Increasing departure tax may backfire on Fiji as competing destinations win travellers on price and leave Fiji with its costly reputation hang out to dry.
And the word of caution from ANZ’s international Pacific economist Dr Kishti Sen is that the stimulus provided by affluent travelers and Australians who had built savings buffers during the pandemic and had kept Fiji’s tourist demand up post-COVID is now fading.
Australians (Australia is Fiji’s biggest source market) are now returning to their preferred destinations in South-East Asia and the cash savings ratio in Australia has returned to the pre-pandemic levels of about 14 per cent.
Fiji’s tourist numbers from New Zealand, our second biggest source market, is also “tapering off” and at a “slightly higher level” than the Australians.
“Tourism is very price sensitive,” Dr Sen told this newspaper.
“So we need to compete on prices to get travellers to favour Fiji as a holiday destination.
“However, households in key source markets are still dealing with cost-of-living pressures and seeking out value-for-money travel.
“Increasing departure tax makes it a little harder to compete on value for money proposition when competition is red hot.”
Fiji will regain its status as being a country with one of the highest airport departure taxes in the world when the tax goes up to $170 next month and to $200 on August 1 next year.
But the increase, announced last week in Government’s 2024-2025 National Budget, is being justified as timely by the Government, who believes the industry is doing so well it can afford it.
“Tourism industry has rebounded very, very strongly. Hoteliers and players in the tourism industry have done very well. Some of them have also made windfall profits. And that has had a positive impact on the economy through spending in other sectors,” Minister of Finance Professor Biman Prasad told this newspaper.
“We don’t see demand as a problem. We see supply as a problem. Accommodation, more rooms…so we’re taking (departure tax) back to $200.
“It’s not something that was not there. It was a COVID measure to bring it down.”
Fiji’s airport departure tax had increased from $100 in 2012 to $200 in 2013 and remained so until it was reduced to $100 in 2020 due to COVID.
The increase is projected to contribute $46.4million in additional revenue this year.
