Tourism sails on with luxury in fragile setting

Maldives tourism has made an impressive comeback since the 2009 global recession, and investment from China and India is expected to surpass precedents in coming years, finds a report from Care Ratings Maldives.

Nonetheless, the Maldives occupies a precarious market, and government controls limit foreign investment, the ratings agency found.

In 2005 Asia surpassed America as a tourist destination, coming in second to Europe. According to Care Ratings, Foreign Tourist Arrivals (FTA) surged this year as China’s economy flourished and European economies made a slow comeback. Chinese tourists are projected to account for 15 percent of Maldives FTA by 2020.

Plans are being made to expand capacity accordingly. The Maldives tourism sector will add 77 new resorts and increase bed capacity by 47 percent over the next three years, the report finds. Additional safari vessels are also expected to be added to the industry, which already boasts a fleet 150 strong.

By the end of 2011, the report projects the direct employments in tourism will have grown from 35,000 to 38,000. Fifty percent of these are likely to be expatriate hires.

Revenues are also expected to increase by 10 percent by the end of the year, claims the report.

Tourism is the largest contributor to Maldives national GDP and foreign currency, however the sector is restricted and vulnerable. The reports lists terrorism, global economic crisis, and limited land and human resources as obstacles to growth. It also points out that environment is a major factor of success.

“The tourism industry is capital-intensive in nature due to the high cost involved in leasing the land, developing the land and constructing a self-contained tourist resort,” states the report. Maldivian resorts frequently sell the appeal of the natural environments, but the Maldivian construction industry lacks the capacity to process raw materials.

Importing processed materials drives the average resort room construction cost up to US$30,000 to US$60,000, one of several factors which makes tourism in the Maldives a high-end market.

Human capital is mentioned as a complicating factor. Resort employment could account for one-tenth of the Maldivian population, 32 percent of which is unemployed. However, only half of resort employees are Maldivian.

Coincidentally, a recent study found that social stigma limited female Maldivian employment in the resort sector to 3 percent, a number far below the demographic’s potential.

Another challenge to growth is government oversight. “The industry now is very much regulated by the government of the Maldives,” states the report. “Tourism is now developed and managed according to country-wide policy based on a master plan.”

All Maldivian islands are government-owned, and resorts can only be leased for 25 to 50 years. Construction is limited by the “One Island One Resort” policy, which allows only one resort per island, and structures are limited to 20 percent of the land available.

Over the past three decades, the ministry has introduced three tourism master plans.

Although the report recognizes the complicating effect of government restrictions on developers and investors, it states attributes these plans with significant growth.

“The growth of the industry in the last couple of decades was mainly due to the efforts taken by the government to promote the tourism industry and the progress was largely on a planned path determined by the First Tourism Master Plan (1983-1992), the Second Tourism Master Plan (1996-2005) and the Third Tourism Master Plan (2007-2011).”

The Maldivian government also created the Maldives Marketing and Public Relations Corporation (MMPRC), which promotes the Maldives as a brand in the world tourism arena.

Last week, MMPRC recognized the value of the Asian travel market by co-hosting a travel agents networking event with GMR. In a nod to the region’s booming business culture, MMPRC MD Simon Hawkins pointed out the advantages of hosting meetings at Maldives resorts.

MMPRC aims to draw 1 million tourists to the Maldives by the end of 2012.This year, the Maldives reached 700,000 arrivals by September.

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2 thoughts on “Tourism sails on with luxury in fragile setting”

  1. Maldives is getting more expensive year by year. Especially due to the recent increment of T-GST. Sadly, the government doesn't realize that to stay competitive in the market, you need the lower down the price. Even now, many foreign tour operators are diverting their guests to much cheaper destinations like Sri Lanka. I presume we will see the negative impact of this on our tourism within next few years. This proves again, the government has failed and we are in desperate need of change again!

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  2. "...will add 77 new resorts and increase bed capacity by 47 percent over the next three years".

    This seriously dents the credibility of Care Ratings. Gullible Ratings or Swallowing Whole Ratings more like. That's a ridiculous statement. Around 7 resorts have been opened in the last three years.

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