• Market Watch

Tourist inflows improve before peak season

• 11 Months Ago

Tourist inflows improve before Namibia’s peak tourism season (May to September) commences. The occupancy rate in April 2023 across nationwide hospitality establishments stood at 51.8%, compared to 36.5% recorded in the same month last year, according to Simonis Storm.

This is the highest monthly occupancy rate recorded for 2023 thus far. On a monthly basis, national occupancy rates were 11.2 percentage points higher, increasing from 40.7%. The year to date (YTD) average in 2023 (40.3%) is merely 3.7% short of reaching pre-pandemic levels – YTD average of 2019 was recorded at 44.0%.

Tourism is set to be one of the best economic drivers for the remainder of 2023. The private sector green hydrogen projects, new aquatic projects such as salmon farming and kelp production in Luderitz, investments in gas pipelines and mining explorations could also feed into boosting the tourism industry.

Indeed, Fly Namibia increased its weekly flights to Oranjemund from 3 to 5 recently in order to cater to a growing number of Shell and Debmarine staff. Engagements with certain stakeholders indicate that hotels in Luderitz and guesthouses in Oranjemund are running at higher occupancy rates as a result of oil operations in the area. 22 610 rooms were sold in April 2023, along with 44 482 beds. This is 65% lower compared to 65 449 rooms sold in April 2019. The gap between the change in rooms and occupancy rates can be explained by less tourism facilities available, as some of them were forced to shut down due to the lockdown put in place, Simonis Storm said.

The central area of Namibia recorded the lowest occupancy rate in April 2023, at 37.3%, from the highest last month of 52.7%. This month, the Coastal area had the highest occupancy rate of 58.1%, followed by the northern area at 56.0%, and the southern area at 49.3%.

Leisure tourism continues to be the main driver of tourist inflows, accounting for 98.3% of visitors in April 2023, while business travellers accounted for 1.7% and conference attendees accounted for 0.02%.

As usual, majority of visitors during April 2023 came from Germany, Austria, and Switzerland (41.0%). Following with the second highest occupancy rates are locals (18.6%), South Africans (8.3%) and the French (6.8%).

Rand

According to the Hospitality Association of Namibia (HAN), the growth in the portion of visitors from Namibia’s main tourist source markets (Germany, Austria and Switzerland) is partly due to the availability of 10 direct flights each week between Windhoek and Frankfurt. In addition, the weakening Rand exchange rate poses as an advantage for foreigners in Namibia as their Euros have more spending power. The inflows from Europe picked up in January of this year and has been on an upward trend since then, Simonis Storm pointed out.

Indeed, occupancy rates are bound to recover beyond pre-pandemic levels. According to the World Tourism Organisation (UNWTO), international tourism increased by 86% in the first quarter of 2023 compared to the corresponding quarter of 2022.

Locals are occupying less of the rooms due to straining economic conditions. Indeed, accommodation services became 15.7% more expensive in April 2023 compared to April 2019, while accommodation services inflation stood at 6.7% year-on-year and food inflation at 13.5% which are above headline inflation of 6.1% year-on-year in April 2023. This insinuates that locals are limited in spending on accommodation as disposable incomes are strained by higher food prices amongst other living costs.

According to the Namibia Statistics Agency (NSA), since April 2019, hotels, cafes and restaurant prices have increased by 16.9%, driven by both catering (18.0%) and accommodation services (15.7%). At the same time, holiday packages offered by Namibian companies have become more expensive. The latest figure for holiday packages inflation was recorded at 73.6% year-on-year in April 2023, compared to 17.9% year-on-year in March 2023. This could be explained by higher fuel costs, higher electricity tariffs, food inflation and higher interest rates which increases operational costs of local tourist and accommodation operators, Simonis Storm added.

Holiday packages in Namibia are reliant on the use of fuel, which recorded double digit inflation rates since April 2022, and for the first time recorded a single digit increase in petrol and diesel prices of 2.7% year-on-year in April 2023. Together with food inflation, electricity charges and higher interest rates, holiday packages are likely to become more expensive going forward. Considering that the Electricity Control Board (ECB) have approved a 9.0% increase in electricity tariffs as well as the expected dry season will add to food inflation.

Going forward, “we therefore expect regional tourist inflows and local tourism to decrease, with international tourist inflows being the main driver of the ongoing recovery in the local tourism industry,” Simonis Storm said.