PNG investing to showcase tourism appeal

 

As one of the world’s most culturally diverse nations, Papua New Guinea offers visitors the chance to experience a country with unique appeal. Surrounded by coral reefs and volcanic islands, the natural beauty of PNG has seen the country gain international recognition as an increasingly popular tourist destination.

However, despite its vast appeal, PNG’s arrival ports continue to be heavily dominated by business travellers, although recent trends have seen an increase in tourists who are venturing in greater numbers to the country to experience its many attractions, consisting of diverse scenery such as mountain ranges, thousands of miles of coastline and dense forests that are home to rare wildlife.

Boosting Capacity

While the diverse landscape of PNG has much to offer international tourists, its ability to host them has historically been hindered by a lack of supporting infrastructure and ongoing security concerns. However, the hosting of international events, such as the FIFA Under-20 Women’s World Cup in 2016, has bolstered the tourism industry. Likewise, the upcoming APEC summit in 2018 has brought much needed investment into a once overlooked segment. While the hosting of the FIFA Under-20 Women’s World Cup demonstrated the country’s ability to coordinate large numbers of visitors, its hospitality capabilities are set to be further tested during the APEC conference.

The government’s intention to boost tourism revenues was clearly demonstrated in the 2016 budget, which included a PGK50m ($15.9m) increase in investment in the sector, more than triple the PGK11.6m ($3.7m) allocated in 2015. Despite being 25 times larger than Fiji in geographical terms, PNG only accounts for 10% of South Pacific tourism, whereas Fiji takes a 41% share of the regional market. Additionally, PNG has a mixture of natural assets that attract travellers from around the globe; however, total tourism contribution to overall GDP is low, accounting for only 1.9% in 2016, generating PGK971.7m ($308m), according to the World Travel and Tourism Council. Despite this, contribution figures are steadily increasing, and so too are job opportunities, with the sector directly and indirectly employing approximately 1.7% of the total workforce, making up roughly 52,500 jobs.

Momentum

With international arrivals increasing year-on-year at an average of 8%, growing from just 40,000 in 1995 to almost 200,000 in 2016, PNG has had to ramp up the number of hotel rooms and supporting services to accommodate foreign guests. For the most part, visitors have mainly entered the country for commercial purposes, however recent data suggests the tourism industry has significant upside potential, albeit with some barriers to overcome.

Figures from 2016 revealed that 58% of arrivals entered PNG for employment or business-related purposes, while 30% entered as tourists, one-third of whom arrived by cruise ship. This is in comparison to 2014, when only 27% of arrivals were for holiday purposes, with 35% on business and 30% travelling to PNG for employment. According to 2016 statistics from the PNG Tourism Promotion Authority (TPA), Australia is by far the largest market, accounting for 49% of all tourist arrivals, while New Zealand, Asia and the UK have shown growth in arrival numbers. People visiting friends and relatives accounted for 6% of international arrivals in 2016, while the meetings, incentives, conferences and exhibitions segment, and sports-related guests accounted for approximately 3% and 1% of foreign guests, respectively.

According to 2016 data, total visitor expenditure was estimated at PGK1.95bn ($618m). Visitors to PNG had a fairly long average length of stay in the country of 16 days, spending more than $300 per day on average. The increase in the average length of stay is partly a result of an increased awareness of the activities that PNG has to offer. The more common options include diving, trekking, fishing, cultural tourism, bird watching and nature-based tourism. Meanwhile, tourists seeking more thrill-seeking adventures are coming in higher numbers every year to experience the country’s coastline, with surfing and kayaking tours increasing in recent years. One such example of this is that of the World Surfaris tour operator, which provides traditional surf camps from October to April across PNG’s reef breaks. The country is also gaining international surfing exposure, hosting the World Surf League Longboard Tour’s 2017 season-opening event at the Tupira break on the north coast of the Madang province.

Building Blocks

As it stands, numerous issues continue to restrict the ease of access to certain sites for international visitors, although various initiatives launched in 2016 look set to bolster the sector and the ease of movement. These include efforts to produce a new and more robust Tourism Master Plan, increase TPA budgets, improve airline competition, as well as construct much-needed infrastructure upgrades at airports, seaports and roads. These initiatives have also been galvanised by increased donor support from the likes of the World Bank, and government departments such as the Australian Department of Foreign Affairs and Trade.

In terms of policymaking, the TPA remains the primary decision maker as far as tourism is concerned, operating as the sole authority for policy since its inception in 1993. In 2006 the TPA released its 10-year Tourism Master Plan 2007-17, with the primary goal to double tourist arrivals every five years, a target well within reach by mid-2017. In pursuit of this principle objective, the TPA launched an international marketing campaign and raised awareness of the country’s profile on social media, though word of mouth is still perceived to be the primary vehicle driving new arrival growth. With the current master plan in its final months, the TPA is preparing to launch its next tranche of five-year targets, which will again aim to double the amount of foreign visitors by 2022.

While the country has previously been criticised for its lack of capacity, building blocks are being put in place to handle the gradual influx of foreign visitors. Measures are also being taken to improve data collection, with the TPA setting up analysis systems, and establishing a national accommodation classification and accreditation system. In addition, the National Development Bank has improved access to credit for local start-ups and existing small businesses operating within the tourism field, with loans ranging from a few hundred US dollars to almost half a million, according to local sources. Visa requirements have also been eased for cruise passengers, which has been identified as a major growth industry.

The TPA is also looking to boost data sources with the aim of improving visitor services, highlighted by its partnership with the International Finance Corporation (IFC) and the New Zealand Tourism Research Institute (NZTRI) of Auckland University. Funded by the IFC, the TPA will be working alongside the NZTRI to compile a comprehensive survey measuring travel and behaviour patterns of visitors who enter by air, including the tracking of tourist expenditure while in PNG. It is hoped that the study, the first of its scale in PNG, will provide greater insight into consumer behaviour and preferences, which will in turn assist stakeholders in developing product offerings, and improve overall visitor satisfaction.

Addressing Barriers

All things considered, PNG’s tourism industry has immense growth potential, but needs to overcome certain obstacles before significant progress can be realised. “A priority for the tourism industry is to increase the international awareness of the country, particularly how it is perceived in terms of safety,” Alice Kuaningi, director of marketing at the TPA, told OBG. “Those who have had the fortune to visit the country know that tour operators offer a safe and professional service.” While tour operators are gradually improving the safety reputation of the country, there are concerns that while the nation has an abundance of sites to explore, it lacks a diverse range of products to attract tourists. However, with the future establishment of the Paga Hill Estate in Port Moresby – and with an increase in thrill-seekers exploring the country’s wilderness – there are a number of products that can be further developed, marketed and invested to entice a greater number of travellers in the future. “PNG has become an adventure destination. It is for the young at heart,” Kuaningi said. “While some come seeking cultural exposure, many more are coming to surf, trek and dive,” she added.

Infrastructure Investment

With the existing tourism product range PNG has no trouble attracting adventure seekers; however, for it to capture a greater number of high-end luxury travellers it will need to address shortcomings in certain areas. Broadly speaking, supporting infrastructure is in most cases inadequate, many destinations lack modern facilities, and for the most part many tourist hubs have limited information in the form of maps and site attractions. However, under the country’s Public Investment Program, the existing gaps are expected to receive greater attention, with the TPA granted an increased budget to address ongoing infrastructure limitations. While the exact figure remains undisclosed, Jerry Agus, chief executive officer of the TPA, announced in December 2016 that the authority would invest heavily in tourism-related infrastructure and product development throughout 2017.

Hotel development has been sporadic in recent years, with the majority of projects focused in the commercial cities of Lae and Port Moresby; however, more projects are expected to come on-line once commodity prices recover, which will help to appeal to luxury tourists. While the number of hotel rooms had increased to accommodate the rise in business travellers, particularly during the expansion of liquefied natural gas projects, current economic conditions have halted progress. “There are incentives in place to invest. There are specific tax breaks aimed at encouraging hotel development,” Glen Murphy, general manager of Coral Sea Hotels, told OBG. “A major drawback is the lack of foreign exchange, which restricts your ability to import materials, which in turn has stalled certain projects,” he added.

Incentives

In terms of tax breaks for investors, there are two main incentives, namely double tax deductions and accelerated depreciation. Double tax deductions can be gained by operators who promote PNG overseas, while accelerated depreciation is geared towards larger investments in the form of hotel or restaurant construction. Double deductions are available for overseas marketing and promotional costs, such as those related to advertisements and travel. Meanwhile, accelerated depreciation applies to capital equipment, which can be anything from a boat engine to a gas stove, as long as it is used within the tourism field. Under this arrangement, the piece of equipment in question will receive an initial-year accelerated depreciation rate of 55%, followed by 10% per year for the next three years. The item also qualifies for an initial 15% depreciation rate under Section 75 of the Income Tax Act, thus adding to the initial value in four years. In addition, large-scale accommodation projects can benefit from a concessional 20% tax rate for the first 10 years of income generation. This initiative also applies to smaller tourism infrastructure upgrades such as hotel renovation or room expansion.

Indigenous Communities

In an attempt to leverage the opportunities tourists bring to the country, the TPA, along with the World Bank, are working to deliver the PNG Tourism Sector Development Project (TSDP), with the aim of supporting the development of indigenous communities under the country’s Environmental and Social Management Framework.

With PNG’s Tourism Master Plan 2007-17 in its final year, a major activity of the TSDP will be to provide a national framework to guide the development and promotion of tourism over the next five years. A report detailing the specifics of the framework and its objectives was released in late 2016, which identified several key development areas. Among the report’s recommendations was to improve tourism services in targeted destinations such as East New Britain and Milne Bay, both of which are considered high-potential tourism provinces.

The TSDP will introduce institutional and policy frameworks that will encourage tourism development, while rehabilitating infrastructure at tourism hubs and heritage sites. The idea of improving existing sites and product offerings has been viewed as a solution that won’t require massive investment over the next five years. Furthermore, it is hoped that the improved policy environment will be more conducive to future project design and implementation, which will in turn fuel the economic impact of tourism.

While the TSDP is a welcome development, it will need to mitigate potential issues relating to PNG’s indigenous communities. With 97% of land considered customary, meaning that it is owned by indigenous communities and administered in accordance to local customs, the World Bank has identified several safeguards that will act to ensure access to land does not negatively impact cultural traditions or values. As a result, overall project design will incorporate an Indigenous Peoples Plan, aimed at protecting the interests of local communities.

Tourism City

The private sector has been making significant progress in recent times. One notable development took place in December 2016, with the signing of a memorandum of understanding (MoU) between government officials, the TPA and local company Paga Hill Development. The signing was related to an agreement to develop a tourism city within Port Moresby, the nation’s capital, valued at a substantial PGK3bn ($951m).

The Paga Hill Estate project will play host to a cultural centre showcasing all 21 provinces of PNG, giving tourists the opportunity to get a better understanding of what the country has to offer in terms of potential holiday destinations. With the project slated to be completed within 8 years, it aims to have a hotel, a cultural exhibition centre and a convention centre ready in time for the APEC Leaders’ Summit in 2018. In a first of its kind venture in PNG, the estate will also look to attract visitors through the establishment of a war museum containing renovated Second World War relics, as well as a waterfront promenade with retail businesses, marinas and night markets.

There have also been reports that a casino will be built as part of the Paga Hill project, leading to some criticism over the potential social impacts of such a development. However, industry officials believe it could act as a significant drawcard for the country. “PNG is a Christian society, which doesn’t always view the gambling industry in the most positive light. I think when they begin to see the economic benefits that the industry can bring through employment, then people will come around,” Imelda Agon, acting CEO of Nation Gaming, told OBG.

Speaking to local press at the official MoU signing, Tobias Kulang, the minister of tourism, arts and culture, said the project – which was 20 years in the making – will also comprise a mixture of residential, commercial and waterfront retail property.

Cruise Ships

Another area with considerable potential for growth is that of cruise ship tourism. While there are clear benefits to be gained from cruise ship visits, a major upgrade of existing ports is needed to optimise the potential benefits the industry can bring to PNG. According to a 2016 report commissioned by the Australian Department of Foreign Affairs and Trade, Carnival Australia and the IFC, titled “Assessment of the Economic Impact of Cruise Tourism in PNG & Solomon Islands”, it was estimated that the total economic impact of cruise ships to PNG in 2015 amounted to A$6.3m ($4.7m).

Prepared by the Hong Kong-based ICF Consulting Services, in association with TNS Australia and Seaport Group, the research was carried out across the five ports: Alotau, Rabaul, Kiriwina, Kitava and Doini Island. It found that each cruise ship call contributed between $18,000 and $120,000 to the local economy. While the distribution of expenditure differed among ports, the entry ports of Alotau and Rabaul received the vast majority. Alotau received the most with 42%, closely followed by Rabaul with 41%. The report also concluded that 93-97% of passengers went ashore during their cruise call, staying on average from 3.4 to 4.3 hours and spending anywhere between $5 to $60.

Upgrades

While the cruise industry represents a potential window for growth, it is hindered by basic port infrastructure that limits the access of larger cruise ships. In light of these shortages, the report suggests several key areas that the government should consider in order to fully capitalise on the economic benefits that cruise ships can bring to PNG. Broadly speaking, the recommendations included improving the provision of foreign exchange services at ports, providing better information on cruise destinations, upgrading to more efficient customs and immigration procedures, developing product offering through a formalised cruise committee that offers smaller island tours, and improving infrastructure at ports of call with a focus on amenities.

While improvements in these areas will go a long way to promoting the industry, there are still some other hurdles that need to be addressed. As it stands, there is a lack of communication between cruise operators and local business owners, who have yet to fully capitalise on the income potential that tourism can bring. Greater coordination between businesses and tourism companies could significantly increase tourism-related revenue streams across PNG.

Outlook

The tourism industry has significant challenges to overcome. There are a number of reasons why the industry has not reached its full potential, with a major cause being the lack of awareness of the country as a potential holiday destination, due to safety concerns and a lack of tourism products. However, an increase in funding, marketing activity and product offerings bodes well for the sector.

If properly managed, PNG could attract greater numbers of tourists, which will further encourage economic growth. Likewise, the implementation of new initiatives and infrastructure programmes are set to bolster the sector, which will go a long way to addressing visitor satisfaction rates. New cruise tours will also bring a range of economic benefits to the country, both direct and indirect.

However, in order to draw the arrival of more cruise lines, the country will need to invest heavily in new port facilities, tailored specifically for cruise ships. International recognition through the hosting of sporting events and summits, as well as being selected as one of National Geographic’s 21 “Best of the World Destinations” for 2017, has provided PNG with increased international exposure. While this speaks volumes for the industry’s potential, the longterm success of the sector will depend greatly on diversifying tourism products, improving the nation’s safety image, and the successful deployment of the Tourism Master Plan 2007-17 and provincial plans.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Papua New Guinea 2017

Tourism chapter from The Report: Papua New Guinea 2017

Cover of The Report: Papua New Guinea 2017

The Report

This article is from the Tourism chapter of The Report: Papua New Guinea 2017. Explore other chapters from this report.