Leisure tourism continues to be the main driver of tourist inflows, accounting for 98.3% of visitors in April 2023, while business travellers accounted for 1.7% and conference attendees accounted for 0.02%, the latest hospitality report by Simonis Storm reveals.
As usual, majority of visitors during April 2023 came from Germany, Austria, and Switzerland (41.0%). Following with the second highest occupancy rates are locals (18.6%), South Africans (8.3%) and the French (6.8%).
According to the Hospitality Association of Namibia (HAN), the growth in the portion of visitors from Namibia’s main tourist source markets (i.e. Germany, Austria and Switzerland) is partly due to the availability of 10 direct flights each week between Windhoek and Frankfurt. In addition, the weakening Rand exchange rate poses as an advantage for foreigners in Namibia as their Euros have more spending power.
“The inflows from Europe picked up in January of this year and has been on an upward trend since then. Indeed, occupancy rates are bound to recover beyond pre-pandemic levels. According to the World Tourism Organisation (UNWTO), international tourism increased by 86% in 1Q2023 compared to 1Q2022. Mostly driven by travel to the Middle East (which has surpassed pre-pandemic levels) and European countries (which has reached 90% of pre-pandemic levels) and travel to Africa reaching 88% of pre-pandemic levels,” the report notes.
The occupancy rate in April 2023 across nationwide hospitality establishments stood at 51.8%, compared to 36.5% recorded in the same month last year. This is the highest monthly occupancy rate recorded for 2023 thus far. On a monthly basis, national occupancy rates were 11.2 percentage points higher, increasing from 40.7%. The YTD average in 2023 (40.3%) is merely 3.7% short of reaching pre-pandemic levels – YTD average of 2019 was recorded at 44.0%.
“According to our Quarterly Economic Review of 1Q2023, tourism is set to be one of the best economic drivers for the remainder of 2023. The private sector green hydrogen projects, new aquatic projects such as salmon farming and kelp production in Luderitz, investments in gas pipelines and mining explorations could also feed into boosting the tourism industry,” the report explains.
Locals are occupying less of the rooms due to straining economic conditions. The report explain that accommodation services became 15.7% more expensive in April 2023 compared to April 2019, while accommodation services inflation stood at 6.7% y/y and food inflation at 13.5% which are above headline inflation of 6.1% y/y in April 2023.
“This insinuates that locals are limited in spending on accommodation as disposable incomes are strained by higher food prices amongst other living costs. According to NSA data, since April 2019, hotels, cafes and restaurant prices have increased by 16.9%, driven by both catering (up 18.0%) and accommodation services (up 15.7%). At the same time, holiday packages offered by Namibian companies have become more expensive.
“The latest figure for holiday packages inflation was recorded at 73.6% y/y in April 2023, compared to 17.9% y/y in March 2023. This could be explained by higher fuel costs, higher electricity tariffs, food inflation and higher interest rates which increases operational costs of local tourist and accommodation operators,” notes the report.
Furthermore, it explains that holiday packages in Namibia are reliant on the use of fuel, which recorded double digit inflation rates since April 2022, and for the first time recorded a single digit increase in petrol and diesel prices of 2.7% y/y in April 2023.
“Together with food inflation (up 13.5% y/y in April 2023), electricity charges (up 9.0% y/y in April 2023) and higher interest rates, holiday packages are likely to become more expensive going forward. Considering that the Electricity Control Board (ECB) have approved an 9.0% increase in electricity tariffs (effective 1 July 2023) as well as the expected dry season will add to food inflation.
“Air transport has increased by 9.0% since April 2019, with its most recent inflation recorded at 5.4% y/y in April 2023. This can partly be explained by a low number of airlines serving Windhoek and Walvis Bay from neighbouring countries, in addition to rising operational costs of airlines operating in South Africa. Going forward, we therefore expect regional tourist inflows and local tourism to decrease, with international tourist inflows being the main driver of the on-going recovery in the local tourism industry,” concludes the report.