Tag: ministry of tourism

China leads Maldives’ 18 percent tourism boom

Over 700,000 tourists visited the Maldives in the first seven months of 2011, the majority of visitors from China.

The Tourism Ministry has released data showing that the number of tourists who visited the Maldives between January and July 2011 increased by 18.3 percent to 520,483. This was compared to the 439,864 tourists who visited the Maldives during the same period last year.

Maldives Association of Travel Agents and Tour Operators (MATATO) Secretary General, Mohamed Maleeh Jamal, told Minivan News that the timing of Europe’s economic decline matches that of the growing Chinese market. Asia’s high season corresponds with Europe’s low season, he said, and resorts are now catering more to Chinese tourists to keep business up.

Jamal also noted that airlines such as Qatar Airways had increased direct service to the Maldives in the last 10 months. He also noted that more airports are being constructed closer to resort islands, such as in Baa Atoll.

“The President has also decided to increase the marketing budget from US$1.5 million to US$7 million, since we expect the industry’s growth to continue,” said the MATATO secretary general.

Statistics show that Chinese tourists dominated the market in the first seven months with 103,734 individuals, accounting for 19.9 percent of the total arrivals. The United Kingdom was the second-largest contributor to tourism arrivals, composing 11.7 percent of the market.

Jamal forecasted “phenomenal growth” in the Chinese market, and estimated that the Chinese would account for 40 percent of the total tourists in coming years.

The Maldives currently hosts over 100 resorts boasting a total of 22,000 beds. Jamal said 3-4 more resorts were currently under construction, and noted that it was important “to always have excess demand and limited rooms to keep the appeal of the Maldives up.”

Secretary General of the Maldives Association of the Tourism Industry (MATI), Ibrahim Mohamed Sim, was more guarded on the issue. Sim told Minivan News that “we are holding steady in growth, but the market looks mixed since the decline of the US economy could affect our traditional European markets.”

Italy and the UK, formerly leading contributors to the Maldivian tourism industry, have declined, said Sim, but Germany was holding steady.

Sim said the demand from China was significant, and that the Maldives “is in a very lucky position to have the chance to meet that demand.”

Sources in the Chinese media and Mandarin-language tourism forums have meanwhile noted the rise of practices such as segregation of Chinese visitors from other guests at meal times.

Sim commented that although he did not believe there was segregation, the Chinese “stand out, they come here for a different reason than most tourists. They do not come here to sun tan, they come here to see a different place.” He noted that some resorts were also designed to specifically appeal to different groups.

Another recent event in the Maldives’ tourism industry was its withdrawal from the New7Wonders competition.

Jamal told Minivan News, “we think it was a loss that the Maldives pulled out. New7Wonders was a marketing tool, and major tourism companies were competing for the award.”

However he said he did not think that the Maldives’ decision had affected the tourism industry.

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National Art Gallery functions transferred to National Centre for the Arts

The functions of the National Art Gallery have been transferred to the National Centre for the Arts, operating under the Ministry of Tourism, Arts and Culture.

The National Art Gallery will not be administered separately but as an office of the National Centre for the Arts.

The change was made to eliminate duplication of work by the art gallery and the centre, thus reducing the costs of managing the gallery.

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Government’s bill reduces tourism revenue “but improves investor confidence”

The government has proposed an amendment to the Tourism Act that reduces the rent resorts pay as well as extending the lease period to fifty years, a move which would significantly reduce the government’s income from the tourism industry in the short term.

The bill was proposed by MDP MP Ibrahim Mohamed Solih, who said the main aim of the bill “is to improve investor confidence and performance of the tourism sector.”

Solih said rent would be charged depending on the resort’s area and not number of beds. Resorts are now to pay US$7 for each square metre.

Resorts would also be categorised according to their size; the smallest group being from 100,000-200,000 m²; the second from 200.000-400,000 m², and the largest is above 400,000 m².

Solih said this will ease the burden on resort owners and will help resorts currently under construction around the country.

He noted that this would reduce the government’s income from the tourism sector from Rf 1900 million (US$148 million) to about Rf 1300 million (US$101 million).

Creating an investor-friendly environment

Minister of Tourism, Arts and Culture, Dr Ali Sawad, said the amendments to the Tourism Act will create more macro-economic opportunities in the Maldives.

“It is geared towards achieving three objectives: the first is transforming leases to land rent. The second is phasing out the bed tax, and the third is increasing the lease from a minimum of 35 years to a minimum of 50 years.”

Resorts currently pay a flat rate of US$8 per occupied room, per night, known as the ‘bed tax’, however the resort industry has criticised this as a disincentive to increase capacity and promote expansion, and limited potential revenues in the future.

Dr Sawad said since all the revenue streams are linked, any amendments to the bill will have a “ripple effect on the economy” and would create an environment for greater investments as investment costs are decreased.

He assured that the amendments would bring in more revenue starting from next year, but admitted the government would see “a slight drop [of revenue] during the transition. It’s all part of a larger fiscal policy.”

The amendments to the bill would ultimately “not lower revenue” from the tourism industry, as they were intended to make investment in the Maldives “more attractive.”

Former Minister of Tourism Abdulla Mausoom said “we definitely have to create a positive investment environment in the country,” because in the last year and a half, “investor confidence has been down.”

He said the outcome of both the tourism bill and the taxation bill “are not certain.”

“The Maldives is very small and our natural resources are limited,” Mausoon said. “The government has a responsibility to look after our resources.”

He said he believed “it is not in the best interest of the country” when an investor is willing to pay a better price and the government had set a lower fixed price.

“We should facilitate and investor-friendly environment without eliminating the competitiveness of the market,” he said.

Mausoon suggested the government set a minimum fixed rate and have bidders propose higher bids from there. He said most of islands desired by resorts were what he termed, “micro-islands” or those less than 10 hectares in size (less than 0.1 km²).

“The government has a responsibility to safeguard our assets,” Mausoon said, noting that if investors are willing to pay more, “they should be allowed to pay more.”

‘Sim’ Mohamed Ibrahim from the Maldives Association of Tourism Industry (MATI) said “we think this a very forward-thinking bill. Obviously there are little tweaks needed, but overall it’s a good bill that has come at the right time.”

Sim said “the government has worked closely with the tourism industry to develop this bill” and had consulted with the industry “at every stage.”

Bed tax and island lease vs. GST and land rent

Currently, the cost a resort pays the government is based on the number of beds it has. Dr Sawad said on average, the government was making anywhere from US$3,500-20,000 per bed every year, generating a total of US$47 million in revenue from the bed tax per year.

He said a “conservative estimate” of how much revenue the government’s proposed Goods and Services Tax (GST) is expected to bring in was over US$60 million a year. He noted that the tax revenue would continue to increase as the tax net widens.

Dr Sawad said the bed tax would be phased out in the next three years when the GST is in place.

He also said the leases for resorts currently brought in around US$78 million, while the land rent should collect about US$60 million a year.

“By addressing the lease rent head on, we will be able to reduce investment costs, which makes for a more attractive investment,” he said.

However Mausoom said the land rent increases the uncertainty for the tourism industry, because there is no guarantee as to how many beds will be developed on then land: “A resort owner can build as many rooms as possible.”

“This US$7 per square metre is very misleading,” he added, noting that “the government will only be getting three set rents: US$1 million [per month] for the islands in the smallest bracket. For the middle bracket it will be US$1.5 million, and US$2 million for the larger islands. It doesn’t make sense.”

He pointed out the smallest bracket—those islands smaller than 200,000 m²—“should catch at least US$1.4 million, if you multiply it by US$7 per square metre. It’s totally misleading.”

Another thing he believes is unfair is the government’s decision to wait until the GST is in place before ratifying the Tourism Act. “They can’t put a condition like that,” he said, “it’s putting an extra burden on resort owners.”

Mausoom also said he believed there were “many discrepancies” in how the MDP is trying to consolidate the different bills and acts concerning fiscal policy, and said “the government has to start singing the same song. A song that is nice to the Maldivian people, nice to the investors, and nice to the tourists.

Sim explained that the amount the government will lose in land rent (compared to the current lease and bed tax scheme) would be offset by the GST levy, “which would go hand-in-hand with this bill.”

He said adding the business profit tax, GST and land rent, the resorts will “probably pay more than they do currently alongside existing government revenues from customs duties.”

He added that the three year waiting period to phase out the bed tax “is a bit long and [we] will try to lobby for one year.”

Sim also noted that the major issue with the Maldives’ tourism industry is capacity: “The industry can only grow through an increase in capacity. The current situation is good for people who have established, successful properties, [but not for new investors].”

The new system, he said, would offer businesses “certainties” and reduce the current level of “maneuvering” occurring within the industry.

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Maldives Center for Historic and Linguistic Research to be closed down

Deputy Leader of the Dhivehi Rayyithunge Party (DRP) Ibrahim Shareef has told Miadhu the government’s decision to close down the Maldives Center for Historic and Linguistic Research, and to transfer its work to other institutions, poses a great challenge for the Dhivehi language.

Shareef said the Dhivehi language has been an integral part of Maldivian culture and identity, and should be protected for future generations.

He said the center’s work with Dhivehi would be very different from how a college would teach Dhivehi, which is something all Maldivians should be worried about.

President of the Center for Historic and Linguistic Research Ahmed Naseer told Miadhu the language department will be transferred to the Maldives College of Higher Education, and the cultural and historical work will be taken to the Ministry of Tourism, Arts and Culture.

He said there would be no change in the level of services being provided and the transition will be over in three days.

The land on which the center stood will be taken over by Malé Municipality to build flats.

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Government spending on tourism marketing comes under scrutiny

A tour operator has claimed that the government should not spend so much money marketing multi-million dollar resorts, particularly since it receives such limited revenue from the industry in return.

Ahmed Firaq, chairman of tour operator Inner Maldives, said the government should not be so much money on tourism advertisement marketing resorts as many had their own marketing campaigns.

Firaq told newspaper Miadhu that the “amount of money being spent on tourism advertising is the same money which could go into the development of social services”.

Government tourism advertising

State Minister of Tourism Thoyyib Mohamed Waheed said the government’s budget for tourism, including marketing, is planned each year in advance.

“The money [for marketing] comes from both stakeholders and the government,” Waheed said, mentioning that the industry adds to the budget if it is asked by the government.

“If there is not enough funding, we approach the industry,” he said.

Waheed said the “industry is quite cooperative” but added the government “does needs more help and support from it.”

Secretary General for the Maldives Association of Travel Agents and Tour Operators (MATATO) Mohamed Maleeh Jamal said after the 2004 Tsunami the marketing budget “drastically increased” to about US$9 million per year.

This number remained unchanged until the 2008 economic depression, when the budget decreased to its current amount of US$2.5 million, used mainly for destination marketing.

Sim Mohamed from Maldives Association of Tourism Industry (MATI) said the government has “very little money to play around with. When this government took over, [the country] was broke.”

Sim said marketing was essential in times of crisis, particularly following events such as the 2004 tsunami or the financial depression, as “you need to let people know you are still here.”

Jamal noted that MATATO’s main concern “is the total number of rooms is increasing and the [marketing] budget is down. If it is reduced further, in the long run we will be disadvantaged.”

Jamal estimated this year’s spend on tourism marketing across the Maldives to be around US$30 million. The industry, he said, was providing around US$20 million for specific product marketing.

He said in a time when the tourism industry is being “expanded north to south” the government should at least maintain the previous budget, if not increase it.

With the new tourism taxation bill being considered in parliament, (a bill that will phase out the ‘bed tax’ which currently stands at US$8 per night) the government will be getting an additional six percent in revenue from the tourism industry, “but they are still reducing the marketing budget,” Jamal claimed.

Marketing the Maldives as a tourist destination

Sim agreed that “the government should get out of [marketing] all together” and “business should be left to businesses.”

But he expressed his appreciation for the government’s efforts to help the industry, saying “we like what the government is trying to do.”

Sim believes “the government should regulate and set national and industry standards” and not focus so much on advertising.

“It is tour operators who sell the Maldives,” Sim said, and “they are doing a good job at it. We should keep them happy.”

He added that “the tourism industry is not about resorts alone, but also employment, transport and aviation.”

He also questioned on whether the government should be spending any money on marketing the Maldives as a tourist destination, saying “it sells itself.”

And although there are other similar products on the market, Sim says the Maldives offers “unique features” and not a lot of money is needed to market it as a travel destination.

However Jamal said competition in the region is a major concern. He noted that the Sri Lankan government has allocated US$50 million to tourism marketing this year, a significant amount compared to how much the Maldivian government is spending.

“We need to maintain occupancy,” Jamal said, adding that the Pacific islands, the Middle East and African countries like Mozambique were quickly becoming major competitors.

One of the main marketing strategies for the Maldives, according to Jamal, is “destination branding”. This brings another major concern for MATATO to the surface.

Jamal said tour operators “now say the Maldives is sinking”, and asked why travel agencies would send their customers to a “sinking” destination.

Other traditional marketing strategies for the Maldives have been road shows and travel fairs. Jamal says road shows in China, Eastern Europe and the Middle East have been cancelled for this year, and that the Maldives is attending eight fewer travel fairs than it did last year.

“We don’t see much [advertising] in magazines,” Jamal said, adding that existing advertising contracts with television channels BBC, National Geographic and CNN will expire this June “and there is not enough budget to renew them.”

“The success of the tourism industry in the Maldives depends on whether or not we maintain advertising,” he said.

On his return from Copenhagen President Mohamed Nasheed said the Maldives’ growing significance on the world stage as an icon of climate change – and the associated free publicity – was worth far more than the government could ever spend on paid advertising.

Tourism Revenue

One of Firaq’s complaints was that the government should be spending this money on development for social services and not on tourism advertising.

When asked about Firaq’s statement that the revenue from the tourism industry should be spent on developing social services and not on marketing, Waheed noted that the money “doesn’t come straight to the ministry, but it goes to the Treasury.”

The Treasury then decides how the money is allocated; some of it goes to social services and some goes back to the tourism industry.

Press Secretary for the President’s Office Mohamed Zuhair said “there is no direct relationship between tourism revenue and social service development.”

He added that the expenses of tourism marketing are jointly assumed by MATI, the Tourism Ministry and the Tourism Board.

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