Ghana capitalises on tourism as a source of foreign exchange

 

With another peaceful transition of power under its belt, Ghana began 2017 with a clear reminder that it is a stable, safe destination for international travellers. However, despite its tropical climate, historical sites and colourful festivals, the country has remained primarily a hub for businesses and consultants, whose arrival numbers have decreased during the country’s economic slowdown since 2014. Particularly given that any increase in international oil prices in the near future is likely to be modest, Ghana’s new administration has indicated that it is looking to further capitalise on tourism efforts as a source of foreign exchange (forex). With a number of key promotion initiatives under way, the sector is making a dedicated push to turn the country into a leisure tourism destination.

Industry Indicators

According to the Ghana Investment Promotion Centre (GIPC), Ghana saw more than 1.32m international arrivals in 2016. This is an increase over both 2014 and 2015, when 1.09m and 1.20m visitors were recorded, respectively. These figures have given Ghana one of the highest international arrival rates in Africa, although the World Economic Forum’s “Travel and Tourism Competitiveness Report 2017” (TTCR) provides a lower 2016 estimate of 897,000 arrivals.

Tourism remains the fourth-highest forex earner in Ghana, after high-value commodities gold, cocoa and oil. According to the TTCR, in 2016 the direct contribution of travel and tourism to GDP was GHS4.97bn ($1.2bn), making up approximately 3% of GDP and providing 292,000 jobs, or 2.6% of total employment. The World Travel & Tourism Council (WTTC) predicted these figures would rise in 2017, and direct contribution to GDP was estimated to have been around GHS5.25bn ($1.3bn) by the end of the year. In 2016 the TTCR also reported $818.8m in international inbound receipts, placing Ghana above other African tourist destinations like Kenya, with $723m, and Namibia, with $378m. As detailed in the Ministry of Tourism, Arts and Culture (MoTAC) Medium-Term Expenditure Framework for 2017-19, the Ghana Tourism Authority (GTA) licensed 7116 tourism enterprises in 2016, including restaurants, bars, tour operators and car rental establishments.

Despite this progress, the sector requires ongoing attention to position itself strategically on the African tourism landscape. The TTCR ranks Ghana 120th of 136 global destinations on a variety of factors, such as infrastructure, openness, tourist services and price competitiveness. This places it below countries in the region such as Côte d’Ivoire (ranked 109th), Senegal (111th) and Gambia (112th); however, it remains more competitive than Nigeria (129th), Mali (130th) and Sierra Leone (131st).

Infrastructure Upgrades

Ongoing projects to upgrade airports and roads are expected to give the tourism sector a boost. Expansion efforts at Kotoka International Airport in Accra, as well as Kumasi International Airport, north-west of Accra, will allow for increased traffic and more efficient passenger operations when completed.

In June 2017 local press also reported nascent plans for the construction of an airstrip in Cape Coast to further promote tourism at popular destinations like Kakum National Park and coastal castles. However, Leeford Quarshie, general manager of La Villa Boutique Hotel, told OBG, “With regard to the stages of tourism, I would say Ghana is still in the development stage. We need to bring the infrastructure surrounding our tourist attractions to a certain level to provide easier access. We must also make the attractions user-friendly by adding accompanying services and facilities, such as clean and hygienic washrooms, eateries and perhaps a forex bureau.”

Indeed, as reported in the TTCR, Ghana scores below regional neighbours such as Côte d’Ivoire and Senegal when it comes to infrastructure. These ratings are based on a composite score for ground and air transport, as well as tourist services.

In addition to infrastructure upgrades, the government is working to implement safety measures, particularly in the aftermath of an incident at Kintampo Falls in March 2017, when a tree fell on local high school students, resulting in 20 deaths and several injuries. Since the accident, local media reports that the MoTAC announced a series of audits at other sites to ensure tourist infrastructure is safe.

New Leadership

With the ushering in of President Nana Akufo-Addo’s administration at the beginning of 2017 came the reassignment of key tourism posts. Catherine Afeku, the newly appointed minister of tourism, arts and culture, was also named as a member of the Cabinet in May 2017. The inclusion of the MoTAC in the Cabinet, which has not always occurred historically, could signify how seriously the government takes the promotion of tourism. In January 2017 local press also announced the appointment of Akwasi Agyeman as acting CEO of the GTA, the implementing arm for MoTAC priorities. In February 2017 Kwadwo Odame Antwi was appointed acting CEO of the Ghana Tourism Development Company, a partly state-owned organisation that helps mobilise resources for investment in tourist programmes and services.

Funding Status

Tourism has remained a lower economic priority for Ghana in recent years, particularly because investment focus shifted to the energy sector after the discovery of offshore oil in 2007. Indeed, the TTCR report ranked Ghana 119th out of 136 economies for prioritisation of tourism and travel, as measured by the level of government spending, the effectiveness of marketing campaigns and the timely submission of detailed tourism data to international organisations.

As detailed in the MoTAC Medium-Term Expenditure Framework for 2017-19, the government aims to increase average spending per tourist from $1512 in 2014 to $1800 in 2018. While it is important that the government is publicly prioritising tourism growth, these goals must be backed up with action. Ghana’s 2017 budget, released in March 2017, allocated GHS43.9m ($10.5m) to the MoTAC, up from GHS38.9m ($9.3m) in 2016. Although this does not represent a significant increase from previous years – the budget was GHS33.3m ($7.9m) in 2015 – the budget named specific goals, including ensuring sustainable tourism development, increasing participation in international conferences and developing standards for new tourism enterprises. It also mandated that the GTA be given resources to inspect and license over 5000 tourism enterprises in 2017, to establish a Creative Arts Council, to facilitate cultural exchange programmes and to rehabilitate the W E B Dubois Centre for Pan-African Culture.

The sector relies not only on the funding allocated in the budget, but also on the Tourism Development Fund, which was established in 2012. As determined by Tourism Act 817, which went into effect in 2011, transactions in hospitality and tourism enterprises are subject to a 1% levy. This money is then channelled into the fund for marketing, training and infrastructure development.

According to local press, the fund had accumulated a total of GHS26m ($6.2m) by the end of September 2016. This, in combination with incentives for private sector engagement, could provide a boost to the industry. As Gideon Tsike, senior investment officer for tourism at the GIPC, told OBG, “The government is providing incentives for those in the tourism sector, including concessionary rates for imports for people opening and managing hotels, conferences and restaurants.”

Visa Facilitation

Industry leaders have long cited easing of the visa issuance process as a key area for reform in Ghana and across sub-Saharan Africa. The TTCR cited visa policies as one of the issues that hinder tourism growth in African countries like Ghana, which received a rating of 1.92 out of seven for international openness.

So far, 2017 has brought signs of improvement, building on the 2016 decision by the African Union to implement a common visa policy that includes visa-on-arrival for all African citizens.

“Tourist visas have been made easier – West Africans coming to Ghana can now obtain a visa upon arrival. They are our closest neighbours, so that is the starting point,” Quarshie told OBG. “It goes beyond a strategy to promote regional tourism, to the overall integration of Africa. Nigeria alone has 186m people. If we can get only 1% of those people coming into Ghana as tourists, it will do our tourism sector a lot of good,” he added.

In addition, Kotoka International Airport established a new World Bank-funded Border Control and Management System to facilitate the visa process for travellers, through systematic document verification and biometric traveller authentication. This is expected to improve travel flow at the airport by creating a faster, automated process.

Tackling High Airfares

Lowering airfares to and within Ghana is another area that could help boost the tourism sector. “We have the stability; we have the history; we have the culture; we have a 540-km coastline,” Francis Grant, CEO of Midindi Hotel in Accra, told OBG. “A game-changer in Ghana tourism requires reduced airfares, more competitive hotel room rates, and better financing and investment. To make use of Ghana’s attractions, you either need to look at getting a national carrier or entering into a partnership to bring in an air carrier that will bring airfares down.” He explained that this is particularly important when attracting the leisure travellers, as they focus more on ticket price.

Afeku has taken this issue very seriously: she told local press in January 2017, “My interest is in getting the aviation industry to see tourism as part and parcel of their industry. So if we have air tariffs drastically reduced, people will travel more and also will entice family members to look into what Ghana has to offer.” She announced plans to reduce air tariffs to encourage increased domestic and international travel and, importantly, in April 2017 the Parliament removed the 17.5% value-added tax (VAT) on all domestic airfares. Afeku has also spoken publicly in favour of using charter flights to bring the overall cost of travel down.

Conferences & Meetings

Conferences remain a key part of the tourism space in Ghana. Tsike told OBG, “Conference centres are almost fully booked year-round.” Indeed, the UN’s “Economic Development in Africa Report 2017” ranked Ghana as the sixth-most popular country in Africa for hosting international meetings in 2015. Major conferences scheduled for 2017 include the Africa Open Data Conference, the annual CEO Summit and the Ghana Diaspora Homecoming Summit 2017. Popular venues include the Accra International Conference Centre, the Ghana National Theatre and the Ghana International Trade Fair Centre.

Hospitality Training

According to a 2014 World Bank report on workforce supply and demand, Ghana’s hospitality sector productivity is hindered in particular by two human resources-related challenges: the workforce still has poor ICT skills, and there is high variation in the level of employee soft skills. As such, Ghana is in need of relevant, up-to-date and standardised training programmes that provide ICT training and soft skill orientations. According to the National Tourism Development Plan for 2013-27, development of human resources is a key part of Ghana’s long-term strategy.

In 2016 MoTAC reported holding nine training programmes, with the goal of hosting another nine in 2017. Of note, the Hotel Catering Tourism Training Institute organised nationwide capacity-building workshops, which trained 8000 hospitality service providers to improve their service delivery. In April 2017 a training programme was also held in Kumasi, Ada and Cape Coast to help enhance the capabilities of various players in the tourism sector. Through support from MoTAC, the GTA and other internationally focused agencies, this programme included speeches and training delivered by industry specialists from the US, in order to provide expert knowledge on the keys to success in the sector.

Accommodation

Interest in hotel development spiked after 2011, and Accra is now home to nine internationally branded hotels, including the Mö venpick, the Holiday Inn, the Golden Tulip, Novotel (Accor) and the Kempinski. The GTA reported in its most recent data that there were 2723 hotels in Ghana as of 2015, and global real estate management company JLL reported in September 2016 that there were 140 hotels in Accra. The most high-profile new hotel development is the Marriott, near Kotoka International Airport, which is due to open in December 2017. While Radisson and Hilton have also signed agreements, properties were not yet under construction as of late 2017. While there are notable areas of progress, sluggish economic growth since 2014 has tempered expansion in the hotel segment. Herbert Acquaye, president of the Hotel Association of Ghana, told OBG, “Revenues have not climbed; instead, they have dwindled, as the sector relies significantly on business clientele and there is a rapid decline in corporate business.”

Furthermore, due to high operating costs for utilities, prices in Accra for tourists remain high, making it difficult to attract more customers. Indeed, according to figures from the most recent JLL report, revenue per available room is one of the highest in the region, reaching $134 in 2015, with $201 as the average daily rate. Hotels have had to reduce prices in recent years to try to increase occupancy.

“Five years ago you could not get a three- to fivestar hotel room for less than $150,” Acquaye told OBG. “Now, it is possible to get a room in a four-star hotel for $100. Average rates for four- to five-star facilities stand at $150, compared to just two years ago, when this figure was $180.”

Two Key Challenges

The “Africa Competitiveness Report 2017” notes that access to financing is one of the most significant barriers to doing business in Ghana. This is certainly the case for developing hospitality properties.

“Ghana has a situation where hotel rates are high, because lending is very short-term in the market, and interest rates are high; a Ghanaian business probably only has three to four years to repay its loan, and hotel prices need to reflect that,” Grant told OBG. “A small hotel borrowing $1m at 14% per year and selling 12 rooms per day would require a rate of $89 just for principal and interest payments. Considering there are operational expenses and taxes to cover as well, a longer-term financing option is necessary to get sustainable lower room rates and give businesses a profit.”

Taxation remains high in the tourism sector. As noted in local press in July 2017, hospitality establishments owe payments to a total of 12 agencies, including the GTA, the Ghana Revenue Authority, the Food and Drugs Authority, and the Environmental Protection Agency. In addition, some hotels also reported that the rise in utility bills has resulted in those costs making up to 45% of their overheads.

Acquiring land is also a challenge that spans sectors, but it can be particularly difficult for larger hospitality-related projects. “It should be easy in theory, but it is still a bit cumbersome, since many land titles are held by traditional rulers and families, for which there is no documentation,” Quarshie told OBG. “It becomes challenging to know who the rightful owner of the land is, which sometimes results in long litigations. If more lands are vested in the government, then when the government decides to undertake tourism projects it becomes easier, as it eliminates uncertainty as to who owns the land, which can speed up decision-making.”

Types Of Tourism

The country’s most popular tourist sites include a combination of ecotourism and historical destinations, including Kakum National Park, Cape Coast and Elmina Castles, Kwame Nkrumah Memorial Park, Kumasi Zoo, Wli Waterfalls and the Manhyia Palace Museum.

Ecotourism in particular is a promising area for development. According to the GTA, 20 national parks and reserves cover approximately 5% of Ghana’s total land, and there is a 540-km coastline of sandy beaches, making Ghana a natural ecotourism destination. Tsike told OBG, “The GIPC is looking at ecotourism possibilities. We have spoken with the forestry service in particular to develop additional ideas.” As detailed in the government’s 2017 budget, MoTAC is focusing on developing ecotourism facilities in sites such as Mole National Park, Shai Hills Resource Reserve, Kakum National Park and Achimota Forest Reserve.

Healthy Prospects

Medical tourism could also be an area for Ghana to explore. The “Economic Development in Africa Report 2017” cited Ghana as an emerging wellness destination, particularly given the development of hospital infrastructure by private companies. Further development of such partnerships could present even greater opportunities for private institutions to provide training, as public nursing schools only have the resources to accept around one-half of qualified applicants. Furthermore, development of medical tourism would likely diversify the sector, which could strengthen its economic stability over time. This could generate revenue not only from medical bills themselves, but also from forex earnings and visa fees.

In January 2017, before the administration shift, former President John Dramani Mahama announced the construction of a $217m medical centre, which would likely solidify Ghana’s position as a medical tourism destination. Aaron Lawson, acting CEO of the University of Ghana Medical Centre, told local press in July 2017 that further progress is dependent upon parliamentary approval of $48m of funding. As of early November 2017 the Ministry of Health was carrying out due diligence on the centre and how it will be managed, according to local media reports.

Re-Enforcing New Segments

According to the most recent figures to be published by the GTA, during 2012-14 almost 40% of visitors to Ghana reported coming for business, conferences or training, while only 19% of travellers came for holiday.

“At the moment, what we really need are credible plans to expand the leisure aspect of hospitality in Ghana. As a business traveller destination, whenever business opportunities occur, like the discovery of oil in 2007, there is a marked increase in business activity, which affects the hospitality sector,” Grant told OBG. “Equally, when there is a slowdown in business activities, you see it adversely impact the hospitality sector,” he added.

Ensuring the success of more targeted leisure outreach will require more nuanced data collection on the types of tourist arrivals that sector leaders hope to attract. For instance, according to the most recent data from the GTA, the single-largest generating market in 2014 was the US, with 135,900 arrivals, followed by Ghanaians living overseas returning home for a visit, with 124,600. As these native Ghanaians do not spend the same way as others in the tourism sector, data collection should better capture these visits and allow for more targeted marketing to travellers.

Additionally, domestic tourism has significant growth potential, particularly with the lifting of the 17.5% VAT on domestic airline tickets. Two of the most famous tourism destinations – UNESCO World Heritage sites Cape Coast and Elmina castles – reported an increase in the total number of domestic tourists visiting the two castles from 82,521 in 2015 to 87,655 in 2016.

Acquaye told OBG that a focus on domestic tourism would be beneficial from a hotel segment perspective: “We have a huge budget for two-star facilities that could be targeted to a domestic market, and these are the hotels that are suffering the most in terms of occupancy and growth.” The WTTC estimated that in 2016 domestic travel spending directly contributed 3% to GDP, and projected it would grow by 5.6% in 2017 to GHS5.3bn ($1.3bn).

Outlook

With another successful election complete, investors are positioned to become more active in the tourism sector. According to the WTTC, the total contribution of tourism to GDP was expected to have grown by 5.2% in 2017, to GHS12.1bn ($2.9bn), and to rise by 4.8% per year to GHS19.3bn ($4.6bn) in 2027. In the short term, the dollar and euro exchange rates to the cedi are favourable for visitors from the US and Europe. Mass change, however, may not happen in the immediate future: as of the first quarter of 2017 tourism was not seeing a lot of new investment.

According to the WTTC, travel and tourism private investment in 2016 was GHS974.5m ($233.3m), which is only 2.7% of total investment, and is projected to have fallen by 0.3% in 2017. Investment incentives will be necessary to prevent this, but with concerted efforts, Ghana can capitalise on its natural attractions and stable environment. “As an industry, we are taking serious steps,” Acquaye told OBG. “We are having a dialogue with the new government, particularly with regard to public-private partnerships to identify key areas to turn the tide.”

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The Report: Ghana 2018

Tourism chapter from The Report: Ghana 2018

The Report: Ghana 2018

The Report

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