Zanzibar Tourism Sector Profile

TANZANIAINVEST has been interviewing Mrs. Antonella Balestra, former Executive Board Member of the Zanzibar Association of Tourist Investors (ZATI), to learn about the Zanzibar tourism sector and about the investment opportunities available.

Antonella Balestra – Zanzibar Association of Tourist Investors: The tourism industry is only about a decade old, in its modern sense, although interested travelers have always visited the island due to its aura of history, the role it played in the slave trade, and its political and cultural relationships with foreign powers and countries such as Madagascar, Oman and Yemen.

In 1984, fewer than 20,000 tourists visited Zanzibar and, of these, many would have been VFR (visiting friends and relatives).

The first new tourist hotel was built in 1990-92 and, from that point we could say the “modern” tourism industry of Zanzibar began.

Table 1 gives the officially recorded international visitor arrivals.

Table1
International Visitor Arrivals – Zanzibar

source: Zanzibar Commission for Tourism

However, not all international visitor arrivals are covered, as many tourists, business and VFR arrivals have already completed immigration formalities elsewhere in Tanzania.

Over 40% of all tourists to Tanzania arrive through Nairobi and travel to Tanzania by regional flights or roads.

Furthermore, domestic tourism is automatically excluded (since an immigration arrival card is not required) from the current data set, and this is known to be significant.

East African tourism, especially from Kenya, has also risen with the daily flights of Kenya Airways from Nairobi.

Most problematic, is the fact that the official figures do not include arrivals by domestic air travel from other important tourist destinations (e.g. Selous) and transit points (e.g. Arusha, Dar es Salaam).

Many visitors come on circuits from the north and south with domestic flights by Air Tanzania, Precision Air, Coastal Aviation, ZanAir, and private charters.

They are not included in the tourism statistics as they have already passed immigration at another entry point in the country.

We, therefore, estimate that by the year 2000 at least 42,000 people – or 45% more than the official estimate of visitors – were arriving in Zanzibar this way (TABLE 2).

Adding this dimension and the domestic tourism dimension implies at least 130,000 visitors a year, and possibly as many as 150,000 for a “normal” year such as during the period from 1997-1999.

Table 2
Passengers Disembarked in Zanzibar from domestic and international flights (excluding transit)

Source: Tanzania Civil Aviation Authority

Another method of cross-checking tourist arrivals is to make an estimate based upon rooms available and average stay.

Zanzibar has at least 6,200 beds in 6 classes of accommodation, but there is a disproportionately large number in ungraded, one and two star categories.

Comparable tourist destinations with resources such as those of Unguja (Zanzibar) and Mafia would have the majority of beds in 3, 4 and 5 star hotels.

Furthermore, the authors believe that the official records of accommodation facilities are out-of-date and significantly understate the actual beds and rooms available on Zanzibar.

An estimate of total tourist bed-nights can then be made by taking the total beds available and multiplying by 300 nights (allowing for 65 days of low or closed season).

This gives a potential total bed-nights available of 1,860,000.

If we assume a 27% occupancy (in 300 nights) we arrive at 500,000 bed-nights.

Given the low occupancy of many guest houses and the number of units closed at any time on Zanzibar, this may be an acceptable estimate.

However, if a more plausible and minimum economic occupancy of 40% is used, then the total bed-nights on Zanzibar comes to 740,000 bed nights.

This higher estimate is reasonable if the arrivals by domestic airlines are added.

At 5 nights average stay, the total bed nights spent on Zanzibar implies 150,000 visitor arrivals.

This provides a reasonable cross-check of the visitor arrivals by international and domestic flights and the starting point for our work.

From the reasoning given above, it can be assumed that there are between 90,000 (official estimate) and 110,000 visitor arrivals per annum on holiday, based on immigration returns and other sources (see Table 1).

The average stay is not known but five (5) nights is believed by the authors to be the minimum average .

This implies some 500,000 bed-nights in all classes of hotels.

While the breakdown between international and domestic tourism is unknown, as is the business and VFR (visiting friends and relatives) components, holiday is expected to be at least 90% of hotel and boarding house bed-nights.

Of the average minimum 100,000 visitors some 50,000 are staying in “tourist class” hotels, the remainder staying in guest houses and ungraded hotels.

This is based on a current (2004, certainly lower than actual) count of 2,400 tourist-class beds and 3,700 guest house and unclassified beds.

The Events of 2001-2004 and the Economic Impact:

Since September 11, 2001, Zanzibar has suffered a series of shocks to its tourist industry; these follow the earlier effects of the 1995 and 2000 elections, which also set back tourism and harmed the economy.

Of greatest impact were the travel advisories issued against Zanzibar from November 2002 – February 2003, which led to a downturn of more than 40% in the annual visitor numbers.

We believe that the impact was at least US$ 18 million lost from earnings to Zanzibar from the broad spectrum of multiplier effects from the tourism industry.

This is based on estimates made in view of the following data:

• the fall in tourism is believed to have represented at least 60,000 visitors
• nearly half of all visitors arrange their holidays directly with hotels and guest houses in Zanzibar
• one-third of the industry is based upon direct contracts between tour operators and hoteliers for “package” tours
• estimates of expenditure made by visitors on Zanzibar, not including hotels and airlines
• loss of airport taxes, visas and other direct revenues from fees paid by visitors

Seasonality

Tourism in East Africa is extremely seasonal, dictated by the climate (rains in late March-May) and by visitor characteristics (the periods of the year when visitors travel – which varies; e.g. Italians in August, New Year and February, Spanish April to June, Swiss October to December).

Table 3
Monthly International Visitor Arrivals – Zanzibar

Source: Zanzibar Commission for Tourism

Existing Accommodation Facilities

Zanzibar, Pemba and Mafia

The existing accommodation in Zanzibar includes very few hotels or resorts that may be classified as five- or even four- star in terms of international standards.

The standards of design construction and finish are low and prohibit high ratings, except for a handful of recent projects.

Zanzibar has rated its tourist hotels (boarding houses and similar premises are un-rated) and only five properties fall into the five-star category.

However, these properties would be unlikely to be rated at five stars under the international system of rating.

A further 2,000-3,000 hotel beds are planned and forecasted for construction over the coming five- to ten-year period in all classes.

This includes some exceptionally good investments by important and valued international investors; these developments will have a very positive impact on improving the standards and recognition of Zanzibar’s hotel industry.

In Pemba and Mafia, the hotel industry is virtually undeveloped by comparison.

On Pemba, there is Fundu Lagoon and Manta Reef Lodge.

The Kiweni Project is in receivership.

Two “floating” facilities exist (Pemba Afloat and Floating Beach Resort).

Swahili Divers operates a guest house, alongside the two Government-owned guest houses at Wete and Mkoani.

On Mafia, the Mafia Island Lodge remains extremely run-down despite having been privatised, and the remaining three resorts are small specialised units catering to specific market segments.

Of these, Kinasi is undeniably the best, with the only swimming pool, two restaurants and a high standard of design, finish and furnishing.

Present Tourism to Zanzibar

Tourists to Zanzibar come mainly from Europe (over 60% of overseas visitors) with Italy and France being, by far, the largest sources.

The United States and Canada are also important origins, as most safari companies marketing in North America offer Zanzibar in their itineraries.

West Germany, Switzerland, United Kingdom, Italy and France dominate coastal tourism in Kenya; in Zanzibar Italy, Spain, France, United Kingdom and Scandinavia are the main markets.

In addition, residents of Kenya are a very important source of visitors, ranking third in total bed-nights occupied on the Kenya Coast in response to special rates applied to Kenya residents and heavy low season reductions in hotel rates.

Similarly, expatriate residents of Dar es Salaam and other parts of Tanzania are a significant source of visitors to Zanzibar, especially during low and “shoulder “seasons such as late March and Easter.

Table 6
Origin of Zanzibar’s Tourists by main source market

Source: Zanzibar Commission for Tourism

Zanzibar Tourism Sector

It is important to draw attention to the fact that tourism is an important industry for reasons other than tax generation.

More important, is the foreign exchange income to the local economy, direct and indirect employment, subsidiary and ancillary industries, technology transfer and training, building and construction, etc. government should not be pre-occupied with direct tax revenues from the industry but more concerned with its good management to ensure its competitiveness and sustainability in view of its overall importance as an engine of growth and development.

The primary tourism industry includes:

• Tour operators (transport services) and guides
• Hotels and guest houses
• Restaurants
• Marine and boat activities
• Travel agents
• Ferry boats
• Air services
• Retail (curio) shops
• Tourist attractions and visitor centres
  

Zanzibar Tourism: Summary of its Economic Role in Perspective

In 2002, the impact on the economy of the tourism industry of Zanzibar can be summarized as follows:

• Tourism as a proportion of gross domestic product (GDP) was 14%, and expected to grow to 21% by 2012 (ten years).
• Tourism has contributed to improved living standards: in the period from 1998-2001, per capita GDP increased from $ 219 to $ 248
• Foreign currency earnings were net US$ 46 million in 2001 from international tourists; this is expected to grow to US$ 116 million in 2012
• At least 5,800 people are directly employed by the tourism industry; but total employment is believed to be some 37,000 from tourism due to the very great indirect employment and multiplier effects of the industry (e.g. fishing, agriculture, transport, building industry, arts and crafts)
• At least $ 67 million is invested in tourism, which is the largest sector of investment in Zanzibar
• The industry has stimulated the growth of international and regional transport services by air and sea ferry
• The direct and indirect contribution to training and transfer of technology, management capabilities, technical expertise, etc.
• The economic linkages of the industry provide an important contributing factor to development of local small businesses such as transport (ground handling services, tour operators, food suppliers, etc.)

Unfortunately, these data have not been updated following a wave of new investment; we believe that over US$ 100 million is now invested by the private sector in tourism facilities.

The years 2004 and 2005 have been boom years for Tanzanian tourism and we estimate that over 1,250,000 international visitors are arriving each year in Zanzibar.

TI: How would you define the destination in term of: infrastructures, price and security?

AB: I. Infrastructure: Poor, although there are plans and actions in place.

The airport and harbour are both a disgrace and our views and efforts in regard to these two facilities are well known.

Power cuts are increasingly common, roads are haphazardly maintained, there is no solid waste management at all, and no monitoring of environmental conditions such as water quality.

II. Price: Zanzibar is generally over-priced for what (“product”) it is offering, taking into account the (lack of) attention to detail and the deteriorating environmental and infrastructure situation.

The reason for this is that Tanzania is a very expensive business environment and the indirect taxes, charges, cesses, fees, etc. add enormously to overheads.

Furthermore, investors in Zanzibar are faced with much higher costs as a result of poor or absent services (power, solid waste disposal, water supply).

There is not enough quality input produce for the industry (vegetables, etc.) and the weak manufacturing sector means that there is a very high level of imports in tourism services.

Finally, taxes (both visible and invisible) are high.

III. Security: We have put a great deal of pressure on the Government to improve the way security is delivered and have supported this with the creation of two police posts, financing of patrols and mobile phones.

Unfortunately, this is only as effective as the Police professionalism and dedication reaches.

We would like to see the formation of tourism police force such as that of Thailand or Dubai.

And we believe it is important to remove the Police roadblocks throughout the island, as they create an image of insecurity, provide almost no benefit to the populace, and are unsightly and generally dangerous to motorists.

Zanzibar Tourism Investment Opportunities and Framework

TI: Is there room for new investors and/or new investments to take place in Tourism in Zanzibar? If so, where would you say are the most interesting investment opportunities?

AB: Yes, we believe there is much more that can be done to improve and diversify the industry; some concepts we have proposed and would improve the attractions and be financial opportunities include: {xtypo_quote_right}There is much more that can be done to improve and diversify the industry{/xtypo_quote_right}

• Theme-based visitor centres (e.g. tropical garden-arboretum-botanical gardens, essential oil factories) with restaurants (perhaps based on menus and foods devised for the “spice” influence, etc.
• Golf and other major sports included in a “club” facility open to the public, also with restaurant/s and other family-oriented facilities
• Horse-riding (a well-maintained and “farm” environment, with a horse trail)
• A forest eco-lodge and camping trail in Jozani Forest (a vast section of the Forest is completely unutilized, including a small lake in the central zone)
• Adventure tourism and challenge tourism
• Childrens’ tourism with social interaction with local children and village life
• Casinos (at present gambling is prohibited) and an indoor entertainment complex
• Duty-free shopping mall
  
  

There are a number of government-held properties that offer good investment opportunities if the private sector were to be involved.

Examples include the Maruhubi training school premises, the Beit al Ajaib, the Old Fort.

The Stone Town itself requires much better management, especially to keep the town well-lit at night, free of the dozen or so “beach boys” who harass tourist (usually through a fog of drugs), remival of waste and rubbish.

The Aga Khan-sponsored upgrading of the seafront and Forodhani Gardnes should go ahead as soon as possible.

We imagine specified pedestrian walkways, craft areas and outdoor restaurants rather than the willy-nilly and unattractive hawking that currently takes place around the town and Beit al Ajabi.

The crowding of pathways with hawkers forces pedestrians onto trafficked roads.

In addition, Zanzibar needs to improve the standard and variety of its guided tours, especially nature-based, agricultural (spice) and historic-architectural excursions.

It is incumbent upon tour companies to do this through training and more attention to the detail that is involved in these tours.

The Zanzibar museum is a disgrace and needs a great deal of attention and investment to make it an interesting attraction.

This could be let to an entrepreneur who would be allowed to add a small theatre, restaurant, etc. the same approach should be taken with historical monuments that should be turned over to local communities to manage and maintain and used to generate income for school projects.

TI: Based on your personal experience, how would you define the current investment framework in Zanzibar and how would you say it evolved since you first arrived on the Island?

AB: The framework is adequate; what matters in any investment environment and developing economy is the support network, level of commitment, openness, transparency (ethical behaviour) and implementation capacity. {xtypo_quote_left}The [investment] framework is adequate{/xtypo_quote_left}

You can have the best Formula 1 racing car and still not win a race.

In this regard, both the creation of the guiding plans and policies and their implementation fall far short of what is required to make the best use of private sector investment and Government’s expenditure on its manpower.

The technical capabilities within government are inadequate and the level of commitment to professional, ethical delivery of the necessary institutional support is seriously inhibiting the industry and its potential to produce benefits.

The Government is not properly managing the industry – the infrastructure, the services and utilities, and the law enforcement – that is essential in a modern tourist world and rapidly-changing environment.

TI: What is the support and involvement of the government of the Island in the successful deployment of private investments in tourism?

AB: Tourism is receiving particular policy support as a priority foreign investment industry under Tanzania’s economic management and investment development programmes.

Visitor numbers have recovered rapidly in response to trade liberalization, renewed foreign investment, and improved licensing and procedural regulations, improved availability of fuels throughout Tanzania, and privatization and greater competition.

The main institutional tool for supporting private investors is the Zanzibar Investment Promotion Agency (ZIPA) and the investment legislation of 1996. {xtypo_quote_right}The main institutional tool for supporting private investors is the Zanzibar Investment Promotion Agency (ZIPA) and the investment legislation of 1996.{/xtypo_quote_right}

Unfortunately, it is in effecting the policies that the process becomes extremely difficult for investors and a lack of “transparency” (the modern expression for ethical behaviour) becomes the driving force.

The need to coordinate the roles and delivery from different departments requires a great deal of energy and unexpected expenditure to make any investment a reality.

There are also gross delays. As you would expect, land issues are probably the most significant hurdle.

ZIPA’s role, therefore – even with the best intentions and attention – are limited by the effectiveness of the partner departments.

There is no ombudsmen system for investors and local businessmen to refer problems and constraints and the re-registration of industry organisations such as ZATI and ZNNCCIA are very recent.

Zanzibar has lagged behind the mainland in accepting and embracing the private-public sector approach to issues.

The quality of tourism Zanzibar receives does not meet the expectations of the Government, which wishes to promote Zanzibar as an up-market destination to compete with other island destinations in the Indian Ocean, specifically Mauritius, Seychelles, Maldives.

Unfortunately, the past and current trends in hotel development have led to either low quality guesthouses (which do not meet international tourist standards) or large, mass-market hotels which can only be filled with charter tours.

If Zanzibar is to maximize the benefits of its tourism resources and avoid the “boom-bust” syndrome associated with low quality and mass tourism, it will need to upgrade its hotel and visitor services and obtain professional help to design interventions and manage the industry and its associated aspects.

TI: What are the origins of ZATI? Why and when was it set-up? What are its activities and the results obtained so far?

AB: We first began to form ZATI in 1998-1999.

An informal group of investors had been trying, independently, to draw the Government’s attention to problems in the industry, which threaten the quality and durability of the “tourism product” (and, therefore, the value of any investment).

These two groups came together at a meeting with the former president in April 1999, at a rather unsuccessful meeting of all departments and institutions directly and indirectly associated with tourism.

Essentially, the investors were “blamed” for the shortcomings in the industry, so our efforts to create a constructive dialogue and joint private-public partnership to deal with issues such as solid wastes, public attitudes to tourism, marketing, the “beach boy” phenomenon, etc. were set back very badly.

Unfortunately, some influential personalities in Government felt threatened by the private sector lobbying, rather than seeing our actions for what they were and still are – constructive, objective-oriented, problem-solving.

As a result of this setback, it took us a further 4 years, until early 1993, for a change of President and a new and imaginative Minister to effect the formal registration of ZATI.

Most of the major problems affecting the industry remain and, of course, have grown along with tourist numbers, but we now at least have a platform for dialogue and action and the President is also forming the Business Council which will enhance this process with greater across-industry reach in solving problems such as power, services, security.

Government now involves the private sector in almost all its deliberations. {xtypo_quote_left}Government now involves the private sector in almost all its deliberations.{/xtypo_quote_left}

The main activities have been directed at strengthening our relationship with government so we carried out joint training courses, a visitor exit survey, and so on.

We were particularly active in 2003, when we devoted much time to this.

Zanzibar Tourism Overview

TI: What are the major challenges the tourism industry in Zanzibar is faced in the next years, if not in the immediate future?

AB: We can list these as:

• Creating a tourism master plan and sticking to it, since all else flows from this (e.g. ensuring demolition of unplanned squatter settlements that are home to many of the “beach boys”, local gangs and petty thieves, prostitutes and drug dealers)
• Security (at least the image and actions towards this) from international terrorism and local lawlessness
• Infrastructure (airport, harbour, roads) and utilities (power, water supply, solid and liquid wastes)
• Planning, policy and enforcement of regulations, especially dealing with land use and environment (i.e. a more effective, professional and ethical government and institutional presence)
• A common-sense and uniform taxation system that encourages investor cooperation, fosters competition and supports quality improvements in the industry
• Training and HRD
• Marketing and promotion, accompanied by planned diversification and reinvestment that is part of the overall master plan and encouraged-supported by imaginative policies (e.g. tax breaks, low rentals of government property)
• Monitoring, continual study of the industry, referral and close administration to ensure that Zanzibar is delivering and that the industry is providing the full benefits to the public.
• An improved medical and emergency capability.
• Improvement of tourist services such as ATMs, public toilets, tourism police.

There is no doubt about improving quality and standards and this involves both the physical environment of the hotels and the abilities and service levels of the management and staff.

These two features encompass a host of criteria: personal safety of guests, peace and quiet on beaches (rather than endless harassment by “beach boys”), a feeling of goodwill and joy (rather than being a source of financial gain), a clean environment, well-trained attentive staff in all aspects of the industry, and so on.

TI: Where do you see the future of such destination, taking into consideration the recent focus of the national government towards the development of the mainland southern circuit?

AB: Zanzibar will continue to be a great attraction to overseas tourists but will need much better management by Government and very substantial investment.{xtypo_quote_right}Zanzibar will continue to be a great attraction to overseas tourists but will need […] very substantial investment. {/xtypo_quote_right}

Zanzibar is very easily and relatively cheaply reached by air and sea, and fits well into both the northern and southern tourist circuits.

In fact, it is increasingly the hub, rather than dare s Salaam.

At least a third of all international tourist to Tanzania visit Zanzibar.

TI: What would be you personal message to foreign investors considering the tourism industry in Zanzibar and in Tanzania?

AB: Be careful, seek advice from those who have become investors, be patient and determined.

Most of all be realistic and be sure to assess and carefully target the market/market segment that you believe exists. Do your research. {xtypo_quote_right}We believe Zanzibar has the potential for a great future{/xtypo_quote_right}

Unfortunately many investors are driven by chance meetings, emotions, dreams or relationships, rather than business sense and market research.

We believe Zanzibar has the potential for a great future, especially as investors in other industries get moving (e.g. sugar, floriculture) because these changes “make” an economy.

The most recent quality investments by Italian and Gulf investors has been an effective and refreshing change in direction to a higher-value product, and improvements are going on in many properties, with the addition of spas, improved furnishings, training, etc.

But Government must get its act together on energy and environment and social issues.