In May, the World Bank released The Pacific Possible: Tourism Report, which states that 11 emerging destinations in the Pacific region could receive one million more visitors, up to US$1.8 billion annually in additional receipts and 128,000 more jobs by 2040. The report, for which I was a contributor, analyzed tourism trends for key generating markets and the receiving markets of Papua New Guinea (PNG), Solomon Islands, Vanuatu, Fiji, Tonga, Samoa, Kiribati, Palau, Marshall Islands (RMI), Federated States of Micronesia (FSM) and Tuvalu (referred to collectively as the PIC11). For investors interested in the region, the report could serve to stimulate increased public and private sector investment, particularly in infrastructure, including hotel investments.
The report recommends four key strategy areas for attention: improving international transport links to the region; attracting higher-spending tourists; improved public sector engagement; and improving linkages between tourism and local economies. Coordinated and targeted actions in these areas by the public sector and businesses will help the PIC11 increase sustainable tourism and the socio-economic, cultural and environmental benefits that can result. Addressing these areas will also raise the bar of confidence, of course, for investors.
In 2014, a record 1.37 million overnight tourists visited the PIC11, with Fiji, Papua New Guinea, Palau, Samoa and Vanuatu comprising the top five destinations. Two thirds of visitors traveling to Pacific Island countries are from Australia and New Zealand, while the United States, China, Japan and Europe represent significant growth potential.
As John Perrottet, report author and senior technical specialist at the World Bank, emphasized: “Tourism is one of the Pacific region’s most economically viable sectors, with significant opportunities for sustainable growth in the Chinese tourist, cruise ship, luxury travel and retiree markets. By taking a targeted approach to tourism development, Pacific Island countries can ensure visitor numbers are kept at sustainable levels, while attracting higher-spending tourists—helping to protect the precious natural environment and cultural heritage that make this region so special.”
According to the report, international brand name hotels are not well represented in the PIC11 countries because of the very small average size of hotels in the region. International Finance Corporation research shows that there are fewer than 60 hotels in the PIC11 with more than 100
rooms and less than 60 percent of these carry an international brand. AccorHotels (France), Starwood Hotels & Resorts (U.S.) and InterContinental Hotels Group (UK) dominate the region with 60 percent of the branded properties. The absence of a critical mass of international brand names limits recognition in international markets.
Increasing the Chinese Market
The Chinese market offers substantial growth opportunities for the PIC11, albeit with the proviso that careful planning is needed so that destinations are not overwhelmed with more visitors than they can manage sustainably. The report explains that between 2009 and 2014, Chinese visitors to PIC11 grew by an average of 27 percent per annum, and now represent 7 percent of the inbound market. This rate could continue at 20 percent per annum over the next 10 years, which would result in the Chinese comprising 20 percent of the market in PIC11s by 2025.
To achieve this growth with the Chinese market, the World Bank recommends the following:
- Negotiate new air routes between PIC’s and Chinese cities. Scheduled routes may initially be developed by charters or supplemented by charters at times of high demand.
- Upgrade airports and provide support to attract new carriers.
- Tailor offerings to Chinese tourists, such as providing translators, improving service standards, installing Chinese signage and Wi-Fi coverage.
- Build relationships with major Chinese outbound operators, wholesalers and China-based agents selling the Pacific to develop concrete sales and distribution channels for marketing efforts.
- Implement a fully-resourced, long-term targeted promotion campaign, covering all cities, including travel trade, public relations and a major on-line presence through leading booking and trading websites.
- Identify specific segments of the Chinese market which match PIC11 offerings, including soft adventure, diving, weddings, incentives, overnight cruising etc.
- Increase the efficiency of visa application processes across all PIC’s targeting the Chinese market where visas are a barrier, including improving the communication of visa requirements, introducing multiple entry electronic visas (e-visa), promoting a regional visa scheme, and introducing a no-cost Visa on Arrival.
- Improve shopping in key destinations through a retail development program.
- Implement a major Pacific awareness campaign through Chinese media.
Increasing the High-Yield Market
Given the limited size and thus absorption capacity of the PIC11 countries, the report recommends a focus on high-end luxury properties. The World Bank estimates that by 2040 an additional 138,000 high-yield tourists could be attracted to the PIC11 for luxury offers, who would generate over US$449 million in total tourism receipts, and over 31,000 additional jobs.
To achieve this growth, the World Bank recommends the following:
- Develop PIC Government policy and strategy on exclusive accommodations.
- Encourage government support for the purchase or lease of land by investors ensuring full protection and benefits for traditional land owners.
- Identify prospective development locations, particularly in regards to accessibility.
- Identify a Pacific champion to lead the development of a regional strategy, an individual who can, with bring investors and opportunities together.
- Develop a Pacific luxury marketing strategy similar to Tourism New Zealand’s Premium Strategy.
- Increase availability of private jet aircraft facilities at gateway airports.
Increasing the Retiree Market
The retiree market is also an important potential segment for the PIC11, which the World Bank estimates could bring US$300 million by 2040. According to the report, the number of Australian retirees is projected to increase by 75 percent over the next 20 years, from 3.3 million in 2012 to 5.8 million in 2032, with assets that will grow from around US$300 billion to US$1.3 trillion by 2032. Retirees in New Zealand are expected to double by 2036. The World Bank estimates that the PIC11 could receive a total of 5,000 retirees by 2025 and that this growth could continue beyond 2025 to
10,000 resident foreign retirees by 2040, who could bring US$320 million in receipts and generate over 22,000 jobs.
To achieve this growth, the World Bank recommends the following:
- Establish visa and taxation regimes to attract long stay retirees
- Invest in high quality and affordable health care offerings that are crucial to the retiree market including private hospitals and aged-care homes.
- Invest in infrastructure and provide incentives to attract the private sector to develop accommodation options for foreign retirees.
- Determine rights of individuals to import personal effects duty free, and vehicles for their own use either duty free (with a claw-back on sale) or at a minimal charge.
- Determine rights of retirees to import capital and receive income from their home country, and to remit capital on sale or to beneficiaries in the event of death.
- Establish a system of licensed immigration agents to assist and guide intending immigrants.
- Enhance targeted marketing efforts to potential foreign retirees.
- Given Australia and New Zealand are both top destinations for retirement, PIC11s need to develop a strategic plan to attract retirees from these two potential markets.
- Develop a communication plan and provide clear guidance to retirees through a dedicated government website.
- Introduce training through authorized providers for aged-care support services.
- Determine the interest of Australian and New Zealand aged care providers to establish facilities in PICs.
Tapping these priority markets and attracting more investment and operators, particularly international tour operators and hotel groups, the World Bank recommends a four-part strategy:
- Improving connectivity with growing and established markets—More direct connections between northern hemisphere generating markets and the PIC11s, with less dependence on the hubs of Australia, Fiji, New Zealand and Guam.
- Attracting more and higher yielding tourists—Long-term market development that emphasizes yield, rather than volume, with less dependence on Australia and New Zealand as the principal generating markets.
- Improving the investment climate and the effectiveness of public sector participation in the sector—Increased focus among the PIC11 Governments on policies that strengthen the business enabling environment, the labor force quality, effectiveness of public institutions to attract visitors, and capacity of regional level destination marketing.
- Improving the efficiency of the tourism sector—Strengthen linkages between tourism and local suppliers, especially for food supplies and services to hotels, improve destination management and strategy, pool private sector resources such as cold storage and access to warehouse financing for this purpose, and regional level training facilities.
For the PIC11 countries, pursuing this strategy with World Bank support, as well as with the support of the South Pacific Tourism Organization, national tourism authorities, tourism businesses in each country and other stakeholders, can stimulate more investment, more high yield tourist arrivals, more income and tax revenue, as well as more jobs. Tourism is a key to the sustainable development and a more prosperous future for the region.