“In terms of business size, micro and medium enterprises had the largest share of reduced wages and salaries in the category of 75% and more,” the BoN says.
BUSINESS CLOSURE
Booking levels last year fell below 10% of capacity for 69% of businesses, compared to only 2% which were in the same predicament in 2019.
“Prices for rooms were cut dramatically during the year in order to attract domestic tourists, although the spending power of local tourists remained relatively low as most tend to opt for cheaper accommodation options; cheaper food selections and less or no tourism activities such as game drives and hiking,” according to the BoN.
Turnover plunged as a result with 84% of tourism businesses which on average lost more than 50% of their normal revenue, the BoN says.
The low demand resulted in very few businesses being able to operate at full capacity, according to the central bank - only 24% of businesses were fully functional by November 2020.
64% of the surveyed businesses were active with reduced staff, while 11% of the businesses were temporarily closed and 2% were fully closed. The BoN, however, points out that the latter was biased as closed businesses were unlikely to have responded to its survey.
One of the major challenges faced by tourism businesses was the depletion of cash reserves and lack of working capital to run their daily operations. A third said their cash reserves and savings were exhausted, while 45% had to borrow capital. Other challenges include the inability to retain employees as well as a lack of ability to repay loans.
STIMULUS
Government rolled out an economic stimulus and relief package to support businesses that were hit hard by the Covid-19 pandemic, which included a wage subsidy, tax-back loan scheme as well as more speedy refunds for value-added tax (VAT).
According to the survey, 24% of respondents accessed the government stimulus support packages – 44% of the businesses accessed the wage subsidy, while 27% received more speedy VAT refunds and payment from government for invoices.
“A handful of businesses raised ongoing concerns regarding delays in VAT refunds, with a few indicating that the outstanding VAT refunds due to them have been outstanding for several years,” the BoN says.
About 33% of respondents indicated they were not eligible for government support, while over 30% tried to access government support, but their applications were rejected. “This could be attributed to the conditions that businesses needed to fulfil to participate in schemes such as the wage subsidy,” the BoN says.
Nine percent of respondents said they weren’t interested at all in government support.
Regarding the regulatory relief measures introduced and facilitated by the BoN, 24% of businesses managed to get repayment holidays on their loans with the commercial banks.
OUTLOOK
The outlook for tourism is “extraordinarily uncertain”, the BoN says.
HAN’s latest data shows its members had a total of 214 915 rooms available in the first quarter of 2021. Of this, only 42 067 or 19.6% were sold. In the same three months in 2020, 283 968 rooms were available of which 33.3% were sold. In the comparative quarter in 2019, 40.8% of the available 358 320 rooms were sold.
Total rooms available in the first quarters decreased by 143 405 or 40% from 2019 to 2021.
The chief executive officer of HAN, Gitta Paetzold, points out that the first quarter of a year traditionally is the low season for tourism in Namibia.
“Given the huge negative impact the Covid-19 pandemic still has on international travel, the 19.6% occupancy achieved for Namibia provides reason for hope that the tourism revival initiative embarked on in September 2020 is showing some signs of success,” she says.
About 12.8% of occupants came from Namibia’s key-source market, comprised of Germany, Austria and Switzerland, despite the stringent and rigid travel restrictions still prevailing in those markets. The percentage from entire Europe for the first quarter of 2021 stands at 17.8%, compared to over 42% in 2020 and 38% in 2019.
RECOVERY
The BoN says the recovery of the sector will depend on the interlinked impacts of the economic and health crises on demand and supply side factors. These include the evolution of the pandemic, the availability of a vaccine (or alternative control measures) and the lifting of travel restrictions, as well as the survival and readiness of businesses throughout the tourism ecosystem to meet demand, the impact on consumer confidence and travel behaviour, and developments in the wider economy.
Although domestic tourism has helped to mitigate the impact on jobs and businesses, real recovery will only be possible when international tourism returns fully, the central bank says.
Countries need to work together, as the actions taken by one government have implications for travellers and businesses in other countries, and for the global tourism system, it adds.
“Countries need to develop collaborative systems across borders to safely resume travel, restore traveller and business confidence, stimulate demand and accelerate tourism recovery. More efficient international coordination systems are also needed to respond to future shocks,” the BoN says.
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