The curse of a weak rand

WHILE the multi-currency system has largely been a stabilising factor for Zimbabwe's economy, a strengthening United States dollar against weakening regional currencies has been the bane of the hospitality industry in Victoria Falls, where arrivals reportedly dropped five percent during the first three months of 2016.

Industry sources say hotel occupancies are currently between 40 percent and 45 percent.

The falling South African rand, which plunged to close to 1:18 against the US dollar in January, is believed to be discouraging visitors fr-om South Africa — the largest source market for the resort town.

Between 60 percent and 70 percent of international visitors to Victoria Falls come through South Africa.

A depreciating rand is bloating the cost of accommodation, food and other recreational activities that are priced in the US dollar.

The 15 percent Value Added Tax on foreign tourists effected in January is also understood to be making local tourism uncompetitive.

Last week, Hospitality Association of Zimbabwe president Mr George Manyumwa said the falling rand had affected arrivals from South Africa and Namibia.

"The foreign market is growing but because of the decline in the rand, the market for South Africa and Namibia, which use the rand, has declined," said Mr Manyumwa.

Preliminary figures suggest that in 2015, Zimbabwe received 1,8 million arrivals (Africa 1,76 million; Europe 149 000; the Americas 76 751; Asia 35 000; Oceania 25 000; and the Middle East 3 990).

Occupancies drop
Rainbow Hotel (Victoria Falls) GM Mr Christopher Svovah told The Sunday Mail Business last week that the hospitality industry in the resort town was also being hit hard by unsustainable cost structures.

"I can confirm that business is now low in Victoria Falls and occupancies for bigger hotels are hovering around 40 to 45 percent.
"I want to think that the decline in business is to do with the depreciating rand and low foreign direct inflows. You see, 60 to 70 percent of international tourists come through South Africa and they would be in possession of the rand.

"So, activities such as cruising and boating, which could be done in South Africa or Namibia for say R500, would be about US$30 here, which is expensive," said Mr Svovah.

He noted that the price of local tourism products were likely to be high considering the cost of utilities and labour.
Explained Mr Svovah: "We might be accused of high costs but you need to appreciate that we operate in Zimbabwe where operational costs are high. So you can't come up with a price that does not guarantee viability.
"However, there is that cancer of wanting to profiteer which should be eliminated."

Zambia cashes in
But losses for the local hospitality industry in Victoria Falls have translated into gains for operators in Livingstone, Zambia, where a depreciating kwacha has been a major selling point.

There is now a renewed push by the Livingstone Tourism Association to market the town — a major competitor to the local tourism product — as an alternative to Victoria Falls Town.

Recently, a former LTA chairperson was quoted by newspapers in Zambia urging industry players to take advantage of the depreciating kwacha to attract more tourists to the country.

"In 2006, the Zambian kwacha was K2,9 to one US dollar. This time around (in October 2015), the kwacha is above K12 to a single dollar and so tourists will spend few dollars when they are in Zambia."

Hotels and lodges in Livingstone have been enjoying brisk business, especially during the Easter holidays which coincided with the Third Livingstone International Cultural and Arts Festival.

Last week, Tourism and Hospitality Industry Minister Dr Walter Mzembi said Government was still consulting with industry and the Reserve Bank of Zimbabwe and invoicing products in rands was being seriously considered.

"I have had two to three meetings on the behaviour of currencies, not just the US dollar and the rand but the entire gamut of multiple currencies in the basket, including a separate meeting with RBZ.

"The latter is very receptive to a cocktail of rand acceptance incentives, and the ball is in their court (industry players) to revert to me and RBZ before we make public pronouncements," said Dr Mzembi.

Hospitality industry players are pushing the Zimbabwe Tourism Authority to resume Brand Zimbabwe campaigns, particularly in traditional source markets to boost arrivals.

Last year's Zanu-PF Annual National People's Conference, the President's birthday celebrations, and the Sadc Summit helped improve the brand visibility for Victoria Falls.

In 1999, when the country recorded its highest ever number of arrivals — two million — Europe, America, Asia and the Middle East contributed 30 percent to the arrivals.

Last year, they accounted for only 14 percent of visitors.
Tourists from Europe and the United States spend an average of US$1 600 per person per visit against an estimated US$150 per person spent by their African peers.

Zimbabwe and Angola account for eight percent each of tourists visiting Africa compared to South Africa, which hosts 42 percent, and Mozambique and Botswana at nine percent.

It is hoped the increase in airlines servicing the local route will help to improve arrivals. Unconfirmed reports suggest that about seven international airlines have enquired on the possibility of flying directly into Victoria Falls where there is a new state-of-the-art airport.

Should the move materialise, that would see tourist arrivals picking up as air transport is considered critical in promoting destinations.