A deeper look at the numbers.
By Ibrahim Athif Shakoor
This article needs to be read as a continuation of the article published in mer.mv on the 13th of April (Link) detailing the rapid pace of growth of the guest house segment. The article concluded by saying that the guest-house segment is here to stay and that ‘It’s time for the larger tourism industry to recognize this truth and work with the segment for the larger good of the Tourism Industry’. This second part attempts a further analysis on 2 fronts; contribution to GDP and the preference of incoming tourists.
As revealed earlier, the number of beds in the Guest House segment has grown by 1900% since its official start in 2008, expanding to nearly 20% of the beds in the tourism industry. According to National Statistics, ‘other accommodation services’ (the previous article demonstrated that, the energy and vitality that drove this component came largely from the guest-house segment) grew by a massive 31.7% while the larger tourism industry grew by a modest 3.9% during 2013-2017.
Yet, while the growth of the Guest House segment was remarkably impressive, the segment has not been able to make its impact felt in GDP figures quite so clearly. The average GDP share of the segment, over the 5-year period (2013-17) is a modest 1.37% and only reaches 2.42% in 2017. For comparison, the fishery industry contributed an average of 3.9%, construction industry 5.6% and the larger tourism industry contributed an average of 24.4% to gdp figures during the same period. Therefore, even while the growth in beds in the guest house segment have been robust and widespread, the contribution of the segment to the larger economy remain low.
Data: National Bureau of Statistics
Meanwhile the assumed scenario of middle-income tourists being attracted to the guest house segment because of its more affordable prices are also not evident in published numbers. This is best seen in the Green Fund Tax Report (the report shows Green Fund Tax received by type of accommodation and divided into Atolls) published by the Ministry of Finance and Treasury for January and February 2019.
The rate of Green Tax charged at a resort hotel is double (8$/bed night) then from those staying in Guest Houses and livaboards (4$/bed night). When adjusted for this difference, the published data shows that only 6.94% of the those who paid Green Fund tax in January and February of 2019 stayed at guest houses while 88% of the tax was received from resort hotels. Assuming, that the figures are right and the errors and omissions in reporting are largely similar to all such reports, the finding that only about 7% of tourists preferred to stay at guest houses, even while the segment has increased so rapidly, is perhaps counter intuitive.
Additionally, even while Tourism Ministry website shows that guest houses have now been registered in all atolls except Sh, the Green Fund Tax statistics show that 80% of the green fund tax were paid from guest houses in K. and Ari Atolls (including A.A. and A.Dh. Atolls) When tax from V Atoll are merged, the % rises to 90%.
Data: Green Fund Report, Ministry of Finance and Treasury. Chart: mer.mv
Hence, even while guest houses have been registered in all atolls except Sh., 90% of guest house tourists stay at close geographic proximity to the capital. This of course means that that 1681 beds registered to 125 guest houses outside K, V and Ari Atolls, received only 10% of the tourists who preferred to stay at Guest Houses.
More worryingly R and M atolls have not registered any Green Fund Taxes during January and February; which is still the height of the season. However, Meemu Atoll have 22 registered guest house beds in two islands Muli and Mulah and Raa Atoll has 16 beds also registered in 2 islands Ungoofaaru and Maakurathu. Yet, of the total 38 beds in 4 registered establishments, none apparently received a single guest during January and February; still at the peak of the tourist season.
Data: Green Fund Report, Ministry of Finance and Treasury. Chart: mer.mv
As stated in the earlier piece, the guest house segment is here to stay. Small Investors have invested in 548 guest houses spread throughout the country and more are being built. Yet, tourists are still, by and large preferring to stay at resorts. Meanwhile, 90% of those who prefer the guest house segment are still limiting their choice to the Male’ Atoll and the 2 atolls closest to Male’; V and Ari.
The third and final article of the series will look at the implications and offer a set of policy recommendations to enable the guest house segment to reach its potential in the larger tourism industry and thus the economy of the Maldives.