CCCGGGIII CCCLLLIIICCCKKK No. 2 – February 2010

Zayd Soobedar

Credit Risk Underwriter 31/12/2009

TOURISM SECTOR OUTLOOK 2010

Dear all,

Following the warm welcome given to our 1st newsletter by the

various stakeholders back in December 2009, we have decided to

provide it with a more salient identity. As from now, our newsletter

will be known as CGI Click.

In line with our strategy to develop further awareness of credit

insurance, we provide you in the 1st section of this new issue with a

brief overview of our business as well as our company profile and

an introduction to the team behind CGI.

In the 2nd part of CGI Click, we elaborate on an analysis of the

tourism sector with emphasis on the 2009 performance and an

outlook for 2010.

Zayd, our economist, did a fantastic job on this survey and we are

proud to have him in our team.

And to conclude, as usual, YOU TRADE, WE COVER!

Johan Crabeels

General Manager

(On behalf of the CGI Team)

Disclaimer: CGI Copyright. While we have made every attempt to ensure that the information contained in this report has been obtained from

reliable sources, CGI is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in

this document is provided ‟as is‟, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this

information, and without warranty of any kind, express or implied. In no event will CGI, its related partnerships or corporations, or the partners,

agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this report or

for any consequential, special or similar damages, even if advised of the possibility of such damages.

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3

OVERVIEW OF CREDIT INSURANCE

Credit insurance is an invaluable aid to successful national and

international business-to-business trade. It covers the risk of

financial loss that can occur when trade credit is offered by a

business to its corporate customers – thus providing a set period of

credit after provision of products or services before payment is due.

In these circumstances, there is always a risk of non-payment, either

because the customer may be unable or unwilling to pay, or because

an unforeseen event prevents successful completion of the sales.

[Ref: Atradius]

CGI‟s business is to provide credit insurance to local suppliers for

both domestic and export markets. Credit insurance provides cover

to businesses against non-payment of debts owed to them by

business customers for goods or services provided on credit terms.

Main advantages of credit insurance for suppliers & traders

Professional management of buyers through credit limits

Protect cash flow & profits from bad-debt losses

Sell safely to new and existing customers

Secure Financing Terms

Enter domestic/international markets with confidence

Increase working capital availability

Reduce bad-debt reserves

Protect your trade

Better trading conditions

Enhanced security

Debt collection service

COMPANY PROFILE

Credit Guarantee Insurance Co. Ltd (CGI) was incorporated in

February 2009 with BRN C08078435. The shareholders are La

Prudence Mauricienne Assurances Ltee (60%) and The Mauritius

Commercial Bank Ltd (40%). Our technical partners are Atradius

and Atradius Re.

Overview of our shareholders

I. La Prudence Mauricienne Assurance Ltee

Turnover 2008 : Rs 806 Mn

Total assets 2008 : Rs 2.5 Bn

Market share stands around 6%

Reinsured by Munich Re (world‟s largest reinsurer)

Certified ISO 9001

Group is diversified into life and general insurance, leasing and fund

management

II. The Mauritius Commercial Bank Ltd

Leading bank in Mauritius with over 40% market share

2600 employees

Present in 8 countries

Net profit of Rs 4 Bn for 2008/2009 (+ 7%)

Capitalisation USD 1 Bn

Since 1838

Our technical partners

I. Atradius

160 offices in 42 countries

2nd largest credit insurer worldwide – 31% market share

Premium: € 1.8 Bn in 2008

80 years experience with

Database of 52 million businesses worldwide

22,000 limits issued per day

Nearly € 500 Bn turnover insured annually

Standard & Poor‟s rating A – & Moody‟s rating A3

II. Atradius Re

Long reputation as a leading reinsurer of more than 40 years in

Credit and Bond reinsurance on 5 continents

Standard & Poor‟s rating A - & Moody‟s rating A

Credit Insurance – our business

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The world economy faced one of the most severe recessions in decades during 2008/09. Global tourism, though resisting better

than some sectors, has not been immune. Markets started to deteriorate by mid 2008 and the effects were still strong in 2009.

As per the World Tourism Organisation (UNWTO), the downward trend in international tourism experienced during the last 6

months of 2008, has lingered during 2009 and international tourism dropped by 4% last year. However, as per the UNWTO,

there are possibilities of a recovery for 2010, but this will depend on the changing economic conditions and the restoration of

consumer and business confidence. Considering the high responsiveness of the domestic tourism market to changes in global

travel and the subdued economic outlook in our main source markets in particular France and UK, the outlook for the Mauritian

tourism sector for 2010 is rather favourable, with the industry expected to renew with growth after the sharpest contraction on

record experienced in 2009. Our arrival estimate for the current year stands around some 915,000 tourists. To brace against the

impact of the crisis, the government has implemented several measures detailed mainly in the Additional Stimulus Package (2008)

and the Budget 2009/10. At micro level also, hotels have applied internal measures and initiatives to counter the fall in tourist

arrivals and low occupancy rates. In the case of a prolonged stressed (another poor peak season in 2010), some hotels might

start facing risk of default, especially hotels recently set up are more prone to the risk of failure. In terms of employment, the

number of job losses in the industry has not been critical for the period March 2008-March 2009, in line with government‟s policy

for job retention and preservation for the sector, but same has started to pick up again in 2010 with many hotel groups recruiting

employees. Regarding the future of the global tourism industry, all major stakeholders worldwide are adamant on the long-term

prospective and high potential of the tourism sector after the effects of the financial crisis fade away. However, the timeframe is

not yet properly defined due to the high level of uncertainty in the market, even though 2010 is likely to be a promising year for

the global tourism industry. On the domestic front, the AHRIM is also confident regarding future prospects of the industry and

the Board of Investment forecasts 1.5 million tourist arrivals by 2013.

Zayd Soobedar

Credit Risk Underwriter

Wednesday, 10 February 2010

TOURISM SECTOR OUTLOOK

06 August 2009

6

Contents MAIN HIGHLIGHTS ........................................................................................................................................................................ 7

OUTLOOK OF THE TOURISM SECTOR FOR 2010 ....................................................................................................................... 8

Sharp downturn in international tourism during 2009 following global crisis… .............................................................................. 8

Measures to brace against the crisis… ............................................................................................................................................ 9

UNWTO Panel of Experts’ Confidence Index showing encouraging signs for 2010… .................................................................... 9

Global outlook 2010: dark clouds to fade… ................................................................................................................................... 9

Milestone for domestic market: abnormal growth “bye gone” as arrivals revert back to core trend…............................................. 10

The key risks to the outlook… ..................................................................................................................................................... 10

Employment in the sector outlook ................................................................................................................................................ 11

In case of prolonged stress… ....................................................................................................................................................... 11

Way forward: post-financial crisis… ............................................................................................................................................ 11

DRIVERS FOR TOURISM: DOMESTIC & WORLDWIDE ........................................................................................................... 13

Economic factors in main source markets..................................................................................................................................... 13

Image & Visibility in main source markets................................................................................................................................... 14

Air access liberalisation ............................................................................................................................................................... 14

Adequate infrastructure and room capacity to meet demand ......................................................................................................... 15

Consumer sentiment .................................................................................................................................................................... 15

SUMMARY OF KEY CREDIT STRENGTHS AND WEAKNESSES FOR DOMESTIC TOURISM ............................................... 17

KEY INDUSTRY STATISTICS ...................................................................................................................................................... 18

2009: A year of turbulence… ....................................................................................................................................................... 18

The imprint of volatility and crisis on main source markets …...................................................................................................... 19

Purpose of visit: MICE segment slackens… ................................................................................................................................. 19

Overview of main tourism industry statistics ................................................................................................................................ 20

Macroeconomic perspective: after highs, lows set in… ................................................................................................................. 20

Tour operators ............................................................................................................................................................................. 21

APPENDIX ..................................................................................................................................................................................... 22

A1. MEASURES TO BRACE AGAINST THE ECONOMIC & FINANCIAL CRISIS ................................................................ 22

International ................................................................................................................................................................................................................... 22

Domestic ........................................................................................................................................................................................................................ 23

REFERENCE .................................................................................................................................................................................. 25

7

MAIN HIGHLIGHTS

International tourism fell by 4% yoy to 880 million in 2009 with international tourism receipts plummeting by

6% yoy for the period. However, the final quarter was marked by a 2% yoy growth. Same trend was followed

by the domestic tourism industry.

Overall, tourist arrival for Mauritius fell by 6.4% yoy to reach 871,356 in 2009.

Arrivals from Europe shrunk by 4.7% yoy to reach 579,508 guests, driven by the poor performance of our

main markets. Nevertheless, it is important to point out that our main source market, namely France,

showed buoyant results in the context of the global economic crisis with arrivals increasing by 6.0% yoy.

Contrarily to September 11 whereby the „willingness to travel‟ was dented, the crisis coupled with

uncertainty and health scares have adversely impacted on both „willingness to travel‟ and more importantly

the „ability to travel‟ of individuals worldwide (through negative wealth effects), covertly suggesting that the

timeframe for recovery might be longer than for 9/11.

As per the UNWTO, the focus should be on 3 main pillars (resilience, stimulus and green economy) to brace

against these challenging times.

The improved prospects for 2010 are confirmed by the encouraging steep rise in the UNWTO Panel of

Experts‟ Confidence Index for 2010.

After factoring in updated information from AHRIM, global trends in arrivals, impact of the financial crisis on

„willingness and ability to travel‟ of consumers and outlook for our main source markets, we estimate tourist

arrivals for the year 2010 to stand around some 915,000 tourists for the year, that is, a 5% yoy pickup

compared to 2009.

8

TTTHHHEEE BBBOOOXXX

Market dynamics in 2009

> Individuals travel to destinations closer to home. Inbound tourism is expected to be favoured to long-

haul travel

> Decline in average length of stay as well as expenditure

> Destinations offering value for money and with favourable exchange rates have an advantage as

consumers become more price- sensitive

> Late booking is expected to increase as uncertainty leads consumers to delay decision making and wait for

special offers

> Segments such as visiting friends and relatives,

repeat visitors, as well as special interest and independent travellers, are expected to be more resilient

> Business travellers tend to make fewer, shorter and

cheaper business trips switching from luxury extras in

favour of basic efficiency and good service.

International tourism 2009 performance

> Full-year results show that growth was negative in all world regions except for Africa, which bucked the

global trend: Europe (-6%), Asia and the Pacific (-2%), the Americas (-5%), the Middle East (-6%),

Africa (+5%)

> The upward trend of the last months of 2009 is also visible in the air transport data from IATA and

various regional airtransport associations. According to IATA, passenger traffic was positive since September

2009 after a year of declines.

> Hotel performance data for the first 11 months, as analysed by Deloitte based on data reported by STR

Global, also corroborates this upward trends – occupancy rates have started to post growth in some

key destinations which is a sign that the recovery has begun.

As in previous crises, consumers tended to travel

closer to home during 2009. Several destinations have seen domestictourism endure the crisis better and

even grow significantly. This was the case among

many other countries, of China, Brazil and Spain, where the domestic market, representing a large

share of the total demand, contributed to partially

offsetting the decline in international tourism.

OUTLOOK OF THE TOURISM SECTOR FOR 2010

Sharp downturn in international tourism

during 2009 following global crisis…

In 2009, the world economy faced one of the most

severe recessions in decades. According to the IMF

World Economic Outlook (October 2009), the

world‟s GDP was projected to decrease by some

1.1% yoy in 2009. Tourism, though resisting better

than some sectors, has not been immune. Markets

started to deteriorate by mid 2008. As per the World

Tourism Organisation (UNWTO), the downward

trend in international tourism during the last 6 months of 2008 has lingered during 2009. The first 3

quarters of 2009 registered declines of 10% yoy, 7% yoy and 2% yoy respectively. However, the final

quarter was marked by a 2% yoy growth, which contributed to quell the overall decline to 880 million

international tourist arrivals (-4% yoy) compared to the 920 million achieved in 2008. Based on the

trends through the first 3 quarters, international tourism receipts for 2009 are estimated to have

decreased by around 6% yoy. While this is unquestionably a disappointing result for an industry

accustomed to continuous growth, it can also be interpreted as a sign of comparative resilience given

the extremely difficult economic environment. This becomes more evident when compared with the

estimated 12% slump in overall exports as a consequence of the global turmoil.

Of note, shocks like September 11 and the financial crisis reengineer the dynamics of the market for a

while before readjustments. However, contrarily to September 11 whereby the „willingness to travel‟

was dented, the crisis coupled with uncertainty and health scares have adversely impacted on both

„willingness to travel‟ and more importantly the „ability to travel‟ of individuals worldwide (through

negative wealth effects), covertly suggesting that the timeframe for recovery might be longer than for

9/11.

The change in market dynamics has already affected Mauritius in the 2nd half of 2008. After a record

year in 2007 after expansion of 15% yoy, growth decelerated to 2.6% yoy in 2008 with tourist arrivals

reaching 930,456. Reflecting trends in international tourism, the 2nd half of the year was marked by a

pronounced slowdown in arrivals with the peak quarter witnessing a downturn of 2.2% yoy. The

downward trend persisted during the first 9 months of 2009. Tourist arrivals shrunk by 9.7% yoy to

608,885 guests compared to 674,174 for same period in the previous year. However, as per the CEO

of AHRIM, the “sector was facing difficult times but the drops in arrivals, occupancy rates and hotel

receipts appear to be stabilising.” This was confirmed by the last quarter‟s positive performance,

whereby tourist arrival growth stood at +2.4% yoy. Overall, tourist arrival fell by 6.4% yoy to reach

871,356 (same will be discussed further in the Key Industry Statistics section).

Figure 1: International tourist arrivals, 1995-2009

534

567

593610

632

682 682

702691

762

802

847

901

920

880

500

550

600

650

700

750

800

850

900

950

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Inte

rn

ati

on

al T

ou

ris

t A

rriv

als

(m

illi

on

)Year

9

Measures to brace against the crisis…

As per the UNWTO, the focus should be on 3 main pillars (resilience, stimulus and green economy)

to brace against these challenging times. As such, these measures are subdivided into 8 broad

categories (fiscal, monetary, human resource, marketing, travel facilitation, public/private partnerships,

environmental and transnational cooperation). So far, most countries have applied these measures.

Similarly, Mauritius has implemented all the above measures detailed mainly in the Additional Stimulus

Package (2008) and the Budget 2009/10. At micro level also, hotels have implemented internal

measures and initiatives to counter the fall in tourist arrivals and low occupancy rates. [Refer to

Appendix A.1 for further details]

UNWTO Panel of Experts’ Confidence Index showing encouraging signs for 2010…

As expected, given the turbulence experienced over the

past 12 months, the over 330 members of the UNWTO

Panel of Tourism Experts from around the world have

evaluated 2009 with a pretty poor score of just 71.

However, the average score given by these same experts

for 2010‟s prospects is 131, well above the neutral 100

and close to the level of the boom years 2004-2007.

Global outlook 2010: dark clouds to fade…

The International Monetary Fund (IMF) has just recently

stated that the global recovery is occurring "significantly"

faster than expected, as compared with its October

assessment which already counted on a clear return of

economic growth in 2010 (+3.1% worldwide, with

stronger performance for emerging economies at +5.1%,

alongside a more sluggish one for advanced economies at

+1.3%). Against the backdrop of both the upturn in

international tourism figures and overall economic

indicators in recent months, UNWTO forecasts a growth

in international tourist arrivals of between 3% and 4% in

2010.

Of note, domestic tourist arrivals high have always

outperformed international tourism over the past 15

years, except for 2009. There appears to be a high degree of correlation (0.98) between tourist arrivals for Mauritius and

international tourism. However, the responsiveness of domestic tourist arrivals to international tourism is 1.5 (based on figures for

1995 to 2009), implying that on average a 10% increase in international market is likely to yield a 15% hike in domestic arrivals (same

also applies for downsides as has been the case for 2009, whereby international tourism declined by 4% and arrivals for Mauritius

TTTHHHEEE BBBOOOXXX

UNWTO response:

> The UNWTO has classified

the measures into 8 broad

categories as follows:

1. Fiscal measures

2. Monetary measures

3. Human resources measures

4. Marketing measures

150

144140

137132

71

131

119

144140

136

143

98

71

25

50

75

100

125

150

175

2003 2004 2005 2006 2007 2008 2009 2010

Equal

YearProspects (before) Evaluation (after)

Better

Worse

Figure 2: UNWTO Panel of Experts’ Confidence Index, 2003-2010

International Tourist

arrivals

Tourist arrivals for

Mauritius

-10%

-5%

0%

5%

10%

15%

20%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Gro

wth

rate

%

Year

Figure 3: Relationship between domestic arrivals and international tourism travel,

1995-2009

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TTTHHHEEE BBBOOOXXX

Outlook 2010

> CGI Research Team forecast tourist arrivals to

amount to around 915,000 (i.e. +5% yoy) for 2010 based on latest information, UNWTO projection and

outlook for our main source markets.

> World tourism expected to hike between 3% and 4% in 2010.

> Improvement in economic conditions in major source countries. IMF projects growth: France

(+0.9%), UK (+0.9%), Germany (+0.3%), Italy (+0.2%). This could contribute to restore consumer and business confidence.

Employment outlook in tourism sector

> Number of layoffs between June 2008 and June 2009 rather insignificant

> In several cases, contracts of expatriates not

renewed

> In case of prolonged stress, less experienced non-

managerial and manual workers prone to lose jobs

dropped by 6.4%). Based on the above relationship and in line with the global outlook for international tourism, domestic arrivals are

anticipated to recover.

Milestone for domestic market: abnormal growth “bye gone” as arrivals revert

back to core trend…

After factoring in

updated information

from AHRIM, global

trends in arrivals,

impact of the financial

crisis on „willingness and

ability to travel‟ of

consumers and outlook

for our main source

markets, we estimate

tourist arrivals for the

year 2010 to stand

around some 915,000 tourists for the year, that is, a 5% yoy pickup compared to 2009. We forecast

average occupancy rate to stand around 74% for the year.

The key risks to the outlook…

2010 provides several upside opportunities, while naturally not eliminating downside risks. On the positive side, the global economy

is recovering quicker than expected and business and consumer confidence have picked up. Interest rates and inflation are expected

to rise only moderately in the short term. In the tourism sector, the pent-up demand that generally follows a slump creates several

opportunities and there is scope for a revival among source markets which were hard hit in 2009 such as the UK or the Russian

Federation. Another factor that will brighten up 2010 is that there will be plenty of events to attract potential visitors – from the

Winter Olympics in Vancouver in February to the FIFA Football World Cup in June in South Africa and the Shanghai World Expo

from May through October.

On the downside, unemployment is the key challenge. The jobs crisis is not over yet, particularly in major advanced economies and

many valuable human resources are still at risk. In the economic front, recovery in major tourism source markets, especially in

Europe and the USA, is still fragile and household and company budgets may face extra pressure from the gradual withdrawal of

stimulus measures and from potential increases in taxation as results of growing public deficits. Oil prices are expected to remain

volatile through 2010 and security threats as well as the potential of increased related hassle and costs for travellers are still a

challenge. Finally, although the overall impact of the influenza A(H1N1) virus was milder until now than anticipated, experience from

previous pandemics shows that the situation could once again become challenging. 2010 will be characterised by a still quite rough

business environment for the tourism sector as revenues and yields are expected to recover at a slower pace than travel volumes.

Figure 4: Actual tourist arrival, core trend and 2010 forecast

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

To

uri

st a

rriv

al

YearActual tourist arrival Core trend

CGI Forecast 2010: 915,000 tourists

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Employment in the sector outlook

As per the AHRIM, the number of job losses in hotels is rather insignificant for the period June 2008 to June 2009, in line with the

job retention and preservation policy of the government. The Additional Stimulus Package (2008) stipulated clearly that “there will be

no layoffs without prior consultations with the Government and a plan for retraining”. In addition, the AHRIM and the

Empowerment Foundation have been working together on training programmes for hotel employees to avoid layoffs among

employers below managerial ranks. Moreover, hotel operators are confident about the future of the industry, and anticipate a strong

recovery in the sector after the outlook in our main source markets improve. Laying off workers in the current context is

considered as a wrong strategy, the reason being that there will be a shortage of experienced workers when the tourist arrivals pick

up. However, contracts of expatriate workers have not been renewed in several cases.

In case of prolonged stress…

As per the CEO of AHRIM, in case of prolonged stressed (another poor peak season in 2010 due to curtailed tourist arrivals), there

is risk of default (even though very unlikely) for some hotels as was the case after the Gulf War in 1993 whereby 6 hotels closed

down. The most sensitive segment prone to risk of failure is new hotels that are yet to position themselves well in the main source

markets to draw the advantages of a regular clientele which in general account for 30% of annual guests in some hotels. In this

context, the increased debt level of the sector for the past few years is a cause for concern. In terms of employment, the impact is

likely to be mitigated depending on hotel operators. However, non-managerial and manual workers with less experience in the

industry are more prone to lose their

jobs.

Way forward: post-financial

crisis…

All major stakeholders in the industry

worldwide are adamant and confident

that international tourism will flourish

further as the effects of the financial

crisis dissipate. However, the

timeframe is not yet properly defined

due to the high level of uncertainty in

the market. On the domestic front, the

AHRIM is also confident regarding

future prospects of the industry and

the Board of Investment forecasts 1.5

million tourist arrivals by 2013.

Using extrapolation, we have tried to

devise a scenario for the evolution of

tourist arrivals and occupancy between

2007 and 2015, which excludes the

600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

1,600,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

To

uri

st

arr

ivals

New trend (based on 2007 & 2008) Future trend line Actual tourist arrivals

Actual

Forecast

Tourist arrivals with crisis

Catch-up

potential

17,486 15,841

12,390

737575

70

7374

61

(22,000)

0

Room

capacit

y

(100)

(50)

Occu

pan

cy r

ate

(%

)

Room capacity Occupancy rate

With crisis. Scenario excluding the financial crisis would yield an average

occupancy rate of 70%

Figure 5: Evolution of domestic tourist arrivals, room capacity & occupancy rates, 2000-2015

12

impact of the financial crisis on tourist arrivals. It is based on the following assumptions:

(i) 2007 and 1H08 figures as new trend and first half arrivals account for 47% of total arrivals for the year

(ii) Government reforms that have been implemented will be successful in boosting tourist arrivals

(iii) Increase in number of hotels, room capacity, and bed places with major hotel projects in the pipeline. With current hotel

projects in the pipeline, room capacity is expected to increase by 5,929 rooms between 2009 and 2012, with a high concentration

being completed in 2011.

(iv) Greater visibility and penetration in main source markets following marketing campaigns carried out by the MTPA/hotel

operators and also successful diversification of markets

(v) The proportion of tourists residing in hotels remains constant

As such, we believe that tourist arrivals would have shifted upwards on a new trend line as from 2007 to 2011 following which

another drift in the trend line is expected in 2011/12 based on projected increase in room capacity with hotel projects in the

pipeline and renovation/extension of existing hotel. Based on the extrapolations, the number of tourists visiting Mauritius is

forecasted to hit around 1.4 million by 2013 and nearing 1.6 million by 2015. To meet this demand, the number of rooms is

estimated to stand around 18,000 with around 32,000 bed places. This suggests further scopes for investment in hotels in coming

years.

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TTTHHHEEE BBBOOOXXX

Main drivers for the industry

> Economic factors like growth in main source markets, exchange rates, interest rate, oil prices and

so on

> Image & Visibility in main tourist-generating countries

> Adequate infrastructure and room capacity

> Air access liberalisation

> Consumer sentiment

> In several cases, contracts of expatriates not renewed

> In case of prolonged stress, less experienced non-managerial and manual workers prone to lose jobs

DRIVERS FOR TOURISM: DOMESTIC & WORLDWIDE

Economic factors in main source markets

Following last year‟s crisis, economic factors in main tourist-generating countries are crucial for determining international travel as

they impact directly on the „ability to travel‟ of individuals. As such, based on the IMF World Economic Outlook Update (October 2009),

most of our main tourist-generating countries were projected to face negative growths during 2009. However, a recovery is

expected in 2010 with world output expected to grow by 3.1% yoy. The following table shows the IMF projections for 2009 and

2010.

Table 1: Selected Growth Rates (%), Global economy

Country/Region 2007 2008 2009* 2010*

Advanced economies 2.7 0.8 -3.4 1.3

US 2.1 0.4 -2.7 1.5

Germany 2.5 1.2 -5.3 0.3

France 2.3 0.3 -2.4 0.9

UK 2.6 0.7 -4.4 0.9

Sub Saharan Africa 7.0 5.5 1.3 4.1

China 13.0 9.0 8.5 9.0

India 9.4 7.3 5.4 6.4

Middle East 6.2 5.4 2.0 4.2

World output 5.2 3.0 -1.1 3.1

Commodity Prices:

Oil 10.7 36.4 -36.6 24.3

Nonfuel (avg based on world commodity export weights) 14.1 7.5 -20.3 2.4

Source: IMF World Economic Outlook Update, October 2009 * Projections

Our main source market for tourism and second principal market for exports of goods, France, faced

tough times in 2009. As per the IMF, “the near-term outlook is challenging with real GDP projected

to drop by 2.4% in 2009, followed by a gradual recovery in 2010. The risks to the outlook are mostly

tilted to the downside in view of the sensitivity of the French economy to a worse-than-foreseen

contraction in the European Union and underlying tail risks, in particular in the financial sector. The

steep increase in unemployment could further shake confidence and weaken private consumption. A

worsening of the financial crisis would hurt banks‟ balance sheets and could further depress credit

growth. At the same time, lower trade openness and higher social protection are expected to

continue to shelter the French economy relative to its peers”. While some progress was

acknowledged in the implementation of structural reforms, more effort was deemed necessary to

boost potential output. The near and medium-term economic projections are subject to unusual

uncertainty at the present juncture. Other key markets namely UK, Germany, Italy and Spain face broadly similar outlooks.

Exchange rate dynamics affect directly the turnover of hotels through the average room rate which is often quoted in foreign

currency. Depreciation of the domestic currency tends to make the Mauritian destination cheaper and more appealing to foreigners.

Another important economic driver is interest rate, which impact on the profitability of local hotels. With many new hotel projects

and renovation/extension works in the pipeline, debt servicing (i.e. financing charges) is a non-negligible element for determination of

profits. Low interest rates can provide hotel operators with greater margin to implement marketing strategies (mainly advertising,

promotional campaigns, special pricing and so on) to lure tourists to the island. In addition, oil price fluctuation in international

markets is also a significant economic factor as it affects the price of air tickets.

14

Image & Visibility in main source markets

Positioning the country‟s image of being a lucrative destination and enhancing the visibility of Mauritius in main markets has

contributed largely to boost tourist arrivals over the years. The main communication channels are aggressive marketing campaigns,

competitive promotional packages, road shows, strong tour operators and network of travel agents, branding and reputation of

hotels among others. In this respect, the budget of the Mauritius Tourism Promotion Authority (MTPA) has been reviewed upwards

in the Additional Stimulus Package and the Budget 2009/10 to help maintain the country‟s visibility in major source markets as well as

developing alternative markets like India to counter the downturn in domestic arrivals during 2009. Recently, the MTPA has branded

our destination with the slogan “L‟ile Maurice, C‟est un plaisir.”

Air access liberalisation

The share of air ticket in the whole package offered to clients coming to Mauritius is relatively high. However, with greater air

access liberalisation, this can be reduced and hence increasing our competitiveness in the international market (the higher number of

bilateral air services agreement with charted airlines, the more accessible and cheaper the Mauritian destination. Based on the latest

bilateral air services agreement dated 27 May 2009, the major developments regarding air traffic to Mauritius for 2009 are given

below:

Source market Main highlights

Australia

Air Mauritius: 1 combined weekly flight to Perth/Melbourne from 27 April to 24 October 2009

direct flights to Sydney during the peak season

Air Mauritius has entered into code share arrangements with Malaysian Airlines to market Perth, Melbourne and Sydney from Kua la Lumpur.

France

Air Mauritius:

7 weekly frequencies in April/Sept/October 2009

6 weekly flights in May/June 2009 2 additional weekly flights in July/August 2009

Air France:

4 weekly frequencies (March – October 2009)

Corsair:

2 weekly frequencies Will introduce a third weekly frequency from Nantes in November 2009

Germany

Air Mauritius:

1 weekly flight from Frankfurt/Geneva from 08 May to 24 October 2009

Condor:

2 weekly flights from Frankfurt

India

Air Mauritius: 3 weekly flights to Mumbai from April to June 2009

2 weekly flights in July, August, September and October 2009

1 weekly flight to Chennai/Bangalore from 29 March to 24 October 2009

1 weekly flight to New Delhi from 29 March to 24 October except from 27 May to 30 June

2 weekly flights to New Delhi from 27 May to 30 June 2009

Italy

Air Mauritius: 1 weekly flight to Milan in May, June, July, September and October 2009

2 weekly flights to Milan in August 2009

Volare:

3 weekly flights (has stopped its operations till October 2009)

Eurofly: 3 weekly flights to Rome(is presently operating 2 weekly flights and will introduce a fourth weekly flight in October 2009)

Air Italy:

1 weekly flight(has stopped its operations)

South Africa

Air Mauritius:

6 weekly flights to Johannesburg

2 weekly flights to Cape Town 1 weekly flight to Durban

South African Airways:

8 weekly flights to Johannesburg

Comair:

1 weekly flight (has reduced its weekly flights from 3 to 1 up to October 2009)

United Kingdom

Air Mauritius : 4 weekly flights from March to 15 April, 15 July to 16 September and October 2009

3 weekly flights from 16 April to 14 July and from 17 to 30 September 2009

British Airways :

3 weekly flights

Virgin Atlantic : 2 weekly flights (has stopped its operations and will resume in October 2009)

Source: Ministry of Tourism. Leisure & External Communications

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Main drivers for the industry

> As per the adaptive expectations theory, consumers

base their future expectations on past events

> Comments on Figure 6:

Step 1 – Shock occurs – people are very prudent - travel significantly less – in their minds, probability of

event happening again is 1.

Step 2 – People get accustomed to the shock, adapt

to it and factor in daily routine – start to travel more – in their minds, probability of event happening again

decreases

Step 3 – Individuals completely disregard the event as

a threat – travel as before or even more – in their minds, probability of event happening is 0.

Step 4 – Shock happens again – expectations are rife

> The Black Swan Theory (in Nassim Nicholas Taleb's version) refers to high-impact, hard-to-predict, and

rare events beyond the realm of normal expectations. Unlike the philosophical "black swan problem", the

"Black Swan Theory" refers only to events of large magnitude and consequence and their dominant role in history. "Black Swan" events are considered

extreme outliers.

> The financial crisis has been classified by some as a

Black Swan.

The agreements provide sufficient coverage of main tourist-generating countries for current demand, but will be widened further in

coming years to be in line with government‟s vision of 2 million tourists by 2015 and diversification of markets.

Adequate infrastructure and room capacity to meet demand

Over the years with development of the tourism industry, the number of hotel rooms has increased from 2,000 in 1980 to 11,488 in

2008. Going forward, the number of rooms needs to be significantly increased to meet tourist arrivals of 2 million tourists. As such,

with current hotel projects in the pipeline, the number of additional rooms for the period 2009-2012 amounts to 5,929. Moreover,

the completion of several IRS and RES projects in coming years and the fact that several existing hotels have indulged in renovation

and extension of their current infrastructure, will contribute further to boost room capacity for Mauritius.

Consumer sentiment

The tourism sector worldwide, although resilient over the years, is characterised by volatility, albeit often on short time span.

Applying the adaptive expectations theory to the international tourism industry is meaningful in the sense that travellers base their

future expectations on what has happened in the past until a major shock happens (e.g. September 11 terrorist attacks) following

which they become prudent again (i.e. travel less). However, as the fear of the event dissipates (or after people get “accustomed” to

the situation, adapt to it

and factor it in their

daily routine),

individuals start

travelling again, thus

explaining to some

extent the fluctuations

in world tourism (after

accounting for the

seasonality effect). The

importance of this

exercise allows us to

understand the gist of consumer rationality linking it to continuously evolving sentiment. Therefore,

the main conclusion from the above is that the extent of impact for any factor on international

tourism is dependent upon how quickly consumer sentiment changes. However, the analysis mainly

applies mainly to situations where the „willingness to travel‟ of individua ls is dented. Other factors

usually termed as „Black Swan‟ events (unforeseen high-impact drivers) might have longer and more

pronounced impacts on international travel. Nevertheless, all Black Swans will not have same impact.

Examples of such events are September 11 terrorist attacks and the current economic/financial crisis.

In the latter case, not only the „willingness to travel‟ has been affected, but also the „ability to travel‟ of

individuals has been eroded. Thus, it has imprinted marked impacts on international tourism in terms

of volume and recovery timeframe. Indeed, the financial crisis has engendered major adverse changes in the standard of living in main

tourist-generating countries as a result of reductions in the disposable income of consumers, job losses, dwindling turnover and

profitability of certain businesses, slowdown in economic activities and so on.

0

1

0 1 2 3 4 5 6 7 8 9 10

Perceiv

ed p

ro

babilit

y e

vent h

appenin

g

Time

Figure 6: Adaptive expectations and shocks applied to international tourism

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Consumer confidence

> The shorter the timeframe, the lower the degree of

the impact on tourist arrivals worldwide

> A crucial factor that cannot be measured impacting on international travel is consumer sentiment.

International tourism is very volatile due to several factors which affect consumer confidence. However,

the fluctuations are usually short-lived

> “Black Swan” events like the financial and economic crisis can affect not only the „willingness to travel‟, but

also the „ability to travel‟ of individuals. This implies that the impact on international tourism is usually for

a longer period of time

As such, we have tried to identify key factors for international tourism that can affect it either

positively or adversely. These dynamics can be classified using the timeframe of their impact on

arrivals worldwide namely: immediate, short term (less than 3 months), medium term (3 to 9 months)

and long term (more than 9 months – usually Black Swans). Often, as per the UNWTO, the impacts

on international tourism are largely localized and short-lived (as explained by the adaptive

expectations theory). The shorter the timeframe, the lower the impact on international tourism.

Immediate impact Short term impact (< 3months)

Strikes of airline-related workforce

Political upheavals

Curfew

Adverse climatic conditions (e.g. storm)

Terrorist attacks and other security scares – depending

on their magnitude

Natural calamities (having moderate impact on the

infrastructure of a country)

International events (e.g. Olympic Games, World Cup)

Airplane crashes

Hike/drop in price of air tickets (driven by fluctuations

in oil prices)

Promotional campaigns carried out by main tourist

destinations

Medium term impact (3 months to 9 months) Long term impact (above 9 months)

Seasonal travel

Political tensions

War

Health scares (e.g. outbreak of diseases like H1N1

influenza, chickungunya) – depending on their magnitude

Natural calamities (having pronounced impact on the

infrastructure of a country e.g. tsunami)

Economic factors (e.g. disposable income of consumers

worldwide)

“Black Swan” events – high impact, hard-to-predict and

rare events beyond the realm normal expectations (e.g.

September 11 terrorist attacks and last year‟s unforeseen

global financial and economic crisis impact on

international tourism)

A long recession which affects economic drivers

The above list of factors is not exhaustive, but based on recurrent and key drivers/risk factors

17

SUMMARY OF KEY CREDIT STRENGTHS AND WEAKNESSES FOR DOMESTIC TOURISM

Credit Strengths Credit Weaknesses

Robust and resilient – downside effects are usually short-lived

Recovering ability of the sector is strong – post-financial crisis outlook is very

favourable

Further air access liberalisation helping to provide more competitive prices for

air tickets – bilateral air services agreement (May 2009) provide for additional

flights and airlines

Public infrastructure projects in the pipeline like better road networks will help

to contribute to future development of the tourism industry

Investment in new hotels – room capacity to increase by 5,929 between 2009

and 2012 – also renovation and extension of several existing hotels in the

pipeline

Further diversification of markets underway – exploring and exploiting further

the potential of emerging source countries like India (in the pipeline) and China

(medium-term)

Government vision to reach 2 million tourists by 2015 – the framework and

infrastructure to meet such demand to be gradually set up

Potential to develop further the MICE and business sections (mainly with

expansion of the BPO sector and affiliations with China and India)

Measures taken by stakeholders of the industry at both micro and macro levels

to counter downturn

Domestic hotels tend to reinvest in infrastructure and other assets to

continuously improve quality and standard of service

Government‟s position not to downgrade the quality of tourists – upmarket

target maintained

Also, diversifying the package on offer to customers i.e. moving away from

traditional concept of “sun, sea and beaches” towards new forms of tourism

namely ecotourism, cultural, medical and so on

The country can derive benefits from its strategic geographical location with the

Football World Cup to be held in South Africa next year

Mauritian hotels have an excellent reputation in main source markets –

constantly innovating to uplift service quality

Presence of captive market – around 30% of tourists in certain hotels are

repeaters

Hospitality, diversity and bilingualism of the locals – alluring for tourists

Level of security (including sanitary issues) and stability within Mauritius makes it

an enticing destination for tourists

Tourists perception (upmarket) of the Mauritius as a “value for money”

destination compared to other destinations like Maldives. Hotels planning to

increase leisure activities and tours currently on offer.

International tourism - a highly volatile industry

The tourism industry has been more affected than other sectors by the financial

and economic crisis

Low arrivals and occupancy rates have resulted in plummeting turnover and

profitability for many hotels

Distance from source market – (i) the element of transport in the package is

relatively high and can be a deterrent; (ii) travelling hours to Mauritius from

major tourist generating countries relatively long

Road networks and public transport do not have proper guidelines to be tourist-

friendly

The business and MICE segment (the ones that have still been travelling after the

crisis) may be jeopardised by the change in habits of business travellers. A

recently published report by the Economist Intelligence Unit, commissions by

Amadeus, points to a new age of austerity for business travellers, which says that

executives will make fewer, shorter and cheaper business trips in 2009 and

switch from luxury extras in favour of basic efficiency and good service.

Diversification of markets might be limited by physiological factors. The average

tourist in emerging markets like India and China might not be looking for the

type of tourism our country offers i.e. “sun, sea and beaches” concept

Efforts to diversify markets over the past year have met with mitigated success

Aggressive competition from other countries like Maldives, Seychelles,

Guadeloupe, Martinique and so on for our main source market namely France

Security issues in recent years might have affected the island‟s image as a

“perfectly secure” destination

18

KEY INDUSTRY STATISTICS

2009: A year of turbulence…

After a record high in 2007,

growth in tourist arrivals

slowed down at 2.6% yoy in

2008 to reach 930,456

tourists. In 2009, the number

of tourists visiting the island

declined for the 1st time since

1982 by 6.4% yoy to 871,356

guests. The drop is in line with

the global international

tourism slump of 4% yoy

registered for the year. The

first half of the year posted a

resounding 9.7% regression in

arrivals, being the aftermath impact of the economic turmoil which started in mid-2008. The main underlying driver which impacted

on tourist arrivals for the 1st semester was an extremely volatile and unfavourable global economy characterized by (i) credit crunch,

Main Markets 2008 2009 % chg yoy

European market 608,358 579,509 -4.7

Of which:

France 260,054 275,599 +6.0

Germany 61,484 51,279 -16.6

UK 107,919 101,996 -5.5

Italy 66,432 56,736 -14.6

African market 213,868 204,308 -4.5

Of which:

Reunion 96,174 104,946 +9.1

South Africa 84,448 74,176 -12.2

Asia 72,771 62,131 -14.6

Of which:

India 43,911 39,252 -10.6

America 13,719 13,070 -4.7

Oceania 20,161 11,143 -44.7

Others 1,579 1,195 -24.3

Overall tourist arrivals 930,456 871,356 -6.4%

Table 2: Tourist arrivals by main markets, Year 2008 and 2009

700,000

750,000

800,000

850,000

900,000

950,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

Dec

-05

Jun-0

6

Dec

-06

Jun-0

7

Dec

-07

Jun-0

8

Dec

-08

Jun-0

9

Dec

-09

Mo

vin

g y

earl

y a

vera

ge

Mo

nth

ly t

ouri

st a

rriv

al

Month

Monthly tourist arrival Moving yearly average

Declining

arrivals

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec2008

2009

Figure 7: Comparative monthly tourist arrivals, 2008 & 2009

Figure 8: Monthly tourist arrival and moving yearly average, Dec 2006-Dec 2009

Recovery

started

19

(ii) widening financial crisis, (iii) soaring commodity and oil prices (iv) decreasing trade volume and (v) sharp exchange rate

fluctuations. The 2nd half of 2009 was rather mitigated by the slight recovery (+2.4% yoy) noted in the final quarter.

The imprint of volatility and crisis on main source markets …

Arrivals from Europe shrunk by 4.7% yoy to reach 579,508 guests,

driven by the poor performance of our main markets.

Nevertheless, it is important to point out that our main source

market, namely France, showed buoyant results in the context of

the global economic crisis with arrivals increasing by 6.0% yoy.

The UK market also proved to be more resilient than Italy and

Germany despite posting a drop of 5.5%. The Italian and German

source markets plummeted by 16.6% yoy and 14.6% yoy

respectively.

For the period under review, arrivals from the African region fell

by 4.5%, despite a substantial 9.1% yoy pickup in arrivals from

Reunion Island, which confirms the view of individuals travelling

shorter distances in times of crisis. In addition, tourist arrivals from the Asian market plunged by 14.6% yoy to attain 62,131. Arrivals

from India, our major source market from this continent, went down by 10.6% yoy from 43,911 in 2008 to reach 39,252 in 2009.

Arrivals from Oceania dived by 44.7 yoy to 11,143, mainly on account of the 45.0% yoy decrease from Australia. Furthermore,

arrivals the America region declined by only 4.7% yoy to reach 13,070, as the drop in tourist arrivals from the USA was countered

by the increase of 10.8% yoy from Canada.

Purpose of visit: MICE segment slackens…

94% of total tourists visiting Mauritius between January and September 2009 were for holiday purposes. Of note, the MICE segment

plummeted by a resounding 49.2% yoy after a rise in 2008, while the business division declined by 24.8% yoy during the first 9

months of 2009.

Table 3: Tourist arrivals by main purpose of visit, 2006-2008 & Jan-Sep 2009

Purpose of visit 2006 2007 2008 Jan - Sep 2008 Jan - Sep 2009 % Change yoy

Holiday 712,620 818,714 821,325 591,086 570,557 -3.5

Business 27,097 30,186 32,366 24,805 18,653 -24.8

Transit 29,590 35,375 42,657 32,790 5,206 -84.1

Conference 5,414 4,447 5,155 3,872 1,967 -49.2

Sports 2,515 834 1,080 909 1,265 39.2

Other & Not Stated 11,040 17,415 27,873 20,702 11,237 -45.7

Total 788,276 906,971 930,456 674,164 608,885 -9.7

Source: Central Statistics Office

France32%

UK12%

Reunion12%

South Africa9%

Italy7%

Germany6%

India5%

Others17%

Figure 9: Share of main source markets, 2009

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Average room rate of 2 major hotel

group

Year Average room rate (Rs)

NMH SRL

2003 4,041 6,141

2004 4,597 6,242

2005 5,202 6,513

2006 7,153 7,004

2007 9,469 6,331*

2008 9,674 6,882

Source: Annual reports of above companies

* As from 2007, SRL parted from St Géran Hotel

Overview of main tourism industry statistics

At the end of September 2009, the number of hotels in operation stood at 100. However, 8 hotels

were not operational due to renovation. Total room capacity for these registered hotels amounted

to 11,102 with 22,530 bedplaces. Moreover, total tourist nights spent in the country stood at 5.9

million for the first 9 months of 2009. In addition, room occupancy rate for all hotels averaged 58%

(with overall bed occupancy of 52%) for the period compared to 68% (with overall bed occupancy of

61%) for same period in 2008. For large hotels, the average room occupancy rate for January to

September 2009 (58%) was significantly lower than that achieved in same period last year (68%).

In line with the trivial growth achieved in arrivals, tourism receipts for the year 2008 went up by only 1.3% yoy to Rs41.2bn

compared to Rs40.7bn in 2007. Of note, 1H08 tourism earnings stood at Rs22.1bn (up by 12.2% yoy). However, the last semester

was marred by the impact of economic and financial hardships on tourist arrivals. With a slowdown in travel, passenger

transportation services plummeted from Rs11.2bn in 2007 to Rs10.5bn in 2008. As such, tourism earnings for the last 6 months of

2008 dropped by 9.0% to Rs19.0bn from Rs20.9bn for same period in the previous year.

According to revised figures of the Survey of Employment and Earnings, direct employment in hotels, restaurants and travel and

tourism establishments employing 10 persons or more amounted to 26,922 at the end of March 2009 compared to 28,534 at the

end of March 2008, representing a 6.4% yoy fall.

Macroeconomic perspective: after highs, lows set

in…

After boasting an exceptional high of 14.0% yoy in 2007, the

„Hotels and restaurants‟ segment expanded by only 2.7% yoy in

2008 pinned down by slack tourist arrivals during the year. In

2009, the segment dwindled by 8.8% yoy following the global

economic downturn. Of note, the sector as a % of GDP

Details 2006 2007 2008 As at September 2009

No of hotels 98 971 1022 1003

Room capacity 10,666 10,857 11,488 11,102

Bedplaces 21,403 21,788 23,095 22,530

Tourist nights („000) 7,761 8,987 9,100 5,850

Tourism receipts (Rsm) 31,942 40,687 41,213 25,685

Room Occupancy rate (All hotels) 66 76 68 58

Room Occupancy rate (Large hotels4) 69 78 70 59

Employment in the tourism industry 25,798 26,322 28,534

Restaurants 1,805 1,792 2,029

Hotel 19,536 20,223 22,317

Travel and tourism 4,457 4,296 4,188

Source: Central Statistics Office

1 excluding 5 hotels not operational because of renovation works

2 excluding 3hotels not operational because of renovation works.

3 Excluding 8 hotels not operational because of renovation works

4 well-established hotels with more than 80 rooms amounted to 43 in 2007and 47 in 1Q09

Table 4: Main tourism industry indicators, 2006-2008

Figure 10: Real Growth rate (%) – GDP and Hotel & Restaurants, 2000-2009F

Hotels and restaurants

GDP at basic prices

-10.0

-5.0

0.0

5.0

10.0

15.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F

Gro

wth r

ate %

Year

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Hotel & Restaurant (H&R) at basic prices and Investment in the sector,

2006-2009(forecast)

Year

H&R at

current basic

prices

(Rs m)

Gross domestic fixed capital

formation

(Rs m)

Aircraft H&R

2006 15,500 5,675 6,558

2007 19,517 2,515 10,127

2008 20,048 0 11,919

2009F 17,960 0 12,978

Source: Central Statistics Office

declined from 9.4% in 2007 to 8.6% in 2008. As per the CSO, the figure for 2009 is expected to stand

around 7.3%.

As such, the contribution of the tourism industry to GDP growth of 5.3% achieved in 2008 stood at

0.2%. Same is expected to be negative (-0.8%) in 2009. Gross domestic fixed capital formation

(GDFCF) for the sector impressively grew by 8.4% yoy in 2008 despite the high base effect following

the amazing 39.2% yoy expansion achieved in the prior year. Despite the global activity downturn and

poor performance of the domestic tourism industry, investment in „Hotel and restaurant‟ is projected

to hike by 6.2% for 2009. The share of investment in „Hotel and restaurant‟ segment as a % of total

GDFCF hiked from 17% in 2007 to 18% in 2008, and stagnated at same level in 2009. Finally, it is

worth noting that investment in aircraft was nil for the past 2 years.

Tour operators

Tour operators combine tour and travel components to create holiday packages (including flight, transfer from airport to hotel,

hotel room, service of a local representative and so on) which they sell to travel agents. As per AHRIM, tour operators account for

65%-70% of total tourist arrivals and 90% tourists residing in hotels. According to the Survey of Outgoing Tourists 2006, a tourist

spends Rs39,578 on average during his stay – in line with earnings per tourist for 2008 which amounts around Rs44,000. Using

extrapolation, tour operators represented around Rs28.6bn of tourism receipts in 2008. As such, major groups of hotels operate

their own tour operators in main source markets, but are still dependent on foreign tour operators like Thomas Cook, TUI,

Nouvelles Frontieres, Thomson and so on.

22

APPENDIX

A1. MEASURES TO BRACE AGAINST THE ECONOMIC & FINANCIAL CRISIS

International

In the Tourism and Economic Stimulus – Initial Assessment

(July 2009) paper, the UNTWO describes the efforts

deployed to harness the sector with the necessary

tools to brace against these challenging times.

UNWTO response is focused on 3 interrelated pillars

namely:

(i) Resilience > to support the sector‟s immediate

response, UNWTO established a Tourism Resilience

Committee (TRC) to provide a framework for better

market analysis, collaboration on best practices and

policymaking. The TRC aims to be a focal point for

crisis response for the tourism sector around the

world.

(ii) Stimulus > UNWTO advocates tourism‟s priority inclusion in general economic stimulus measures and urges governments to put

tourism at the core of their stimulus packages.

(iii) Green Economy >tourism must be at the forefront of the transformation to the Green Economy contributing with carbon-clean

operations, jobs in environment management and energy-efficient building.

As stressed by UNWTO on the occasion of the G20 Summit, tourism means “Jobs, Infrastructure, Trade and Development”. Many

countries have acted swiftly in developing stimulus measures to sustain demand, support tourism enterprises and maintain/increase

employment. As such, national stimulus packages for tourism recovery are focused on promotion and marketing as well as

economic measures. These include fiscal and monetary instruments like increasing public expenditure and reducing taxes (fiscal), and

the use of monetary tools such as cash ratio, interest rates, new credit lines and mutual warranty systems, especially for SMEs. For

analysis purpose, the UNWTO has classified the measures into 8 broad categories as follows:

1. Fiscal measures

2. Monetary measures

3. Human resources measures

4. Marketing measures

5. Travel facilitation

23

6. Public/private partnerships

7. Environmental measures

8. Transnational cooperation

(Of note, Mauritius has implemented all the above measures)

So far, most countries have implemented measures in the areas of marketing and public/private partnership which have a direct and

immediate mandate. In addition, a significant number of countries have also applied fiscal and/or monetary measures to maintain

access to credit and liquidity for tourism businesses in order to keep their operations and maintain jobs. Finally, travel facilitation

measures such as applying visa on arrival, decreasing the cost of visas or, in some cases even, exempting visa requirements for a

certain number of source markets are major steps towards the resilience of the sector, and the economic recovery at large.

Domestic

Macro level measures

Additional Stimulus package (December 2008) Budget 2009/10

Environment Protection Fee payable only if hotels show a profit at end of their

financial year (1 January 2009 and until 31 December 2010) – payment at end of

the financial year instead of every month

Temporary Solidarity Levy will be suspended from 1 January 2009 to 31

December 2010.

Tour operators will be allowed to sell their duty free vehicles within the first

four years of purchase and pay duty on a pro rata basis rather than reimburse

the full amount of duty.

Additional Rs100m for promotion budget of the Mauritius Tourism Promotion

Authority.

Government is organising special promotion campaigns at the thirty five points

now served by Air Mauritius under code sharing agreements with Air France

and in China for the code share agreement with Malaysian Airlines.

MTPA to appoint Public Relations/marketing representatives in some new

markets.

Airlines exempted from the contribution to the MID Fund from 1 January 2009

to 31 December 2010.

AHRIM and the Empowerment Foundation will work together on a training

programme to avoid layoffs in particular, among the 70% of employees of hotels

that are below managerial ranks. There will be no layoffs without prior

consultations with the Government and a plan for retraining.

Setting up of Hotel Reconstruction Scheme till December 2010. Refund of the

lower of 50% of wage bill or difference between the new and old rental.

An alternative financing approach – allowing individual foreign and Mauritian

investors to acquire hotel rooms and villas but they have to be made available to

hotel operators.

Suspension of rental payments for small hotels on less than one hectare and less

than 50 bedrooms till December 2010.

Rescheduling of rental arrears for hotels (small hotels : 5 years as from January

2011; others : 3 years)

Developing a new policy on the rental amount for islets and other state land

with severe planning restrictions that limit construction and development.

The Saving Jobs Recovery (SJR) Fund will operate a scheme to assist small hotels

and restaurants to improve, refurbish and renovate. In addition, the SJR Fund

will also finance up to Rs5m for cost reduction projects through energy

management for small and medium hotels.

Providing additional Rs200m to the Mauritius Tourism Promotion Authority to

further expand its promotional campaign.

The Tourism Authority Act will be amended to regulate Whale and Dolphin

watching.

The Ministry of Tourism and the MBC will set up a Tourism Channel to provide

information on activities, events and facilities to encourage tourists to move

throughout the island and share the fruits of tourism with a wider cross section

of the population. The Tourism Fund will collaborate with the MBC to finance

the project.

Government is amending legislation to prevent non-citizens to acquire

residential properties outside the IRS and RES schemes without the required

authorization.

24

Micro level – Hotels

As per the AHRIM, the performance of hotels during these difficult times does not depend on the size of the hotels, but mainly on

the impact of the crisis on target markets arrivals. In regular years, most hotels tend to cover their costs during the period April-

September, and generate their profits in the period October-March. With the drop in tourist arrivals and an average occupancy rate

of 59% for the 1st 9 months of 2009 (compared to 70% for same period in the previous year), it is a possible outcome that some

hotels might not be able to cover their costs as has been the case for Naїade Resorts. However, costs will be covered at the

expense of profitability for the current financial year. The following table gives the financial performance of 4 important hotel groups

for the period (year for NMH and 9 months for the other 3 hotel groups) ending September 2009.

Table 5: Financial results for main hotel groups for quarter ending September 2008 & 2009

Rs’000 Period Period ending September 2008 Period ending September 2009 Growth yoy %

Turnover

NMH Year 8,099,921 7,401,852 -8.6%

Sun Resorts 9 months 2,416,885 2,484,240 2.8%

Naїade Resorts 9 months 1,735,603 1,756,369 1.2%

Belle Mare Holding Limited 9 months 14,336 12,286 -14.3%

Net profit

NMH Year 1,845,820 1,175,788 -36.3%

Sun Resorts 9 months 166,614 82,668 -50.4%

Naїade Resorts 9 months (16,785) (357,819) NA

Belle Mare Holding 9 months 13,151 34,535 162.6%

Turnover for main hotel groups stagnated or declined and net profit regressed substantially for period ending 2009, driven by the

9.7% yoy contraction in arrivals at national level for the period and low occupancy rates. Many local operators discounted

significantly their room rates in an attempt to boost occupancy levels.

As such, to face against further downturn for the final semester, hotels have implemented the following internal measures and

initiatives:

Aggressive marketing campaigns to enhance visibility in major source destinations

Promotional packages to both local and tourists

Cost cutting measures mainly through energy management

Preserving employment

Re-branding of their services with the aim of boosting their standard and quality

Adapting their services to the type of tourists (mainly by country of origin)

Soft renovations – refurbishing, decoration and so on

25

REFERENCE

IMF World Economic Outlook, July and October 2009

Public Sector Investment Programme – tourism and civil aviation

Interview of Mr Patrice Legris (CEO of AHRIM) August 2009 and other statistics from AHRIM

UNWTO Tourism Barometer – June & October 2009 and January 2010

UNWTO Tourism and Economic Stimulus – Initial Assessment – July 2009

Bilateral Air Services Agreement (BASA)/Memorandum of Understanding (MOU) – 27 May 2009

IATA Financial Forecast June 2009

IATA Economics Briefing Airline Business Confidence Index

IMF public information notice - France