Tourism statistics: Dimensions of awareness and comparisons

The downing of Malaysian Airlines flight MH17 by a high altitude missile, whilst flying over Ukraine, killing all 298 people on board is a tragedy that could have been avoided. Despite there been evidence, several weeks before this horrific incident, that high altitude missiles were on site, and, despite some airline carriers been aware of this, no one shared this information.

Had someone passed on this information, it is likely that every airline including flight MH17, (had they known), would have by-passed the danger zone. “If only I had known better” was the distressing reply, I received from a hotel owner when I asked him how his hotel was performing. Lamenting further, he exclaimed “I don’t have any control over my business!” Delving deeper, it appeared that there was no structured business plan to begin with. He simply didn’t know where he was headed – let alone know how to get there. This hotel owner like many other rookie hotel investors, jumped in, no sooner they saw the wave of development in the hotel industry.
Tempted by the surge in ‘arrivals’ and an unwavering belief in future demand growth driving higher occupancy and greater revenue, they all rode the wave - without recognising the magnitude of the wave. They failed to factor in changes that are expected with new competition or ‘variables’ that create demand and supply imbalance. As usually happens, every wave eventually crashes. Those who are prepared for its impact survive to ride the next wave. Those who aren’t prepared will be ‘wiped out’ (as they say in surfing) and if one does not ‘wipe out’ properly, the greater the chance something really bad will happen. So, what can one learn from these two widely different cases? Both suffered due to the absence of relevant and timely information.
 

Economic impact of tourism

3.3 billion People, equivalent to 44 percent of the world’s population will travel this year. People from one country travel to another country for several reasons: a change of scenery, for relaxation, adventure, to meet new people, for education, to work, to do business, to visit friends and relations. The list can be endless.

Some countries receive many visitors while others not so many. Last year Bhutan received less than 100,000 visitors whilst France attracted 86 million visitors. In any event, visitors to any country are at the centre of observation of tourism. Tourism is a promising source of revenue, especially for developing countries, because it provides an effective transfer of income from developed to developing economies. Notably, tourism has enabled countries such as Botswana, Cape Verde and Maldives to transition out of the ‘Least Developed Countries’ category’.

It therefore follows that the most important information for estimating tourism impacts is an accurate count of the annual number of foreign ‘visitors’ to the country. At the risk of oversimplifying, ‘visitors’ fall into two distinct segments:

X). those who stay in hotels, supplementary establishments and in ‘below the threshold’ places and
Y). ‘Visitors’ who stay with family, relations or friends, where accommodation / meals are provided free.               The principal motivation for a business to serve tourists is generally economic and any individual business primarily interested in its own revenues and costs, will be keen to know how many ‘visitors’ fall into segment X. Segment Y includes a majority of Sri Lankans who have taken foreign citizenship after emigrating and those of Sri Lankan descend (2nd/3rd Generation), referred to as ‘Diaspora’. All countries have this ‘diaspora’ connection. For instance, Turkey has approximately 3.6 million Turkish nationals living abroad (3.2 m in Europe) and on the other end of the scale, almost 70 million Irish – nearly seven times the population of Ireland, live all over the world.



 

“Measuring is knowing - Guessing is missing”

In 2013, there were 102 classified hotels, 167 unclassified hotels and 688 supplementary establishments totaling 957 tourist accommodation establishments – all of whom operate within the threshold of having registered with the Sri Lanka Tourism development Authority (SLTDA). Accommodation statistics covering registered establishments providing paid accommodation, though very often using a bandwidth in terms of a specified number of bed places, bed rooms, rate of occupancy and guest nights is released regularly by SLTDA.

The monthly / periodic report from SLTDA is not very extensive nor is it conducted from the perspective of information supply. It is mostly raw and simplistic data - where the risk of misinterpretation leading to oversimplified conclusions can arise. Accommodation (rented or non-rented) is a core tourism sector even if it is relevant for one part of visitors only (i.e. tourists = overnight visitors).

In order to have at least a basic picture of the entire sector of rented accommodation, one expects SLTDA to provide data on the total number of nights spent by foreign visitors in establishments excluded from the scope of (regular) observations, i.e. for so called “Below Threshold Establishments” (BTE).

This type of accommodation includes rented rooms in family homes, dwellings rented from private individuals and unregulated establishments masquerading as hotels). Unfortunately this information is unavailable. Not because the number of BTE’s is insignificant, on the contrary, one suspects, there already is a large number operating below the radar, and, more alarmingly, expanding rapidly!

More or less

Total Guest Nights (TGNs) for all accommodation establishments in 2013 increased by 2.2 Million (+23 percent) over 2012. The increase in TGNs came from foreign visitors.

The classified hotels benefited by grabbing 66 percent of this increase in Guest Nights. Nearly 90 percent of the TGNs in the classified hotels was contributed by Foreign Guest Nights (FGNs). In the unclassified hotels category, ‘Two-in-every-Three’ Guest nights was generated by foreign visitors, whilst in the Supplementary Establishments, this rose to ‘Four-in-every-Five’ Guest nights from foreigners.

Foreign tourists had a higher propensity to choose classified hotels – with the highest FGNs ‘year-on-year’ percentage increase (88 percent), seen in the 3-star hotels category. Astonishingly, this was in the backdrop of total 3-star units decreasing from 16 in 2012, to 14, also resulting in a lower room and bed count. The 2-star hotels performance, on the contrary, had a ‘year-on-year’ negative growth. Despite posting a 14 percent increase in FGNs, the improvement was wiped out by the inexplicable loss of over 100,000 Local Guest Nights (LGNs). The overall room count in all three accommodation classes went up from 21,785 in 2012, to 23,606 in 2013. Likewise the bed count rose from 44,532 in 2012, to 48,700 in 2013.

Nevertheless, the annual rate of hotel room occupancy for the three accommodation classes remained virtually identical during 2013 & 2012 – meaning that the ‘status quo’ regarding supply and demand has remained constant during the past two years? What of 2014? Will it be the same? LGNs in 2013 were less than that of 2012 by over 60,000 nights – sliding from a 22 percent contribution to Total Guest Nights in 2012 to 18 percent in 2013. The drop in LGNs is cause for concern: since hotels, particularly resort properties, are reliant on domestic tourism to boost visitor spending especially in slower ‘shoulder’ and ‘off season’ months.

The history of international tourism overall is one of growth interrupted sectors by short to medium term crises. Countries with a weak domestic tourism sector are less able to withstand the impact of major crises in international markets, e.g. economic depression, terrorist attack, natural disaster. Conversely, countries with a strong domestic tourism sector are generally better equipped to withstand fluctuations in international demand. One must therefore not forget that Domestic tourism provides critical support to tourism operators in several areas of industry performance including seasonality and regional dispersal challenges.

Moving on, we need to find out the exact composition of the total Guest Nights? How many Guest Nights did the ‘visitors’ from India, UK, China, and others, (at minimum, our top 15 source markets), independently contribute? Drilling further, we need to establish the distribution patterns? For e.g. how many of the total ‘Indian’ Guest Nights did the Classified, Unclassified and Supplementary Establishments capture? More exacting data is when we can discover how many ‘Indian’ Guest Nights there were in the 1,2,3,4 and 5 star hotels? With this available information, one can pin point distinct spending patterns and visitor by nationality reactions to various policy (minimum hotel rates included) and marketing actions.

Chinese arrivals increased by 143.5 percent for 2014 YTD, with the likelihood of surpassing 120,000 arrivals by year end and perhaps becoming Sri Lanka’s 2nd biggest source market for tourists. What is the average daily ‘spend’ and ‘length of stay’ of a Chinese visitor compared to that of a visitor from UK? For e.g. If the average length of stay of the Chinese visitor is four days and the daily spend is US$ 125, compared to the UK visitor’s nine-day stay and US$ 180 daily spend, it would mean that tourism income from 120,000 Chinese arrivals = tourism income from 37,000 UK visitors. In effect, ‘More can be less’ – but then if we don’t know, we can only guess… and guessing is missing!
 

Market intelligence or crystal ball?

Do Indians use a travel Agent or book their trips to Sri Lanka on the web? Where in Sri Lanka do the Germans like to visit and when? How much do the French spend on accommodation when they vacation in Sri Lanka? We need to have market intelligence about our top 15 core markets (volume or geographic) – to be able to reach consumers from targeted countries. Product demand plus guest segment research will enable the industry stay ‘tuned’ in order to deliver the travel experiences visitors need. Only then can we make solid predictions on consumer sentiment and travel intent and be able to match new travel experiences with future market demand and changing demographics. Unless we do this and much more, a bewildered industry which silently and uncomfortably waits for info will be better served by a psychic reader gazing into the crystal ball.


(Shafeek Wahab has an extensive background in Hospitality Management spanning over 30 years. He has held key managerial responsibilities in internationally renowned hotel chains, both locally and abroad. Now focusing on corporate education, training, consulting and coaching he can be contacted on
shafeekwahab@in2ition.biz. Website: www.in2ition.biz)