Public Disclosure Authorized

Report No. 62353-MW

Malawi Travel & Tourism

Realizing the Potential
December 2010 Finance and Private Sector Development Africa Region

Public Disclosure Authorized

Public Disclosure Authorized

Public Disclosure Authorized

Document of the World Bank

Abbreviations and Acronyms

AP CAMAL CAWS CBNRM CEM COMESA DNPW DoT ESA GEF GoM ICA KIA MCCCI MGDS MoF MoIT MSE MTAc MTAu MTWC ODI NSO PAYE PPI SADC SSA T&T TFCA THB TSA VAT WTO WTTC African Parks Coffee Association of Malawi Central African Wilderness Safaris Community Based Natural Resource Management Country Economic Memorandum Common Market for Eastern and Southern Africa Department of National Parks and Wildlife Department of Tourism East and Southern Africa (Region) Global Environment Fund Government of Malawi Investment Climate Assessment Kamuzu International Airport Malawi Confederation of Chambers of Commerce and Industry Malawi Growth and Development Strategy (2006) Ministry of Finance Ministry of Industry and Trade Malawi Stock Exchange Malawi Tourism Association (private sector membership body) Malawi Tourism Authority (proposed regulatory & promotional body) Ministry of Tourism, Wildlife and Culture Overseas Development Institute National Statistical Office (Zomba, Malawi) Pay As You Earn (Payroll Tax) pro-poor impact Southern African Development Community Sub-Saharan Africa travel and tourism Transfrontier Conservation Area Tourism and Hotels Board tourism satellite accounts value added tax World Tourism Organization (United Nations) World Travel and Tourism Council

Currency Equivalent US$1 = Malawi kwacha (MK) 152 for the purpose of calculation, unless otherwise stated.

Acknowledgement
This analysis was prepared at the request of Malawis Ministry of Tourism, Wildlife and Culture and guided by the stewardship of Mr. Jeffrey Kanyinji, Principal Secretary, Ministry of Tourism, Wildlife and Culture. The goal of this work was to assess the sectors current situation and provide insights into its potential and constraints. Working with Jason Agar of Kadale Consultants as the lead researcher, the World Bank team included Hannah Messerli (Senior Private Sector Development, Tourism, Africa Region, Team Leader), Brian Mtonya (Senior Private Sector Development Specialist, Malawi Country Office) Andres Garcia (Economist, Finance and Private Sector Development, Africa Region) and Eneida Fernandes (Tourism Consultant, Africa Region). There were further analytical contributions through which the team greatly benefitted from Sandra Bloemenkamp (Country Manager, Malawi), and Samuel Maimbo (Lead Financial Sector Specialist, Africa Region). The World Bank and consultancy team involved with this reports preparation and dissemination are particularly grateful to the Directors of Tourism (Mr. Isaac Katapola), Parks and Wildlife (Leonard Sefu) and Culture (Dr. Elizabeth Gomani). A number of other individuals at the Ministry, particularly Mr. Charles Kachelenga (Principal Tourism Officer) and Mrs. Patricia Liabuba (Assistant Director, Safety and Standards) were helpful in gathering key information on the sector. In addition to thoughtful input from stakeholders across the public and private sectors during preparation and dissemination, the study benefitted from keen insights from the peer reviewers, namely: Dr. Ronald Mangani (Department of Economics at the University of Malawi), Jean-Michel Pavy (Senior Environmental Specialist, Zambia World Bank Country Office) and Iain Christie (Tourism Consultant). Such an analysis of Malawis tourism sector could only be possible through tapping the frank opinions of private sector tourism operators who propel the travel and tourism sector, and who gave valuable information and data for this review. Their commitment to the sector---today and tomorrow--- is noted and appreciated. The authors hope that this study supports on-going public/private dialog integral to Malawis tourism sector becoming both sustainable and economically productive.

Table of Contents
Abbreviations and Acronyms .......................................................................................... 2 Executive Summary .......................................................................................................... 6 Malawis Tourism Sector: Overview ............................................................................ 14 A. Introduction and Study Outline .............................................................................. 14 B. Context ................................................................................................................... 17 C. Malawis Tourism Assets ................................................................................... 17 1. Travel and Tourism Sector Profile ............................................................................ 20 A. B. C. D. E. F. G. H. I. J. Economic Review ................................................................................................... 20 Policy and Enabling Environment ......................................................................... 27 Tourism Hubs and Linking Infrastructure ......................................................... 31 Market Structure and Dynamics ........................................................................ 36 Resorts and Leisure Centers .................................................................................. 38 Product Offerings................................................................................................... 44 Human Resources and Training ......................................................................... 46 Visitor Analysis .................................................................................................. 48 Marketing and Promotion Activities ...................................................................... 53 Conclusions ............................................................................................................ 55

2. Value-Chain Analysis ................................................................................................. 57 A. Definitions and Methodology ................................................................................. 57 B. Analysis of T&T Product Lines .............................................................................. 58 3. Poverty and Environmental Impacts ........................................................................ 65 A. Pro-Poor/Poverty Linkages and Impacts............................................................... 65 B. Environment and Land ........................................................................................... 69 4. The Case for Travel & Tourism ................................................................................ 74 A. Malawis Commodity Dependence ........................................................................ 74 B. Travel and Tourisms Transformative Potential.................................................... 76 5. Constraints, Opportunities, and Recommendations ........................................ - 79 - A. Summary: Constraints, Opportunities, and Strategic Actions ........................... - 79 - B. Constraints ......................................................................................................... - 82 - C. Opportunities and Recommendations ............................................................ - 87 - D. Way Forward.................................................................................................. - 94 -

Annex 1: Persons and Organizations Consulted ...................................................... - 96 - Annex 2: Sources ......................................................................................................... - 98 - List of Tables Table 1: Cross-Country Comparison of T&Ts Contribution to GDP ............................. 22 Table 2 Output multipliers in Malawi 2005. .................................................................. 24 Table 3: Visitor Access to Malawi by Mode of Transport, 2006-09 ................................ 31 Table 4: Market Share of Domestic and International Air Passengers, 2001-07.............. 33 Table 5: Comparative Long Haul Flight Costs, 2009 ....................................................... 34 Table 6: Air Travel Comparison Selected East and Southern African Countries............. 34 Table 7: Beds available Nationwide, 2008 ....................................................................... 40 Table 8: Hotel Room and Bed Occupancy Rates by Zones, 2006-09 .............................. 40 Table 9: Hotel Room and Bed Occupancy by Month, 2008 ............................................. 41 Table 10: Type of Accommodation Used, International Visitors 2006-09 ...................... 42 Table 11: MIT Student Enrolment 2005-10...................................................................... 46 Table 12: International Visitors Annual Growth Rates, 2004-09 ..................................... 48 Table 13: Reason for Visit by Source Market, 2009 ........................................................ 51 Table 14: Top 5 Source Countries for Visitors on Holiday or Vacation, 2009 ................ 51 Table 15: Top 5 Source Countries for Visitors on Work or Business, 2009 .................... 52 Table 16: Top 5 Source Countries for Visitors to Friends or Relatives, 2009.................. 52 Table 17: Mineral Sector Direct Economic Benefits, annual constant US$ 2008-20 ...... 76 Table 18: Summary Constraints, Opportunities and Strategic Actions ........................ - 79 -

List of Figures Figure 1: T&T Sector Contribution to GDP in Malawi .................................................... 21 Figure 2: Comparison of T&T Multiplier Rates, Selected Countries ............................... 23 Figure 3: Trends and Projections in T&T Employment, 19882020 ............................... 25 Figure 4: International Visitors to Malawi, 19942009.................................................... 49 Figure 5: Purpose of Visit, 19942009 ............................................................................. 50 Figure 6: Source of International Visitors (2009) ............................................................. 51 Figure 7: Safari Cost and Revenue Analysis .................................................................... 58 Figure 8: Lakeside Cost and Revenue Analysis ............................................................... 60 Figure 9: Urban Lodge Cost and Revenue Analysis ......................................................... 61 Figure 10: Mountain Hiking/Climbing Package, Costs and Revenue Analysis ............... 63 Figure 11: Extracted Table on Negative Claims and Responses ...................................... 66 Figure 12: GDP and Export Relationships, 1960-2007 .................................................... 74

Executive Summary
1. TOURISM IS A VALUABLE ECONOMIC DEVELOPMENT TOOL FOR MALAWI Malawi sits amid a vibrant travel and tourism (T&T) region that is growing rapidly and increasing its world market share. Proximate to countries with thriving T&T sectors, Malawi has a relatively underdeveloped diversity of natural, cultural, and man-made attractions. It is challenged to embrace effective policies that would enable public and private sector alignment to achieve a viable niche as an economically productive, multiexperience destination in its own right. It is important to view tourism as a national priority across sectors and ministries in Malawi. Despite significant growth during the past decade, the T&T sector in Malawi struggles to become a national development priority. There is some level of uncertainty regarding the specific merits of supporting T&T as a source of economic growth and tool for poverty reduction. The uncertainty is aggravated as the sector has to compete across borders with well-established destinations such as Kenya, South Africa, and Tanzania. Thus, there is the need to better understand the economic potential of Malawis T&T sector and recommend strategies to promote a level of competitiveness that leads to further economic growth, employment generation, and poverty reduction. With its crosssectoral foundation, tourism can integrate natural, cultural, and man-made assets, enabling economic productivity while also protecting the environment and conserving culture. Achieving these results requires collaboration across ministries to assure sustainability. The goal is to identify the economic potential of T&T in Malawi. The objective of Travel and Tourism in Malawi: Delivering Economic Growth and Diversification is to analyze the value of T&T in Malawi. Specifically, the study provides an economic review of the sector through a synthesis of previous sector analyses and a value-chain analysis. A better understanding of the potential of T&T in Malawi is expected to lead to a more coordinated effort among government, private sector, donor, and local community stakeholders to promote and invest in T&T as a productive development tool. The T&T sector is active, growing, and needed. T&T investment is taking place in Malawi with more activity and momentum than previously anticipated. Malawis T&T sector has grown twice as fast as its overall economy since 1996. Using the World Travel and Tourism Councils (WTTC) broad economic measure, the T&T sector contributed US$184.8 million (5.8 percent) of Malawis gross domestic product (GDP) in 2008. Direct and indirect activities cascade to support multiple sectors, notably transport, infrastructure, and agriculture. An additional benefit of the T&T sector is that its performance is not impacted by variable weather patterns that make the agricultural sector vulnerable and less reliable as a growth source. While Malawis T&T sector directly provides a higher than average proportion of GDP than in other countries in the Sub-Saharan African (SSA) region, limited linkages translate to a weak multiplier. Using WTTCs wider T&T economy GDP measure, Malawis performance is lower than the SSA average, suggesting relatively weak linkages and a lower multiplier. Despite lagging behind key regional competitors,

these data are encouraging on the current performance of the sector and indicates large potential gains if the multiplier can be improved. There is an opportunity to increase export earnings through T&T. Malawis T&T sector generated US$39.5 million in visitor spending in 2008, equivalent to 63.4 percent of service exports. WTTC estimates Malawis T&T exports will account for 3.5 percent of total exports for 2010, but this compares poorly to other countries in T&T contribution to exports. In the SSA region, international visitors will generate 6.6 percent of total exports in 2010, and an estimated 6.1 percent for the world economy. This highlights the potential to increase export earnings from Malawis T&T sector. T&T is an important source of employment. Based on WTTCs economy measure, in 2008 T&T provided 140,000 direct and indirect jobs across the economy (4.5 percent of employment). Of these, direct T&T industry employment was 68,000 jobs, equal to 2.2 percent of total employment (WTTC). Many of these jobs are in remote areas and often provide people with their first formal employment. Further, the impact of tourism wages is multiplied across the economy, supporting others through subsequent rounds of spending. For example, operators out of the main cities mostly had their own initiatives for promoting local suppliers, particularly for perishable food stuffs. T&T is an important source of revenue for the Government of Malawi (GoM) through tax and nontax revenues. For fiscal year 2010/11, the Ministry of Tourism, Wildlife and Culture (MTWC) has a revenue target of MK 65.28 million (US$430,000). More significantly, T&T operators generate tax through direct and indirect taxes. Valuechain analysis found that an international visitor paying US$2,327.00 for a two-week safari-lakeshore package yields direct and indirect taxes/charges of US$684.41 for GoM (30.5 percent of the price). This excludes tax revenue from discretional visitor spending and international flights. T&T combines economic growth with poverty reduction, environmental preservation, and promotion of Malawis cultural heritage. The T&T sector has a pro-poor impact through employment and business opportunities, often in remote areas where there are few other opportunities. Furthermore, it plays a key role in conserving and improving Malawis natural assets, many of which are degraded or facing the constant threat of degradation. The T&T sector also has a vital role to play in maintaining and promoting the countrys rich cultural heritage sites and events. This study identifies the key constraints to development of Malawis T&T sector. They include (i) data collection and analysis limitations, (ii) a weak multiplier, (iii) insufficient supply of well-trained staff, (iv) fluctuating and high tax share of revenues, (v) weak institutional arrangements, (vi) non-specialist investors, (vii) underdeveloped destination positioning, (viii) limited effect of destination marketing, (ix) insufficient attention to cultural sites and events, (x) weak product innovation, (xi) natural assets that are facing degradation, (xii) risk of community-investor conflicts, (xiii) high cost of air transport and poor air access, (xiv) (some) below standard local and international access roads, (xv) poor quality utility supply, (xvi) insufficient zoning of land for T&T, (xvii) high operating costs, and (xviii) inconsistent dialogue on key policy changes and implementation.

2. REALIZING THE POTENTIAL OF T&T IN MALAWI The economic review and value-chain analyses conducted in this study provide a clearer picture of the constraints and opportunities that the T&T industry currently faces. To address the constraints and take advantage of opportunities (see section 5), particular attention is required in four areas: Improve the economic performance of travel and tourism Improve public sector performance and create policies that attract investment Improve marketing to make Malawi a more attractive destination to travelers Embrace policies that encourage competitiveness

Increase the Economic Performance of Travel and Tourism Improve supply chain linkages (multipliers) and pro-poor impacts. To maximize the economic value of the T&T sector to Malawis economy, there is a need to increase the multiplier effects through improved supply chain linkages. This could be addressed by stimulating a stronger supply chain response to opportunities generated by existing T&T providers, notably by developing and utilizing more domestically produced goods and service supplies through supplier initiatives. Increase the quantity and quality of trained staff, supervisors, and managers. Current graduates from public and private institutions are not sufficient in their skill sets, quality, and numbers. The curricula of public and private institutions should be reviewed, as should the quality of the teaching. This can be undertaken as a public-private partnership better suited to satisfy the needs of the T&T industry. As part of a sustainable sector, the T&T industry needs to focus on creating careers and not just jobs. Expand response by international T&T investors and train existing, domestic nonspecialist T&T operators. Involvement in T&T has been mostly opportunistic in Malawi, particularly by non-specialized domestic investors interested in niche opportunities. Given the competitiveness of the sector across borders, standards should be improved to progressively professionalize all T&T operations in the country. This can be done by full implementation of the grading system. The benefits would lead to a more competitive T&T sector that would be more attractive to international investors. Restore and improve tourism and cultural assets. The tourism segment is built on accessing Malawis natural assets, some of which have been badly degraded. Restoring the natural environment and rebuilding the resource base has been demonstrated in Malawi to increase T&T opportunities. The Liwonde and Majete success stories and the Nyika Transfrontier Conservation Area (TFCA) are models for going forward. Replication and expansion are viable paths for sustainable and economically productive development. Public and/or development partner investment is a necessary first step, supported by more effective protection and enforcement.

Improve Public Sector Performance and Policies to Promote Investment Stimulate investment in the T&T sector to generate medium- and long-term GoM revenues. The T&T sector needs a tax structure that attracts investment while protecting government revenue over the medium to long term. The nature of T&T investment includes high initial investment (hotels, restaurants, vehicles, and so forth) and high overheads. Recent changes to the tax treatment of T&T investment have made mediumand long-term investments less attractive and less viable. Therefore, a balance must be found, allowing for continued and increasing tax revenue while encouraging the large capital investment required in the T&T sector. Improve T&T institutional performance. The institutional arrangements for the T&T sector are not effective or indicative of best practices. For example, MTWC undertakes operational activities in licensing, grading, and destination marketing that are normally the functions of a public-private tourism body. In countries such as Kenya and Tanzania, tourism ministries are dedicated to policy formulation and analysis while public-private tourism boards handle cross-cutting policy and regulatory implementation. Consequently, the GoM may consider creating a public-private T&T body that focuses on promotion and regulation of T&T investments. This approach has been successful in countries such as Tunisia, Mexico, and more recently Mozambique. Increase data gathering and analytical capacity to support T&T-sector decision making. Insufficient domestic data collection and limited ongoing analysis makes it difficult for policy makers to determine the value of the sector and intervention priorities. As a result, increased data collection and analytical capacity are needed in the key organizations that operate in and support the sector: notably, the MTWC, National Statistical Office (NSO), Tourism and Hotels Board (THB) or successor body, University of Mzuzu, and private sector associations. Efficient, focused data collection and analysis through the establishment of tourism satellite accounts (TSA) in the medium term would allow the government to better monitor the T&T sector and find areas where support is needed the most. Engage in cross-sectoral public-private dialog to establish policies that achieve the intended effects. For example, it is entirely appropriate for GoM to seek to reduce the use of public resources and time spent on meetings, such as at the lakeshore. However, the policy may not be having the intended effect, as meetings are moved to other, nonlakeshore venues out of Lilongwe. Implementing policies can have disproportionate effects on particular groups of investors, employees, and localities. More broadly, this issue reemphasizes the importance of wide stakeholder dialogue on policy decisions in the T&T sector, so that implementation can be more effective. Improve Marketing to Make Malawi a More Attractive Destination to Travelers Improve Malawis destination positioning. Malawi is competing in a global T&T market against many better resourced, more established, and better known destinations. Yet Malawi offers relatively undiscovered attractions that collectively offer visitors a different and diverse package compared to competitive offerings in the region. The overall destination positioning is important and could be improved to present Malawi as a

multi-experience destination in its own right and as a complementary destination to other countries for those that have visited the iconic attractions of its neighbors. Improve the effectiveness of public and private resources to promote Malawi. The limited amount of destination marketing activity and low international visibility of Malawi constrains the number of international visitors. Given financial constraints in the T&T sector, efforts should be focused on Worldwide Web presence and attendance at key travel markets. There need to be attention to key current source markets rather than dissipating spending and clearer messages and information for business travelers. Stimulate innovation in product offerings. This requires developing and packaging a more innovative set of product lines. It could be supported through a challenge fund approach as well as technical assistance. Use and promote cultural heritage as part of Malawis main visitor attractions. There is considerably more value to be gained from Malawis rich cultural heritage. Than is currently being generated This requires improved recording and preservation of cultural sites, improved presentation of cultural events, and increased attention in marketing to the cultural asset base. Promote Competitiveness Improve accessibility and reduce air access cost to Malawi. The cost of air transport to Malawi and poor access options are major constraints for operators targeting international business and tourist visitors. Malawi has long been a signatory to the Yamoussoukro Declaration on open skies, but it has not implemented this as a policy. Although politically difficult, a solution has to be found that would enable a substantial increase in air access at lower cost. Improve road quality and access to key T&T locations. Access roads are a key constraint for particular operators that depend on them. Creating access to Malawis natural assets, such as parks and reserves, requires continued investment in roads. International road access for international visitors is more important than air in volume terms. Important domestic tourism roads should be prioritized in national decision making, together with improvements to busy border post infrastructure and staffing. Increase the competitiveness of the lodging sector. In the urban and the lakeshore areas, increasing supply requires effective planning and zoning. An increase in lodging supply should encourage a more appropriate T&T accommodation development mix that over the medium and long terms will help to increase competitiveness and reduce prices. 3. THE WAY FORWARD The findings and recommendations presented in this study provide more clarity on the economic potential of tourism. An increase in dialogue among the public sector, private sector, and development partners can identify synergies to promote investment in T&T aimed at job creation and poverty reduction. Also, findings in this study highlight opportunities for moving toward a better framework for cross-sector support, enhancing

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stakeholder collaboration and technical assistance, and strengthening the private sector. These findings are summarized in the following table.

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The Way Forward

Objective/ Opportunity Outcome 1. Improve the economic performance of T&T 1.1 Improve supply Stimulate a stronger supply chain linkages chain response to (multiplier) and opportunities by existing pro-poor impacts. T&T providers by using more domestic goods and service supplies. Strategic Actions Key Stakeholders

Analyze supply chain operation and areas of low response; develop a T&T supplier initiative.

1.2

Increase the quantity and quality of trained staff, supervisors, and managers.

Improve the flow and quality of entry level T&T graduates from MIT and Univ. of Mzuzu. Improve short-term training for employed staff, supervisors, and managers. Investment promotion targets domestic and smaller T&T specialist regional investors, with standards progressively tightened to encourage increased professionalization. Restore and maintain key national parks, forest, and wildlife reserves through public-private-community partnerships; preserve and promote cultural sites and events.

Review T&T sector training provision and demand forecasts; institutional review of MIT; reach agreement on publicprivate funding of T&T sector training.

1.3

Increase response by international T&T investors and train existing, domestic nonspecialist T&T operators. Restore and improve tourism and cultural assets

More focused investment promotion; implementation of the grading system; training and technical support for domestic non-specialized operators to professionalize.

MTWC, with Min of Industry and Trade (MoIT) and Malawi Confederation of Chambers of Commerce and Industry (MCCCI). MTWC with Malawi Tourism Association (MTAc) and (T&T) private sector operators, MIT, Univ. of Mzuzu & Min of Finance. MTWC with Malawi Investment Promotion Agency (MIPA), THB, MTAc, and private sector operators.

1.4

Develop restoration and management plans for targeted natural and cultural assets.

Dept. of National Parks and Wildlife and Dept. of Culture with MoF, MTAc, and private sector operators and community bodies. MoF with MTWC, MTAc, and private sector operators.

2. Improve public sector performance and create policies that attract investment 2.1 Balance and maximize Conduct comprehensive and Stimulate short- and medium-term tax regionally comparative review of investment in the revenue by encouraging tax policy for T&T sector; T&T sector to investment, foreign restructure incentives to balance generate tax exchange, jobs, and longer- jobs, investment, foreign revenues term GoM revenues. exchange, and tax revenues. Regulatory and destination Reach policy decision on 2.2 Improve T&T marketing role is institutional housing of institutional transferred from MTWC to regulatory and marketing roles; performance a functioning public-private develop shared public-private body. funding mechanism. 2.3 Improve capacity at Assess key policy and decisionIncrease data MTWC, NSO, Dept. of making information needs and gathering and Immigration, THB/Malawi capacities; develop linkages with analytical capacity Tourism Authority UN World Trade Organization for decision (MTAu), private sector Africa Statistical Capacity making associations, and University Building Program; develop of Malawi (Mzuzu). capacity-building program.

MTWC with MTAc and private sector operators, and MoF. MTWC.

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Objective/ Outcome 2.4

Opportunity Engage in dialogue on key T&T policy changes with private sector associations/representatives to determine impacts and best methods to implement

Strategic Actions

Key Stakeholders MTWC and MoF.

Review alternative approaches that limit meeting expenditure in Improve dialogue ways that do not on T&T policies disproportionally impact and mechanisms particular groups of investors, employees, and communities; establish regular mechanisms for dialogue on key T&T policies. 3. Improve marketing to make Malawi a more attractive destination to travelers Position Malawi as both a Refine positioning statement and 3.1 multiexperience destination communicate position through all Improve in its own right and as a available media. destination complementary product to positioning the regions iconic attractions. Greater utilization of the Increase compliance with levy 3.2 Improve Web with better targeting through better collection and effectiveness of of business visitors and incentives to comply; increase limited resources more focus on key current technical support for destination to promote Malawi source countries. marketing initiatives. 3.3 Increase the extent and Provide technical support for Stimulate diversity of visitor T&T product innovation; innovation in options. create challenge fund to support product offerings innovative T&T product development. 3.4 Increase attention for Improve recording and Use and promote Malawis cultural heritage preservation of cultural sites; cultural heritage and events as a key part of improve presentation of cultural as part of its diversified attraction. events; increase attention to Malawis main marketing. visitor attractions 4. Embrace policies that encourage competitiveness 4.1 Increase competition in air Improve transport and improve accessibility and facilities. reduce air access cost 4.2 Improve road quality and access to key T&T locations Improve key border crossing facilities and linking roads. Improve access roads to natural assets and T&T resorts. Increase supply of lodging in urban areas where demand is highest; improve management of remaining undeveloped lakeshore sites suitable for tourism.

MTWC with MTAc and private sector operators.

MTWC with MTAc and private sector operators.

MTWC with MTAc and private sector operators.

Dept. of Culture with MTAc, private sector operators, and cultural associations/ bodies. MTWC, Min. of Transport, Dept of Civil Aviation, MTAc, private sector operators, Airlines. MTWC, Ministry of Transport, MoF, MTAc, and private sector operators. MTWC, city and targeted district assemblies, MTAc, and private sector operators.

Review how competitiveness can be increased, including implementation of the Yamoussoukro declaration.

Identify and prioritize key roads by T&T stakeholders; lobby within GoM for higher priority. Implement zoning on the lakeshore; improve prioritization of sites for urban accommodation units.

4.3 Increase the competitiveness of the lodging sector

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Malawis Tourism Sector: Overview

A. Introduction and Study Outline 1. Malawi is land-linked to three better known and more developed international tourism destinations: Tanzania, Zambia, and Mozambique. The wider East and Southern Africa (ESA) region, within which Malawi sits, includes other countries with well-developed tourism sectors, notably, Kenya, Mauritius, Botswana, Namibia, and South Africa. Over the next three to four years a revitalized Zimbabwe could put itself back on the tourism A list. Having better-established tourism neighbors means that Malawi has to compete hard for each tourism dollar.
2. Although countries compete for tourism visitors, the 2010 World Cup demonstrated

that there are spillover benefits from being located in a region that attracts high-end international tourists. There is no other region of the world that can offer the classic safari experience and such iconic natural attractions as Mt. Kilimanjaro, Victoria Falls, the Okavango, and the Namib and Kalahari deserts as well as so many relatively unspoiled tropical beaches. Malawi can leverage its location within the ESA region as a relatively under-explored destination in combination with visits to the better stocked game reserves and the big ticket attractions of the regions other countries. In particular, Lake Malawis beaches are more accessible to Zambias and Zimbabwes visitors than is Mozambiques coast, attractive as it is. Several operators already operate across the ESA region, packaging multi-country visits that combine a range of tourism products. Some of these have recently invested in Malawi.1 Although Malawi has no single must see, internationally recognized attractions such as Victoria Falls, it does offer a rich combination of natural and man-made attractions due to its geography, history, heritage, and diverse ecological zones.2 While not well known outside of Malawi, destinations such as Lake Malawi, Nyika Plateau, Liwonde National Park, and Mulanje Mountain have potential to attract international visitors in their own right. The combination of these and other secondary attractions suggests that Malawi has a viable market niche as a multiple-experience destination and as a combination destination alongside its regional competitors.
3.

Definitions 4. Travel and Tourism (T&T) is a unified sector, but is difficult to define and capture in statistics,3 because it encompasses many diverse and hard-to-measure areas of economic activity, including remote rural activities and intangible services. The tourism part of T&T refers to international and domestic travelers visiting a place for their own recreation, leisure, and pleasure for at least one night away from home, including visits to
For example, Robin Pope Safaris of Zambia has established a high-end resort at Pumulani and is now developing a lodge in Majete National Park.
2 1

Malawi sits at the southern end of the Great Rift Valley, combining highland plateau (Nyika), Lake Malawi (and other lakes), and Southern Africas second highest mountain (Mount Mulanje).

A higher proportion of T&Ts economic value in developing countries is informal and not easy to capture, but this also increases its potential for pro-poor impacts.

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family and friends. The travel part of T&T includes travel for work, business meetings and conferences, and any other non-leisure reasons. In this report T&T refers to all forms of leisure and work-related travel, accommodation, meals and refreshments, and entertainment. Tourism in this study refers to travel primarily for purposes of leisure, recreation, and pleasure. As found in this study, travel for business and other purposes, particularly meetings and conferences, is an important market segment and larger than travel for leisure.
5. This study utilizes the World Travel and Tourism Council (WTTC) definition for

travel and tourism as the activities of persons travelling to and staying outside their usual environment for not more than one consecutive year for leisure, business and other purposes not remunerated from within the place visited.4 This study analyzes T&T broadly, covering tourism, travel, and hospitality for reasons of leisure, business, conferencing, and events, both domestic and international.
6. Within the T&T sector, the term hospitality includes accommodation, meals,

refreshments, and entertainment. Hospitality is utilized by all segments of the T&T market. There are other important, related services, such as transport, incorporating flights, transfers to accommodation, car hire, game-viewing vehicles, boat trips, and so forth, that are also integral to the T&T sector.
7. The term visitor is used in Malawi as the basis for statistics collected by the

Government of Malawi (GoM). Visitor categories include people visiting for tourism purposes (narrowly defined) as well as those visiting for work/business and conferences/meetings and for visiting friends or relatives. GoM statistics focus on international visitors, as these are more readily captured through the immigration process.5 Domestic T&T is more difficult to record and capture, resulting in the tendency to focus on international visitors. For this study, visitor refers to a person visiting Malawi for any T&T purpose. If that is primarily for a tourism purpose, then the visitor is more specifically referred to as a tourist. To encompass both international visitors and domestic users of T&T products, the term client is used.
8. The range and complexity of T&T products6 is also broadmost T&T clients use

combinations of goods and services tailored to their particular needs. Some are standard (-ized) packages, but even these often have elements added at the front and back ends to partially customize them. The T&T sector is characterized by combinations of two or more packages, such as flights, transfers, accommodation, excursions, hospitality, car hire, and leisure activities. At the middle and high end of the T&T market, individual

See http://www.wttc.org/bin/pdf/original_pdf_file/2008_methodology.pdf . The definition draws from United Nations Statistics Division, Statistical Office of the European Communities, Organisation for Economic Co-operation and Development, and World Tourism Organization (2008).
5 6

All visitors must complete entry and exit cards.

Product is used here to encompass all T&T goods and services. This reflects the dual nature of the sector, which combines tangible and intangible offeringsa good example is a meal at a restaurant.

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packages are assembled specifically to the clients wishes and budget, which makes defining and measuring tourism products difficult.
9. Within the segment for people travelling for work/business is a subsegment for

conferences. In this context, the term conference means any meeting of any number of people where a meeting room/facility has been hired for at least part of a day. Typically, the conference operator provides a room with necessary facilities, plus refreshments, snacks and meals. Conference delegates may or may not stay overnight as part of, or in addition to, the package. Most conferences are single meetings rather than large contiguous events that the term conference can imply. The term is used here because it is the most common term used to cover the wide range of meetings serviced.
10. This study, commissioned by the World Bank in collaboration with the GoMs

Ministry of Tourism, Wildlife and Culture (MTWC), analyzes the economic, social, and environmental significance of the T&T sector in Malawi and considers the potential for economic impact and benefits. The purpose of the study is to determine the economic potential of tourism in Malawi. Based on discussions with stakeholders and review of previous analytical work, it is proposed that the scope and direction of the Tourism ESW be focused on quantifying the sustainable growth opportunities of tourism to Malawis economy.
11. Data have been drawn from domestic and international sources. Secondary sources

include MTWC, the National Statistics Office (NSO), other GoM ministries and agencies, published studies, and key international bodies, such as the WTTC and World Tourism Organization (WTO). A list of secondary sources is included in Annex 2: In addition, primary research was undertaken through interviews with key public- and private sector organizations and individuals in Malawi. This included GoM ministries and agencies as well as private sector tourism operators.
12. There are considerable difficulties obtaining information on the sector that probably

reflects its low priority but also the more general difficulty of measuring services. Much of the MTWC data are based on self-reported visitor data taken from entry and exit cards, which relies on manual collection and collation. Although the use of Satellite Tourism Accounts is an attractive option in terms of data reliability and accuracy, realistically Malawi is a long way from being able to produce these; they would require a significant investment. More realistic are options to improve the existing sources in timeliness and accuracy. Limitations to the data are indicated where applicable.
13. Section 0 of this study provides a profile of the T&T sector in Malawi; Section 20

provides a T&T value-chain analysis; Section 3 analyses the poverty and environmental impacts, while section 4 makes the case for more investment in T&T. Finally, section 5 summarizes constraints, opportunities, recommendations, and the way forward. Annexes include details of interviewees and secondary sources.

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B. Context 14. The Malawi Growth and Development Strategy (MGDS)7 highlighted the role of tourism under Theme One (Economic Growth), Sub-Theme One: Maximizing the Contribution to Economic Growth through the Potential Sectors of Growth (Tourism, Mining and Manufacturing). It stated that Malawi will be established as a principal and leading eco-tourism destination in Africa and domestic tourism will be increased. Strategies to be pursued include: increasing capacity to service additional tourists in internationally competitive accommodation; improving transport links to tourism destinations; increasing attractiveness of national parks for tourism and eco-tourism; and improving tourism marketing regionally and internationally. Tourism was also identified as an element in Sub-Theme Three: Export Led Growth, and Sub-Theme Four: Conserving the Natural Resource Base. The stated aim was to increase the contribution of the tourism sector from 1.8 percent of gross domestic product (GDP) in 2005 to 8 percent of GDP by 2011. At the time of the MGDS formulation, tourism enjoyed prominence in GoM thinking and strategy because it was underdeveloped, had potential to bring additional export revenues, had pro-poor impacts, and would help conserve and restore the natural environment.
15. The MTWC with support from the Commonwealth Development Corporation

produced a Tourism Sector Strategy, 200813, updating the earlier 20026 document. The overall positioning shifted from Malawi as a principal eco-tourism destination to a broader range of T&T opportunities, including improving the enabling environment and institutional development.8
16. Tourism has fallen lower on the priority list for GoM over recent years and is not

currently included in the nine priorities given by the State President in his 201011 statement to parliament, having previously been in the top 10 priorities. The budget for MTWC increased from MK 37.5 million (US$470,000) in 200203 to MK 118 million (US$840,000) in 200910, reflecting an increasing priority during that period, but it has been cut back to MK 110 million (US$730,000) for 201011.
17. It is within this overall strategic context that this analysis of the T&T sectors

economic potential has been undertaken.

C. Malawis Tourism Assets Natural Assets 18. Malawi promotes itself as the warm heart of Africa, with both natural and cultural attractions. Malawis most important tourism assets are its national parks, wildlife reserves, mountain plateaus, lakes, and diverse ecology. Malawi has five national parks: Nyika in the Northern Region; Kasungu in the Central Region; and Liwonde, Lengwe,

7 8

Government of Malawi (2006).

A review of the previous strategy (200206) and the new strategy are set out inTourism Intelligence and Commonwealth Development Corporation (2008).

17

and Lake Malawi National Parks in the Southern Region. There are four wildlife reserves: Vwaza and Nkhotakota Reserves in the north and Mwabvi and Majete in the south. In addition there are forest reserves that have the potential for visitor activity, including Dedza and Zomba, as well as private game parks, such as Nyala Park and Kuti Ranch.
19. Lake Malawi, formerly Lake Nyassa and called the Lake of Stars by David

Livingstone,9 covers almost 20 percent of the country. It is a major attraction for domestic and international (mainly regional) visitors, with resorts offering a range of packages, budget to high-end. These are clustered in the south around Monkey Bay and Mangochi and accessible from Lilongwe and Blantyre. As well as hosting high-end resorts and being part of the backpacker trail, the area around Cape Maclear is a UNESCO world biodiversity site, where there are high concentrations of brightly colored mbuna cichlid (fish). Lake Malawi is estimated to have close to 1,000 species of fish, of which 800 are endemic and close to half not yet documented. In the central lakeshore, Salima provides a cluster of resorts within two hours drive of Lilongwe. Further north, there are resort clusters around Nkhotakota, Chinteche, and Nkhata Bay. As well as lakeshore resorts, there are several important islands for tourism, including Likoma Island with its Gothic Cathedral, and Mumbo and Domwe Islands. The lake is popular for water sports, with some high-quality snorkeling and scuba diving opportunities.
20. In addition to Lake Malawi and smaller lakes such as Malombe, the country has

upland areas of interest to visitors. Sapitwa peak on Mount Mulanje is the highest summit in south-central Africa, at 3,000 meters above sea level. With 1,700 meters of rope climbing, the west face of Chambe peak offers a true challenge on what is claimed to be the longest rock climb in Africa. Zomba plateau is another well-visited mountain plateau, rising above what is often called Malawis university town, the city of Zomba. Finally, the Nyika plateau offers a unique upland environment with the opportunity to combine game viewing and horse riding. Nyika National Park is Malawis largest national park and offers diverse and rare flora such as orchids and proteas, just some of Malawis 6,000 species of plants. The eastern edge of the Nyika Plateau forms the southern tip of the Great Rift Valley. The plateau is home to Livingstonia, one of the mission stations established by Livingstone. It offers many colonial era buildings. Overall, Malawis parks and reserves host around 650 species of birds, offering unusually high concentrations for bird watchers.
21. Liwonde, Lake Malawi, Mount Mulanje, and Nyika are known to some extent outside

Malawi and are capable of drawing visitors in their own right or as the focal point for a multidestination holiday. However, Malawi lacks a widely recognized nature-based iconic attraction comparable to Victoria Falls, Okavango Delta, Kilimanjaro, Serengeti, or Masaai Mara. Instead it offers a diverse range of ecological zones and natural attractions.

9 Livingstone took a number of missionary journies to and within Malawi, establishing mission stations and creating part of Malawis colonial and religious heritage. Blantyre, which is Malawis commercial capital, is named after Livingstones birthplace in Scotland.

18

Cultural and Heritage Assets 22. Malawi offers diverse cultural attractions, including ethnic and cultural festivals (Chewa, Lomwe, and so forth) and cultural villages, a range of museums (such as the dinosaur museum at Karonga), colonial era buildings (government offices in Zomba, Mandala Offices), independence struggle monuments (Providence Industrial Mission at Chiradzulu), and religious buildings and monuments (Livingstonia, monuments/ buildings/places associated with David Livingstone, Likoma Cathedral, and so on).
23. New cultural events initiated in recent years attract domestic and international

attention to different degrees, such as the Lake of Stars music festival that is now a recognized part of the international music festival circuit and the Lake Malawi Yachting Marathon in its 25th year. The Yachting Marathon covers over 500 kilometers and is the longest freshwater race in the world; it was featured in 2010 on the Southern African DSTV network. There are also the ethnic-based cultural events being actively promoted for various groups (Chewa, Lomwe, Ngoni, and so forth). Finally, there are smaller special interest events, such as the Mulanje Porters Race, Luwawa-Lake trail bike race, and the Mangochi Bicycle race that attract domestic and some international attention. Many of these events are relatively new but have been gaining in popularity. While these events do not draw large numbers of visitors, they add to the diversity of special interest offerings available and incrementally contribute to T&T visits and incomes.
24. In addition to the above, there are other important visitor opportunities, such as early

hominid and dinosaur sites close to Karonga, the Chongoni rock art area close to Dedza which is a UNESCO World Heritage Site, and various mission sites, such as Mua Mission famous for its wood carvings and the Ngoni heritage museum.
25. Although not a large segment, there are development-related tourism visits,

including those for supporters of nongovernmental organizations (NGOs),10 faith groups and schools/colleges/universities.11 Often these are linked to understanding development through visiting projects that the sponsoring organization is supporting or running. However, they often involve undertaking some small task alongside a community, such as building/decorating a classroom or orphanage. These are primarily solidarity-building experiences rather than serious technical help; they engage sponsors in hopes of having them continue and increase their support.
26. Links such as those with the Scottish Government and even publicity around

Madonnas visits help raise Malawis profile, encouraging people to visit and understand poverty and efforts to address it. One tour operator organizes trips to the Millennium Villages Project, near Zomba. Others, such as Central African Wilderness Safaris (CAWS), organize overnights or at least meals in villages as a way to let visitors engage with Malawians in their communities. These visits can lead to longer term person-toperson and organization-to-organization links that have valuable spin-off benefits.

10 11

OXFAM, Plan International, World Vision, Traidcraft, and so forth..

For example, Englands Leeds Girls High (subsequently Leeds Grammar School) has undertaken regular visits to Malawi with students for at least the past six years.

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1. Travel and Tourism Sector Profile

A. Economic Review Overview 27. T&T employs 235 million people worldwide (8.1 percent of total jobs), accounting for 9.4 percent of world GDP, in 2009, according to WTTC. In 2008, there were 924 million tourists, three-quarters of them from developed countries, of which 40 percent visit developing countries. According to the Overseas Development Institute, tourism has been described as the worlds largest voluntary transfer of resources from rich to poor people (Mitchell and Ashley 2010). The authors estimate that this transfer amounts to US$295 billion per year, approximately three times the amount of overseas development aid flows. Gross Domestic Product Growth 28. In 2008, the T&T sector directly contributed US$91.8 million (2.9 percent) to Malawis GDP (WTTC 2010a). The contribution for 2009 and 2010 is estimated at US$90.7 million and US$104.4 million, respectively. However, this WTTC measure excludes indirect effects generated throughout the supply chain and other tourism-related investment, collective public spending, and export-related Travel and tourism economy GDP is the broadest measure of T&T sector economic tourism goods (WTTC, 2010b). contribution. It records the activity of traditional 29. WTTC uses a broader measure T&T providers (lodging, transportation, etc.), to account for the wider economic plus T&T-related investment, public spending, contribution of the T&T sector, and export of goods. It includes direct and incorporating the components indirect effects of T&T spending via the supply above and thus describing how chain. T&T feeds into other economic sectors. Under this metric, the Travel and tourism direct industry GDP is a T&T sector contributed US$184.8 narrower concept that measures the direct value million or 5.8 percent of GDP in added of the traditional T&T industries, 2008, equivalent to US$14.13 per excluding any indirect effects generated throughout the supply chain. It also excludes all capita.12 tourism-related investment, collective public spending, and export of tourism-related goods. 30. Figure 1 shows the relative contribution of the T&T direct Source: WTTC (www.wttc.org) industry and economy-wide metrics from 19882008.

12

Population of 13.1 million per NSO, 2008 Census.

20

Figure 1: T&T Sector Contribution to GDP in Malawi

Source: World Travel and Tourism Council data. 31. T&T has doubled its share of Malawis GDP since 1996, from less than 3 percent to

close to 6 percent by 2008. Aside from stronger growth in the T&T sector over the period, the rising share from 2000 to 2005 partly reflected weak overall growth rates in Malawi that were a function of volatile agricultural performance and macroeconomic instability in that period. More recently, T&Ts share of the economy has grown less quickly due to, and partly contributing to, higher GDP growth rates since 2006. The exception was the leap to close to 7 percent share of GDP in 2005 (see figure 1), a drought year with poor agricultural performance. Therefore, the potential for T&T to contribute a higher share of GDP partly depends on what is happening with the wider economy, in particular the agricultural sector. Important for Malawi, T&Ts contribution is not linked to the cyclical weather patterns that the country faces. This provides a very valuable contribution to the economy when the agriculture-related part of the economy faces a major negative weather shock.
32. Looking to the future, real growth in Malawis T&T sector is expected by WTTC to

remain high, with 10-year annualized real growth of 8.7 percent for the wider economy GDP measure. This places Malawi third out of 181 countries ranked by the WTTC for T&T growth prospects. The basis for predicted strong real growth in tourism given by WTTC is a function of the factors discussed later in this report, including (i) new investment, (ii) growth in T&T in the ESA Region, (iii) the trend for tourists to seek out new underexplored destinations, and (iv) the overall strong performance of the Malawi economy stimulating domestic T&T demand. It should still be noted that Malawis T&T sector is growing from a relatively low base, compared to other countries in the ESA Region that have focused heavily on T&T, such as Kenya, Tanzania, Mauritius, and Botswana.

21

33. However, while T&Ts share of Malawis GDP has increased steadily, WTTC

expects this to level out over the next decade while at the same time predicts continued high T&T growth rates. The leveling out is a function of the high growth rate of the overall economy in recent years, which is predicted to continue. Since Malawis overall growth rate is closely linked to agricultural growth, if T&T continues to grow at its current high rate, then T&Ts share of GDP would leap in a poor agricultural production (drought) year. As the sector and economy both grow larger, T&T can provide an even more important contribution in a drought year.
34. Malawis T&T sector directly provides a higher than average proportion of GDP than

across the Sub-Saharan African (SSA) region. However, using WTTCs wider economy GDP measure, the performance is less robust than the SSA average, suggesting relatively weak linkages and a weak multiplier. Overall, despite the country lagging behind key regional competitors such as Kenya, Tanzania, and Mauritius, the data provide encouragement for the current performance of Malawis T&T sector and indicate that there may be large potential gains if Malawi can close the gap with SSAs average wider economy performance.
Table 1: Cross-Country Comparison of T&Ts Contribution to GDP Contribution of Tourism to GDP (%) Direct Industry 200007 (annual 2008 2009 avg.) (annual) (annual) Malawi 2.6 2.9 2.4 Zambia 1.3 1.1 1.2 Mozambique 2.3 2.6 2.5 Tanzania 4.2 4.4 3.4 Botswana 3.2 3.8 3.8 Kenya 4.4 4.8 4.1 Gambia 6.5 6.0 5.1 Mauritius 11.8 13.0 11.8 SSA Average 2.5 2.3 2.2 World Average 3.6 3.2 3.2 Source: World Travel and Tourism Council data. 200007 (annual avg.) 5.3 4.2 5.8 9.5 7.7 10.2 15.1 26.0 7.2 10.1 Economy 2008 (annual) 5.8 3.7 5.8 10.2 8.5 10.3 14.1 27.2 7.6 9.6 2009 (annual) 5.0 4.0 5.5 8.4 8.6 9.0 12.6 25.9 7.0 9.4

Tourism Multiplier
35. A concern from the cross-country comparison in Table 1 is the apparent limited

multiplier effect of direct T&T GDP to Malawis economy. T&Ts direct contribution appears not to stimulate as large a response in the supply chain, public spending, and tourism-related investment than across the SSA region
36. This can be seen more clearly in Figure 2, which shows how much extra economic

activity is associated with $1 of direct T&T spending:

22

Figure 2: Comparison of T&T Multiplier Rates, Selected Countries

Source: World Travel and Tourism Council data. 37. For Malawi, US$1 of real GDP (in year 2000 US$) in the T&T sector led to an

average US$1.08 of increased economic activity associated with T&T in the wider economy (200008). In contrast, the figures for SSA and the world were US$1.77 and US$1.81, respectively. Zambia had a response of US$2.17, though it should be noted that Zambia recorded its T&T sector with a lower GDP contribution on both direct and economy measures. Mozambique and Tanzania also had higher multipliers than Malawi.
38. While the multiplier on tourism-related spending in Malawi is disappointing relative

to other countries, it suggests there is potential to increase T&Ts impact through improving the multiplier. This could include stimulating a stronger supply chain response to opportunities generated by the existing T&T providers through utilizing more local goods and service supplies.
39. Using the NSOs 2005 input-output table, output multipliers were calculated for 13

industry groups, with the tourism industry group represented by hotels and restaurants. Hotels and restaurants are a narrower group than that used by WTTC for its cross-country sector comparisons, and typically likely to have higher multipliers than the whole tourism sector. While multiplier analysis makes assumptions and has its limitations,13 comparing industry output multipliers brings valuable insight into the relative effects of external investment in tourism compared to other sectors. The multipliers in Table 2 show the magnitude that an external investment would generate in the economy, typically through exports or government investment.

13

For the results of multiplier analysis to apply, two important assumptions must hold simultaneously. First, supplyside constraints to economic expansion are not binding. As a result, the level of demand determines the level of economic activity. Second, either it is assumed that prices are constant or that preferences and technology are of the Leontief form. In other words, consumers consume in fixed proportions and producers use inputs in fixed proportions either because fixed relative prices provide no incentives to change those proportions or because preferences and technology are specified in that way. Furthermore, multipliers do not consider either distributional or dynamic effects. While these are limitations, the data give an indicative picture of the likely effects.

23

40. The strongest multipliers are found in ownership of dwellings, construction, and

tourism. In 2005, investment in tourism would have generated more economic activity than in agriculture, manufacturing, or mining. This is not surprising, as tourism requires inputs from other industries, notably agriculture, manufacturing, transport, and communication.
Table 2: Output Multipliers in Malawi, 2005
Industry Ownership of dwellings Construction Tourism Mining and quarrying Wholesale and retail trade Manufacturing Electricity, gas and water Transport and communication Personal services Real estate, renting and business activities Agriculture Financial services Forestry and fisheries Multiplier 3.78 3.08 2.70 2.36 2.33 2.33 2.27 2.04 2.02 2.02 1.91 1.71 1.61 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13

Source: NSO data, 2005. 41. The data from the WTTC cross-country comparisons and from the NSO output data

appear to be at odds. Part of the difference is in that NSO data are more narrowly focused on hotels and restaurants, which are likely to have higher multipliers, and part of it is likely to be different methodologies and data sources. The WTTC data give a particularly low multiplier for Malawis tourism sector that is probably understating the true sector multiplier. However, the WTTC data are primarily a comparative analysis, calculated on a consistent basis, suggesting that even if Malawis tourism multiplier is higher, it is lagging other countries when calculated on a comparative basis. Therefore, it is reasonable to conclude that tourism does have a relatively high multiplier than other sectors, but that Malawis tourism multiplier is not as high as other ESA countries. Employment 42. Aside from its contribution to GDP in Malawi, T&T provides much-needed employment in a country characterized by high un- and under-employment. According to WTTC, direct T&T employment accounted for over 68,000 jobs in 2008, or 2.2 percent of total employment (see Figure 3). T&T touches many sectors of the economy; taking this into account, the sector is estimated to account for 140,000 jobs, 4.5 percent of total employment, formal and informal.14 Employment in T&T has steadily risen, and projections suggest jobs associated with T&T will reach 178,000 jobs by 2020 (WTTC, 2010a), as per Figure 3.

14

Estimates for 2009 suggest a small fall in employment to 59,900 (direct industry) and 123,100 (wider economy).

24

Figure 3: Trends and Projections in T&T Employment, 19882020

Source: World Travel and Tourism Council. 43. It is important to note that T&T has a positive impact through creating scarce formal

jobs in rural and remote areas, as well as providing entry level jobs for those that have never been employed. Export Earnings 44. Another important dimension of T&Ts economic role is export earnings through spending by foreign visitors (Mitchell et al. 2009). According to the WTTC, in 2008 T&T generated US$39.5 million in visitor spending, equivalent to 63.4 percent of Malawis service exports. This records spending from the balance of payments accounts while travelling, as well as on transport services. WTTC estimates these will account for 3.5 percent of Malawis total exports for 2010.
45. However, Malawi compares poorly to the rest of the region and the world as a whole.

International visitors are predicted to generate 6.6 percent of total exports for the SSA region this year (WTTC 2010b), while for the world economy T&T export earnings are estimated to be 6.1 percent (WTTC 2010c) of total exports. This suggests there is potential to increase Malawis share of exports through increased international visitors and increases in their spending. Adopting strategies that increase international visitors and foreign exchange receipts would have clear benefits for the economy. Government Revenues 46. The T&T sector provides an important source of GoM revenue through tax and nontax revenues. For the 2010/11 fiscal year, GoM set the MTWC a target of MK 65.28 million in tax and nontax revenues,15 equivalent to US$430,000. It is expected that entry fees to Malawis nine national parks and game reserves will generate MK19.5 million;

Taxation on goods/services at MK 31.5 million and revenue from sale of goods/services at MK 33.78 million according to the Ministry of Finance.

15

25

the Department of Tourism (DoT) within the MTWC is expected to collect MK 30 million in local excise duties.
47. Aside from revenue received through the MTWC, T&T enterprises pay employee

income tax deducted through pay-as-you-earn (PAYE), collect value added taxes (VAT) on sales, pay excise and customs duties on imported items, pay excise taxes on the sale of selected luxury products (for example, alcohol), pay corporation taxes on profits, and deduct withholding taxes from suppliers as advance payment on their tax liability.16
48. Employees pay income tax from MK 10,000 per month (US$66 per month) at 15

percent, increasing to a top rate of 30 percent for all income over MK 13,000 per month (US$86 per month). Even with low wage employment, the PAYE revenue yield for GoM from 140,000 employees is substantial.
49. The VAT is 16.5 percent and applies to most T&T services, notably accommodation,

meals, (domestic) flights, and car hire. As well as making a significant contribution through collecting output VAT, current rules do not allow VAT registered users to claim meeting rooms, conference costs, accommodation, and meals as offsetting input VAT, which is a tax anomaly. The effect is to substantially increase the net effective yield of VAT from the T&T sector, though the converse is that it increases the net effective cost of these T&T services to users, potentially reducing usage and demand.
50. Duties are set according to different categories, but typically up to 25 percent. Excise

also varies, but is set at 30 percent on imported spirits. Tax revenue on the sales of alcohol alone through hospitality outlets, which are part of the T&T sector, are likely to be substantial. In the 201011 national budget, much to the concern of investors in the sector, GoM recently removed many of the duty exemptions on the T&T sector, including on buildings and vehicles. It is yet to see what impact this will have on investment and revenue yields, but as T&T investments are often longer term than other categories of investment, with time horizons of 10 to 25 years, there is merit in tax concessions at the front end to attract incremental investment.
51. The corporation tax rate is 30 percent for Malawi-registered companies and 35

percent for branches of foreign companies (Deloitte 2010). Withholding tax rates range up to 20 percent of cost and aim to capture income/corporation tax from informal unregistered suppliers.
52. Since July 2009, a tourism levy at 1 percent of sales was reintroduced on food and

beverages, accommodation, and other tourism-related services charged irrespective of the use/user of the service (tourism and nontourism). According to MTWC, this levy yielded MK 47 million (US$310,000) in fiscal 200910 and is projected to reach MK 100 million (US$660,000) in fiscal 201011, its first full year of implementation, based on improved enforcement activity and the introduction of incentives to comply. MK 100 million from a 1 percent levy on VAT-able invoices equates to MK 1.65 billion (US$10.9 million) of output VAT. This is an underestimate for VAT, given that there is more evasion on paying the tourism levy; VAT is more rigorously enforced by the Malawi Revenue Authority.
Withholding Tax (WHT) is important in an economy where there are many informal suppliers of services and goods, most of which do not ultimately pay tax on their profits.
16

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53. Using the value-chain analysis presented in section 0, it is calculated that an

international visitor for a two-week safari and lakeshore trip (excluding flight costs) yields US$519.71 (23.67 percent) in direct taxes,17 and at least US$164.61 (6.83 percent)18 through indirect taxes on a package of US$2,327.00. The total tax yield on such a twoweek trip is calculated to be in excess of US$684.41 (30.5 percent of revenue). In addition, there are revenue from fuel levies on transport used, supplementary purchases by the visitor, and multiplier effects. Although this is a high-end package, the figures indicate that potential tax revenue to be generated by T&T is significant for GoM. The relatively high tax take is a source of complaint by operators in the sector, as is the unpredictability of the tax regime. The latter is a response to the removal of incentives that had been introduced in recent years. Operators commented on the lack of dialogue on this major change; most stakeholders were surprised by it. B. Policy and Enabling Environment Policy and Ministry Role 54. The MTWC is responsible for the T&T sector through four departments, each headed by a director: Tourism, National Parks and Wildlife, and Culture, all supported by Planning and Finance. The MTWC role covers policy and strategy formation as set out in the National Tourism Policy and the Tourism Sector Strategic Plan 200813.
55. The National Tourism Policy sets out roles for the ministry under (i) facilitation and

implementation, (ii) coordination, (iii) planning and policy making, (iv) regulation and monitoring, (v) development promotion, and (vi) provision of infrastructure and supporting services.19 Facilitation and implementation include conserving wildlife and other natural and aesthetic resources. Although this involves direct action through the Department of National Parks and Wildlife (DNPW) and the Department of Culture, it is necessary to ensure that key tourism-related natural resources, monuments, and sites of antiquity are preserved and conserved where necessary. Coordination covers international and regional coordination within GoM and between sector stakeholders. Planning and policy making involves policy formulation and integration with district and national government plans. Regulation and monitoring includes setting regulations and providing guidelines as appropriate, ensuring the industry is environmentally responsible and enforcing compliance with regulations. Development promotion is promoting the development of tourism destinations within Malawi that have potential, engaging the local communities, and promoting major tourism projects. Finally, provision of infrastructure and supporting services includes working with other ministries and stakeholders to provide roads, airports, telecommunications, and electricity.

17 In this calculation, direct taxes include the VAT, tourism levy, concessionaire fees, permits and licences, and park entry fees that are included in the package.

Indirect taxes in this calculation include PAYE on wages/salaries, estimated duties, and excise taxes on vehicles, beverages, and other luxury items used.
19

18

Section 8.1 of the policy.

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56. These are the expected roles of a tourism ministry.

Responsibility for the Departments of National Parks and Wildlife and for Culture ensures better integration of Malawis natural and human attractions. Overall the policy sets appropriate roles for the MTWC, including directly managing parks, wildlife, monuments, and heritage facilities.
57. The MTWC works with a number of subsidiary boards and trusts, notably the

Tourism and Hotels Board (THB), the Gaming Board, and the Malawi Institute of Tourism (MIT) Trust. It also has an ex officio seat on a number of T&T-related boards, such as the Air Malawi and the National Lotteries boards. However, the MTWC has faced difficulties with resources needed to carry out these roles and functions. For example, the THB is constituted as a board but does not have its own secretariat. Rather, it depends on ministry staff to support and implement its functions.20 Regulation 58. Customer-focused, standards-based regulation of the T&T sector was established in 1968 through the Tourism and Hotels Act. Over the past 40 years, the scope, application, and content of that regulation has evolved to cover the full range of establishments that offer T&T-related services, and the particular standards to which they are subject have been updated. The Tourism and Hotels Act of 1968 provides the basic framework for regulation of the T&T sector. It originally applied to hotels only but was extended in 2005 by the Tourism and Hotels (Enterprises) Order to cover other T&T establishments such as restaurants, tour operators, and car-hire firms. The framework is based on a licensing system whereby individuals/entities wishing to establish any of these enterprises must, themselves, be licensed by the THB. That licensing requirement is the basis on which the THB can test and control the suitability of persons managing T&T enterprises, as well as the qualities of the enterprises they wish to operate. It provides a mechanism for ensuring reasonable minimum standards of provision across the industry.
59. Applicants pay a tourism license application fee and must meet minimum working

capital and turnover thresholds. They are then subject to inspection and approval. Operators in the study reported no major difficulties obtaining the license from Department of Tourism as long as they were compliant with the requirements. Tourism operating license fees are based on the size of the unit. There are separate licenses for food and alcohol service and a license from the local government body within whose area the services operate. Like other businesses, T&T enterprises are subject to inspection by the Malawi Bureau of Standards. Such provisions are common in regulatory regimes, with the aim of protecting customers and providing confidence in the operation of an industry, but it is important to ensure that the fees and capital/turnover requirements distinguish between different types of businesses and are set at appropriate levels. Private sector operators indicated that there is an overlap of responsibilities in licensing with either competing inspections on the same issue or no inspections at all. Reviewing and streamlining processes would make entry into the T&T sector less expensive and easier, particularly for smaller enterprises on whom the burden of regulation always falls

20

In this case, the minstrys Standards and Safety Division.

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most heavily, as they have more limited capacity and resources to manage the process and fulfill the requirements.
60. Licensing can bring the MTWC into conflict with private sector operators, as has

happened in the past during facility inspection and enforcement of closure. Licensing in many countries is placed with a body outside the ministry, such as a tourism board, which has both governmental and private sector representation. The legislation and policy in Malawi anticipate such a body, but MTWC is not able to implement this in the absence of a THB secretariat or resourcing for it. It is unlikely that the T&T sector is sufficiently large to resource this through a levy, which may add too much to the price to clients. Any such body would need to utilize public, private, and development partner funding.
61. The regulatory framework provides for maximum charges to be applied by hotels to be applied, although maximum charges have not been enacted. There is also provision for various industry levies to be established. These can help ensure that costs of regulating and developing the industry are both targeted and proportionate; it is also critical that they be transparent to avoid creating unnecessary entry barriers or operational costs. The reintroduction of the tourism marketing levy at 1 percent has generally been accepted as necessary, though most operators interviewed would not welcome any further increase. Operators want to be fully involved in discussion on how the levy is spent and how it can be integrated with other marketing initiatives. This is achieved through the marketing committee, which is scheduled to meet every three months. Overall, private sector operators felt that the levy was being better spent than in the past and that the transparency, accountability, and visible outputs had also improved.

Classifying and Grading 62. The Tourism and Hotel (Grading) Regulations of 2005 provide for a standardized system of classifying and grading21 hotels and lodges using a mixture of objective and subjective scoring systems tailored to different types of outlets.22 This combination of factors reflects relevant differences per category and yet provides a reliable basis for comparison between establishments. The MTWC announced that the delayed implementation of the grading system would commence in September 2010, though it was subsequently further postponed to November 2010.
63. A grading system that is applied in a consistent and transparent manner, with good

communication of the grades and criteria to customers, can build confidence and correct information asymmetries. An official system may also be seen to be more objective than a private grading system, though it has to remain objective and free from being corrupted.

21 Classifying is the determination of the different categories and standards within them. Grading is the awarding of a particular classification to a particular operator. 22

For example, with different standards for lodges and hotels; an elevator is a valuable feature in a city center multistorey hotel, but not in a one-story game lodge.

29

Institutional Structure 64. A detailed review of the institutional structure has recently been performed for MTWC and recommendations were made for a new Tourism Law to reform the institutional structure and update and expand the established grading system.23 Among the proposals is the establishment of the Malawi Tourism Authority (MTAu) to take on the regulatory and licensing functions as well as marketing and international representation. This would enable the MTWC to focus more on the policy and planning functions, but the issue of resources still remains. In countries with developed industries, such a body would be funded by a mixture of government allocations and sizeable contributions by operators through a levy. However, the resources required relative to the size of the T&T sector at present make unlikely that this scenario would be sustainable in Malawi. For now the function might have to remain de facto within MTWC and the THB, focusing on what could realistically be done within the available resources, even if that means not all the desired regulations can be implemented in the near term.
65. More broadly, the business enabling environment for Malawi is addressed in key

publications, such as the World Banks Doing Business series, the 2006 Investment Climate Assessment (ICA) and the Country Economic Memorandum (CEM) documents (200910). For Malawi as a whole, key constraints include (i) utilities (electricity and water), (ii) roads and the cost of transport, (iii) key skill shortages in human resources, and (iv) foreign exchange. All these were confirmed as significant constraints in interviews with T&T private sector operators. Access (roads) and utilities (electricity and water) are particularly important for the sector as many tourism enterprises are, by their nature, located in less accessible undeveloped locations with poor roads and utilities. Significant constraints specific to the T&T sector include (i) the cost and ease of international access by air and (ii) the degradation of the natural environment.
66. Operators in urban locations highlighted the importance of utilities, as most of their

services depend on the availability of power and water for preparing and serving meals and refreshments. Guest services for rooms, including air conditioning and television, also depend on electricity. Without water, it very quickly becomes impossible to provide accommodation and hospitality. Clients paying a premium price expect to have these services for the duration of their visit, resulting in most providers investing additional sums in backup generators and water supplies. The additional operating costs and inconvenience result in higher charges and poorer service.
67. As highlighted in section 2 on value chains, the roads and the cost of transport,

particularly vehicles and their operation and maintenance, were a significant proportion of overall operational costs. Poor roads, particularly for regular transfers to and into National Parks, add to already high maintenance costs.
68. The issues around human resources are set out in section 1G below in more detail.

In summary, T&T is very dependent on its human resources, yet the quality, number, and range of skills among trainees and graduates in Malawi are insufficient for the sector. The impending opening of the new conference hotel in Lilongwe will also place a
23

Tourism Intelligence and Commonewealth Development Corporation (2008) .

30

considerable strain on the sector, as it will require at least 400 staff. These will mostly be recruited from existing providers, resulting in a major hiatus in the labor market, as players seek to both retain and attract staff. This is likely to provide upward pressure on employment costs and a drop in quality and service in those units that cannot retain or attract good quality recruits. There are no related measures being implemented to increase the supply of graduates, such as through MIT.
69. Shortages of foreign exchange over recent years was highlighted as a constraint by

some operators, particularly those with a mainly domestic client base. These operators need to sustain critical imports that are integral to their service, but have limited access to foreign exchange to obtain them. This does encourage them to use domestic suppliers, but there are quite a number of inputs that cannot be obtained in Malawi. The result is that operators buy from small-scale traders who travel to South Africa with foreign exchange purchased from the Forex Bureau at higher prices and provide key items. This is an inefficient and expensive means to import goods, resulting in even higher prices than direct importing.
70. The cost and ease of international access by air and limited international and

domestic air services are viewed as major constraints for T&T enterprises with an international focus. These are considered in the section on Tourism Hubs below (section 1C). Some operators that target international clients noted that the overvaluation of the Malawi kwacha exchange rate relative to the major trading currencies was making their packages relatively more expensive than neighboring countries. The recent devaluation of the Mozambique metical was given as an example of how a competing country had become much more price competitive to visitors at a time when there is weakness in international tourism demand.
71. Another major T&T-specific issue is related to the degradation of the natural

environment and wildlife resources, which was a concern for operators whose investment is based on access to these resources. This is considered in section 3B. C. Tourism Hubs and Linking Infrastructure
72. All modes of transport showed an increase in numbers of visitors using them to enter

Malawi

from

2006

to

2009

Table 3). Air transport marginally increased its share from 31.5 percent to 33.2 percent of all visitors by 2009. Road had a small reduction in its share over the period, but was still the most dominant form of access in 2009 with 62.0 percent of visitors. Rail and water accounted for less than 5 percent of visitors in 2009. Table 3: Visitor Access to Malawi by Mode of Transport, 200609
Mode of transport used: Air Road Rail Water 2006 No. 200,919 425,969 6,015 4,869 2007 No. 231,700 484,129 9,743 8,860 2008 No. 227,143 487,539 12,821 14,955 2009 No. 250,960 467,788 14,759 21,524 2009 % 33.2 62.0 2.0 2.9

31

Total

637,772

734,432

742,458

755,031

100.0

Source: Department of Tourism Annual Statistics

73. Some 63.5 percent of those visiting Malawi by air came for the primary purpose of

work/business, while 24.2 percent came for holiday/vacation. For those visiting Malawi by road, 44.7 percent came for work/business and 35.4 percent for holiday/vacation. The three largest categories of visitors are those who came by (i) road for business/work (208,988); (ii) road for holiday/vacation (165,427); and (iii) air for business/work (159,380). Visitors by air for holiday/vacation are ranked fifth, with 60,780 visits in 2009, although this category is the main focus of stakeholder attention and promotional efforts.
74. There are two international airports in the country: Kamuzu International Airport

(KIA), Lilongwe, and Chileka International Airport, Blantyre. Both are undergoing upgrades of terminal facilities (and the runway in the case of KIA) as these had, particularly in the case of Blantyre, reached a point where the condition of the runway and facilities impaired operations. There has also been a rehabilitation of air traffic control, as this had fallen below an acceptable international standard. Now that standards have been restored, there is an opportunity for attracting more international carriers, particularly those with direct flights to Europe. In addition, there are four domestic airports with scheduled service: Lilongwe, Blantyre, Mzuzu, and more recently Karonga. In total there are 23 airports and landing strips (Bofinger 2009).
75. The number of airlines operating internationally into and out of Malawi has varied

over recent years. The loss of the weekly British Airways flight, the only direct flight to Europe at the time, brought to an end intercontinental flights originating from Malawi. The withdrawal was reportedly a function of limited demand, a favored incumbent stateowned national carrier, and high operating costs (for example, landing fees and aviation fuel), as well as poor infrastructure and security. With this mix of factors, the LilongweLondon route was an obvious flight for British Airways to drop.
76. There are currently five airlines operating international flights into and out of

MalawiAir Malawi, South African Airways, Ethiopian Airways, Air Zimbabwe, and Kenya Airwayswith a sixth (Zambezi Airways) planning to commence operation.. There are direct flight links with Johannesburg, Dar Es Salaam, Nairobi, Addis Ababa, Lusaka, and Harare. In total it is estimated that there are only around 40 international flights per week, though this varies according to season and, in some case, availability of aircraft. The Ministry of Transport and Public Works reports that an additional three airlines have been cleared to land, but destination include smaller airports such as Monkey Bay. Kenya Airways has requested more flights, particularly at night, but has not yet received clearance for these. Some of the outstanding issues include insufficient manpower and what Kenya Airways regards as high charges for the region. There are also shortages of firefighting crews able to support the new Boeing 777s and other larger planes, poor facilities for handling more passengers, and insufficient hotel space to accommodate guests when flights are delayed. There is demand for more flights, but services to support increased supply appear constrained, resulting in limited incentive to bring down prices.

32

77. Although Air Malawi has a monopoly on domestic scheduled flights, there are several

small operators, such as Air Nyassa, that provide private charters for T&T clients. In addition to the domestic airports, these smaller operators use nonbitumen landing strips, notably those at Mkanga (Lilongwe), Nchalo, Dwangwa, Monkey Bay, Satemwa, Nyika, and Club Makakola. Some of these flights service commercial operations, such as the sugar estates at Nchalo and Dwangwa.
Table 4: Market Share of Domestic and International Air Passengers, 200107

Source: Bofinger 2009. 78. Through its monopoly of domestic scheduled flights, Air Malawi maintained an

overall majority share of passengers in 2007 (see Table 4). Since that date, however, it has experienced considerable operating difficulties caused in part by its financial difficulties. It is likely that Air Malawi still carries the largest number of passengers overall, but its share is estimated to have fallen to less than 50 percent of total (domestic and international) passengers. International routes are dominated by the other carriers, notably South African Airways (SAA), with increasing competition from Kenya Airways, Ethiopian Airways, and Air Zimbabwe. As Air Malawi passenger numbers have declined, the international carriers have increased the number of passengers carried and thereby increased their market shares.
79. Malawi ranks 127 out of 133 countries in the World Economic Forums Travel and

Tourism Competitiveness Report 2009 for the Air Transport Infrastructure indicator.24 Particularly relevant among the subcomponents are ranks of 126 out of 133 for the number of operating airlines; 123/133 for scheduled available international seat kilometers per week originating in country; 116/133 for airport density (airports per million of population); and 111/133 for quality of international connections to key business markets. In contrast to the infrastructure weaknesses, Malawi scores relatively well on air-transport-related fees in the T&T industry, being ranked 42/133 for international services. However, some airlines reported that the cost of airport handling, operated by Airports Development Limited, a parastatal company, is relatively high and excessive for night flights compared to other regional destination. This may reflect that there are a range of charges to be paid.
24

Sum of domestic and international inbound and outbound flights.

33

80. Flights within SSA are expensive, thereby reducing the volume of business and

ultimately impacting negatively on the economies due to lost visitor opportunities. Comparable data are difficult to obtain on flight costs due to the complexity of dynamic offerings, pricing, and discounting, particularly on the overall average rates paid. The data in Table 5 shows that while Malawi is not the most expensive place in the region from which to reach London and Paris, it is the most expensive from which to get to New York, Frankfurt, and Amsterdam.
Table 5: Comparative Long Haul Flight Costs, 2009
Malawi LongHaulHub London Paris NewYork Frankfurt Amsterdam
Dec.(US$) May(US$)

Zambia
Dec.(US$)

Tanzania 870 938 1,570 945 938 830 850 1,257 930 850

Mozambique 1,036 1,488 1,661 1,272

Botswana
May(US$)

May(US$) Dec.(US$) May(US$) Dec.(US$)

925 1,591 2,022 1,440 1,665

890 1,421 1,854 1,301 1,530

930 1,601 1,826 1,217 1,500

847 1,407 1,667 1,188 1,360

May(US$) Dec.(US$) 1,124 1,428 1,408 1,322 1,582 1,606 1,201 1,221

1,156 1,255 1,395 1,172

Source: World Bank Tourism Profiles from the SSA Tourism Database Note: Based on average high and low season fares, 2009.

81. Like long-haul flights, short-haul flights within the region are expensive.

No comparable data were available, but a scheduled economy-fare return to a main regional hub such as Johannesburg priced at over US$400 is a significant cost for those wanting to travel to and from Malawi. In summary, Malawi is a small market, with premium pricing from a small number of operators willing to service the route. The cost and accessibility of flights to Malawi were mentioned as a major constraint by all private sector operators that target international visitors.

Table 6: Air Travel Comparison: Selected East and Southern African Countries
Inter Domestic International continental Seats Seats Seats Totalseats 31,767,537 6,314,557 7,707,063 45,789,157 2,093,416 3,144,782 2,755,362 7,993,560 1,871,255 1,271,153 585,763 3,728,171 502,892 544,362 2,235,545 3,282,799 437,658 1,459,766 113,217 2,010,641 1,144,644 582,836 91,637 1,819,117 237,635 1,109,986 182,585 1,530,206 84,162 877,812 242,736 1,204,710 327,988 468,217 193,414 989,619 241,696 435,708 677,404 167,007 435,032 3,842 605,881 303,518 272,569 576,087 467,203 18,304 485,507 Per Annual Capita Growth Noof Noof Domestic Seats 200107 Airports Airlines Airlines 1.0 12.3% 20 61 11 4.8 9.7% 10 26 4 10.7 15.6% 13 22 3 0.4 7.1% 2 18 2 6.0 28.3% 7 16 2 11.5 21.0% 15 12 2 8.5 8.7% 4 17 1 1.7 8.3% 7 6 1 62.7 0.6% 13 14 2 2.8 5.9% 4 5 1 23.1 2.7% 3 8 1 1.4 21.9% 1 8 2 20.0 29.2% 1 6 1

Country SouthAfrica Kenya Tanzania Mauritius Zambia Mozambique Zimbabwe Namibia CongoDRC Botswana Malawi Djibouti Rwanda

Rank /53 1 7 11 12 17 18 20 22 25 30 31 32 35

Source: Bofinger 2009.

82. A cross-country comparison ranks Malawi 31 out of 53 SSA countries in 2007 in

passenger numbers. The majority of these passengers are international, but virtually no

34

intercontinental flights originate from Malawi.25 Domestic flights are more in demand for travelers in countries with large land areas, as seen for Mozambique, Tanzania, and Zambia (see Table 6). Malawi has less than one-third the number of international flights that Zambia, another landlocked country, has. Rwanda, which is both landlocked and with a small land area like Malawi, has significantly more international flights. Malawi has less than half the seats per capita than most other Eastern and Southern African countries and just over a quarter of the seats per capita compared to Zambia. There are several factors that impact the number of seats, notably the size of the country (which affects the opportunity for domestic flights) and the level of the economy. Overall, the conclusion is that Malawis air transport sector is less developed than might be expected, with high costs and limited competition. This lack of development is a key constraining factor in the development of the T&T sector in Malawi.
83. Malawi has three international neighbors with 14 recognized international land border

posts with immigration/emigration and customs facilities. The most important ones are Mwanza, Chiponde, Muloza (all for Mozambique), Songwe (Tanzania), and Mchinji (Zambia). Mwanza is the most important by far, with 191,499 international departures in 2009 (25.7 percent of all departures), followed by Mchinji (89,850), and Songwe (83,021). The busy border posts are Malawis main export routes, notably Mwanza to Beira (Mozambique) and Durban (South Africa) and Songwe to Dar Es Salaam. The other posts handle less than 50,000 departures per year.
84. The land-crossing points serve mainly transporters and traders, who count as visitors

in the statistics, yet both may increase imports rather than increase export earnings.26 The difficulty in an analysis is to segment these visitors further using the available data from immigration records and to determine gross and net spending.27 Spending is selfreported, and there are considerable difficulties tracking externalization of currency by business people, especially at small-scale and informal trading levels.
85. In road infrastructure, Malawi has an advantage over its neighbors, because it is a

relatively densely populated small country with short distances between centers, making it more cost effective to provide relatively good primary and secondary roads. T&T operators did complain about the quality of roads, based on localized problems, such as the Cape Maclear road. However, improvements in the access road to Nyika and the MangochiMonkey Bay road in the past three years are significant advances for the tourism sector, reducing transfer times and cost and improving visitor comfort. Overall, Malawis roads are better than most of its T&T competitors.
86. Lake Malawi runs about two-thirds the length of Malawi and potentially offers

transport-related T&T opportunities. MV Ilala operates a passenger service that takes tourists to Likoma Island and to other ports along the lake, but the facilities are
25 26

That is without a transfer at a regional hub airport such as Johannesburg, Nairobi, or Addis Ababa.

Day visitors crossing the borderfor example, for petty trade, visiting family, and so forth are not included as international visitors. A trader may sell (import) products to a value greater than what s/he spends on accommodation, local travel, meals, and so on.
27

35

rudimentary and the income limited. With the re-concessioning of Malawi Lake Services, the new operator is expected to offer a luxury cruise boat as part of the concession. Contract negotiations were underway at the time of this study.

D. Market Structure and Dynamics 87. The T&T sector in Malawi is characterized by a diverse set of enterprises, with relatively few large, specialist, or international operators. Most operators are domestic, though a few have some international parent companies or relationships. Malawis T&T sector has not attracted the very big T&T operators, particularly the large multinational hotel groups, such as Holiday Inn. Many operators are small with limited T&T experience and invest out of profits from their core businesses, particularly construction. This is a disadvantage for the sector in that it is insufficiently professionalized. However, these are the operators that have seen the opportunities in Malawi and responded to them. While it may be desirable to have large international T&T groups running many of the facilities, this would also reduce the scope for Malawi citizens to invest and run T&T enterprises. It is also clear that Malawi is not able to attract any or many such international groups at present. Therefore, it is more realistic to seek to progressively professionalize the sector rather than force out inexperienced operators at this point in the T&T sectors development.
88. There are nearly 500 licensed accommodation units in Malawi. Twenty-six of are

classified as hotels, of which Sunbird is the largest Malawi-based operator, with seven separate accommodation units. It is partially listed on the Malawi Stock Exchange (MSE, and has a small element of employee ownership, with its majority shareholder being GoM. In practice, Sunbird has considerable autonomy in its operations, but as a consequence it has to raise capital like any other operator. Protea is the only international brand in Malawi, currently operating Ryalls Hotel in Blantyre; it is owned and operated by local investors. Cresta previously gave its brand to the Crossroads Hotel in Lilongwe, but this arrangement has ceased. Alexander Hotels is a locally owned group with three hotels. There are other single hotels, locally owned, but often as part of a diverse group of holdings/investments, such as Pacific Hotel, Lilongwe, which is owned by investors with interest in commercial and residential property development. The same group is now developing another hotel and shopping mall complex in Blantyre. The owner of Victoria Hotel in Blantyre has a printing business. Club Makakola, regarded as a premier lakeshore resort, is part of the SR Nicholas Group, which is mainly involved in construction but also owns a lodge in South Luangwa National Park, Zambia.
89. The major development in the sector is the ongoing construction of a new convention

facility and five-star hotel for GoM in central Lilongwe, funded by a US$90 million loan secured from the Government of China in 2009. A convention center of this size creates opportunities for attracting international conferences, but it will have a major impact on other providers because of the availability of a large number of bedrooms and meeting/conference rooms from 2012. Linked to this development is the need for at least 400 managers and staffmost are likely to be recruited from other accommodation providers, particularly those in Lilongwe, probably increasing wage and employment 36

costs in the process. The new development may also exert downward prices in the market at least at the outset as it seeks to fill rooms and generate revenues while building demand. It will be difficult to immediately make an impact in the international convention market, as the center is as yet an unknown entity, hence there will probably be considerable targeting of the domestic market. As demand is growing in the urban areas, particularly Lilongwe, the extra rooms and conference capacity occupancy rates will potentially increase again, especially if the hotel can attract a major international operator to run it and that operator can build a successful international conference business.
90. The diversity of ownership, including by groups with wider business interests, is

repeated with urban, lake, and game lodge ownership. Central African Wilderness Safaris (CAWS) operates Mvuu Camp in Liwonde, probably Malawis premier game lodge, as well as Chinteche Inn (formerly government owned) and Heuglins Lodge (urban) and has recently won the concession for Nyika camp and lodge. CAWS is part of a group of premier lodge operators in Central Southern Africa. Pumulani lodge (lakeshore) was a new operation in 2009 and is part of the Robin Pope Group, which has recently commenced another new investment in Majete National Park.28 Its investment is a positive sign for Malawi, as it targets multicountry, high-end visitors. The Ulendo group of Lilongwe has been active in helping existing service providers to upgrade their product offerings and then manage them for them, such as Huntington Lodge at Satemwa Tea Estate and Burley House in Lilongwe. Ulendo is the co-owner of Nyassa Airways, a charter flight operator.
91. There are other groups with multiple accommodation units, such as Annies Lodges

(Zomba, Lilongwe, and Blantyre), but most are locally owned single, nonspecialist operations whose owners were attracted by the relatively high demand for accommodation in the major cities and, to a lesser extent, on the lakeshore. Some are run by expatriates that came and fell in love with Malawi and decided to invest and stay, such as the owners of Luwawa Forest Lodge and Bua River Lodge. These may are a category of operators willing to invest in relatively marginal or newly opened tourism destinations. In such a case, the enterprise is operated rarely only, and not necessarily primarily for profit, but part of a lifestyle choice for the owner; it needs to make a profit to survive but often the true return to the owner is what has been built and the chance to live and work in a location of outstanding beauty.
92. In rural areas, towns, and trading centers, low-cost accommodation targeting small-

scale businesses and other economy travelers is owned and operated by indigenous Malawians, usually as single units, meeting a local demand niche. In the urban areas and towns, there are many more indigenous Malawian owners of middle to upper end accommodation. Many have had access to land and resources and see opportunity in accommodation provision, such as Western Construction, which owns Ufulu Gardens (Lilongwe). There are also several nonindigenous and foreign-owned lodges in urban areas, including those owned by Malawian Asian, Chinese, Korean, and South African nationals. Most operate just one or two accommodation units.

28

Robin Pope is a high-end tour operator based in Zambia.

37

93. In summary, entry into the accommodation market appears to be relatively easy if the

owner has access to land or a building that can be utilized and resources to construct or modify an existing building. Although this means that the market has been able to respond to increased demand, and presumably put some restraint on accommodation bed rates, it has also enabled many non-specialist and inexperienced providers to enter, which probably contributes to poorer levels of service. Although this may not be the most desirable position from the point of view of policy makers, these are the firms and individuals that are currently willing and able to invest in T&T. As well as seeking to attract T&T specialist operators, the sector needs to be progressively professionalize. Attracting an international hospitality group to run the new conference center in Lilongwe could help push up standards in the sector.

E. Resorts and Leisure Centers Facilities

94. The main T&T focal resort areas are Liwonde National Park; the southern lakeshore

strip (Mangochi to Cape Maclear, particularly Monkey Bay); the central lakeshore resorts, particularly Salima; the Northern Lakeshore resorts such as Nkhotakota, Nkhata Bay, and Chinteche; the upland areas of Mulanje, Zomba, and Nyika; the urban areas of Lilongwe and Blantyre; and to a lesser extent, Mzuzu. Recent investment in Majete and Lengwe parks has increased visitor options, as well as investments in Sun n Sand Resort, Mangochi and around other forest reserves Sun and Sand had less than 30 rooms in 1997 (for example, Luwawa in Viphya and was primarily a (weekend) resort for and now Nkhotakota Reserve). Blantyre residents. Following the identification There are examples of where of the conference market opportunity, the Siku investment has been withdrawn, (Transport) Group invested heavily. such as Kasungu National Park, By 2010, Sun and Sand had 240 twin/double and opportunities missed, such as rooms and commenced construction of a further Golden Sands at Cape Maclear. A concession was awarded to Press 100 twin rooms. Corporation three years ago, but as It employs 456 staff, of which 286 are full time. yet it has not been developed, due Around 200 staff members are from the partly to negotiations over moving immediate locality. The resort provides jobs in 15,000 people and efforts to build an area heavily reliant on fishing and agriculture, supporting infrastructure, including with limited formal employment opportunities. an airport for direct international flights. However, despite some setbacks, the overall trend has been an increase in investment in new29 and refurbished resorts30 over the past five years, as indicated in the overall sectoral GDP and employment data.

29 30

For example, a new lodge in Majete, Pumulani on the Southern Lakeshore, and Bua River Camp/Nkhotakota. For example, Dedza Pottery, and Hippo View and Shire Lodges at Liwonde.

38

95. There has been very significant investment in urban accommodation responding to

strong and sometimes excess demand for short-term overnight accommodation and meeting/conference space in the main cities, particularly Lilongwe, and also along the lakeshore. Crossroads Hotel has established itself as the leading conference venue in Lilongwe by delegate share, over the more established venues of Capital Hotel, Lilongwe Hotel, and the Malawi Institute of Management. New conference venues in Lilongwe in the past three years include the Pacific Hotel, Kumbali Lodge, and Wamkulu Palace. In addition, the five-star conference center is due for completion by 2012. In Blantyre, the market was dominated by Mt Soche Hotel and Ryalls Hotel, and the refurbishment of the latter has enabled it to gain market share, especially at the upper end of the conference market. The Malawi Sun Hotel increases competition for conference facilities.
96. Related to these conference and accommodation investments, has been co-investment

in plaza/food court/shopping developments at the same locationsfor example, the new Crossroads and Pacific (both in Lilongwe) and Malawi Sun (Blantyre). These are more targeted at domestic consumers but also benefit and increase the leisure and hospitality options for domestic and international visitors and are an important example of the wider economy links of the T&T sector. NICO and the group that own the Pacific Hotel are investing in new hotel/mall/food court complexes in Lilongwe and Blantyre respectively.
97. There has been considerable investment in lakeshore conference facilities, notably

Sun n Sand, which is significantly larger than such other providers as Club Makakola, Nkopola Lodge, and Livingstonia Beach. However, there is close collaboration among lakeshore resorts, which share overspill guests. There are also spin-offs for smaller resorts such as at Boadzulu and Andrews that benefit through providing accommodation for drivers of conference delegates.
98. Strong demand for meeting, conference, and accommodation facilities ensures the

operators staff and facilities are occupied throughout the day, whereas accommodationonly providers find their facilities underutilized for long periods of the day. A further benefit of conference/meeting business is that demand is not strongly seasonal except for the major public holiday periods of Christmas and Easter. Occupancies
99. MTWC splits Malawi into geographical zones to assist in policy planning and

investment decisions. The national room occupancy rate increased from 57.6 percent in 2008 to 59.8 percent in 2009, while the national bed occupancy rate rose from 53.4 percent to 55.1 percent over the same period.31 The increase is due to growth in domestic T&T, especially business and meetings, as international visitor numbers increased only marginally. The cities of Lilongwe, Blantyre, and Mzuzu and lakeshore districts recorded slightly increased room and bed occupancy rates, despite more accommodation units opening in the period. Table 7 sets out the supply of beds in Malawi, amounting to over 5,000 per night and 1.8 million annually.

31

A room may have one or more beds in it, depending on sharing arrangements.

39

Table 7: Beds Available Nationwide, 2008 Zone Lilongwe Blantyre Mzuzu Northern Lakeshore Central Lakeshore Southern Lakeshore Protected Areas Zomba/ Liwonde/Balaka Kasungu/ Mchinji/ Dedza Thyolo/ Phalombe/ Mulanje Total
100.

Nightly Beds available 1,121 925 294 318 565 614 147 397 336 314 5,031

Annual Bed Nights Available 409,165 337,784 107,204 116,070 206,279 224,273 53,584 144,802 122,700 114,558 1,836,419

Source: Data from Department of Tourism, with additional estimates from consultants.

The highest occupancy rates are in the major cities, led by Lilongwe, in the range of 61.7 percent to 66.5 percent for beds (see Table 8). The lakeshore follows with relatively high occupancy rates from 53.2 percent to 59.8 percent. Other than the Zomba/Liwonde/Balaka zone, the remaining areas have bed occupancy below 50 percent, and in the case of protected areas, below 40 percent. The occupancy rates confirm T&T operator interview findings that the strongest demand is for urban and lakeshore work/business clients. Aside from Liwonde, the premier National Park, occupancy rates are low, potentially undermining sustainability.32
Table 8: Hotel Room and Bed Occupancy Rates by Zones, 200609
2007 Zone Lilongwe Blantyre Mzuzu Southern Lakeshore Central Lakeshore Northern Lakeshore Zomba/Liwonde/ Balaka Kasungu/ Mchinji/ Thyolo/ Phalombe/ Mulanje Other Areas Protected Areas Room (%) 73.0 70.1 62.3 64.6 63.5 61.0 57.8 44.2 31.0 29.0 43.0 Bed (%) 57.6 56.4 52.3 49.3 53.5 44.5 47.7 41.2 21.0 23.0 33.2 2008 Room (%) 74.9 72.9 64.8 67.1 66.1 63.5 60.1 47.6 49.9 48.6 46.4 Bed (%) 64.5 63.2 58.6 55.2 59.9 49.9 53.4 46.2 42.0 41.1 37.2 2009 Room (%) 75.6 73.4 66.2 68.5 67.7 65.8 63.9 52.9 52.4 51.5 46.8 Bed (%) 66.5 64.8 61.7 59.8 54.1 53.2 57.9 48.3 47.9 46.6 39.2

Source: Data from Department of Tourism.

32

Units can be sustainable at low occupancies, depending on rates, costs, and other efficiency measures. However, low occupancy suggests poor use of fixed assets and foregone profit opportunities.

40

The high occupancy in urban areas has resulted in higher prices. This is difficult to track, but one major operator shared its actual bed revenue rates for the past three years across more than one outlet. This showed that average rates increased by 16 percent in 2008 and by 24 percent in 2009 to reach an average of over US$85 for bed and breakfast. This rise partly reflects a desire to increase profitability, but it also indicates that demand was strong enough to support this increase. Over the same period, this operator increased bed nights sold by just under 2 percent. High occupancy linked to high demand also explains why there has been increased supply of urban accommodation.
101.

Table 9 illustrates that January to March is low season for accommodation; September to December is peak season; and occupancy progressively increases from April to August.
102. Table 9: Hotel Room and Bed Occupancy by Month, 2008 Month Room Occupancy (%) January 47.1 February 48.7 March 50.6 April 55.3 May 54.8 June 58.2 July 56.9 August 59.1 September 66.2 October 61.3 November 66.6 December 66.6 Annual 57.6 Source: Department of Tourism. 103. Bed Occupancy (%) 43.6 45.1 46.8 51.2 50.7 53.9 52.7 54.7 61.3 56.7 61.7 61.7 53.4

Analyzing the type of accommodation used by international visitors suggests that private housing33 is now the most important accommodation category, having increased significantly from the levels in 2005. It indicates that many visitors are accommodated at low or no cost, and that this is outside the formal system for licensing and revenue collection. However, data are self-reported, and there can be confusion between the categories resulting in miscategorization. As detailed in Table 10, hotels/inns/lodges was the second most important category in 2009, but it has alternated its relative position with rest houses in numbers of visitors over the period. Hotels/inns/lodges are those catering to the high end of the market, while rest houses and private houses accommodate those at the lower end. The number of visitors using high-end accommodation has been stable in the range of 200,000 to 220,000 per year and thereby progressively losing market share to cheaper alternatives as visitor numbers have grown.
104.

33

Including staying with friends/family and informal guest arrangements.

41

Table 10: Type of Accommodation Used, International Visitors 200609 Type of accommodation: 2005 2006 2007 104,700 187,400 214,800 Hotel/Inn/Lodge 83,700 116,200 211,000 Private House 190,400 274,800 302,200 Rest House 58,800 59,400 6,500 Other 437,600 637,800 734,500 Total Source: Department of Tourism, Annual Statistics. 105. 2008 220,900 226,100 252,100 43,300 742,400 2009 202,018 240,351 174,344 138,317 755,031

It is important to note that the above data relate to international visitors, which is only one category of visitors. Malawis largest accommodation group by number of beds is Sunbird Tourism,34 which reports that Malawi citizens and residents are the source of between 72 and 76 percent of its bed nights, highlighting the relative importance of domestic visitors, mainly business/work and conference guests. Conferences and Meetings Malawi does not currently attract many international conferences or meetings, though it does attract international delegates to some of its meetings. The main market for meetings and conferences is domestic. The most important segments for domestic conferences and meetings are the Government and development partners.
106.

A major issue emerged in the T&T sector in 2010 with the banning of GoMsponsored conferences at the lakeshore, effective from July 1, 2010. There is clearly a legitimate concern by government and some development partners about the use of the lakeshore facilities for meetings and conferences and its impact on GoM expenditures. Meetings held at the lake often require overnight accommodation and allowances for mostly urban based staff. 35 These visitors also incur significant travel costs and use of time. The ban on lakeshore conferences is, therefore, a response to the high levels of GoM travel and related expenditure.
107. 108.

The lakeshore conference business grew in response to increasing conference/ meeting demand for venues out of the major cities that benefit from the attraction of the lakeshore setting. The operators that invested in that opportunity over many years now express frustration that the ban, implemented on relatively short notice, has undermined their investments, has forced them to put their expansion plans on hold, and will result in lost jobs in areas with limited formal employment. There are few if any alternative uses for these facilities that could sustain the same level of employment.

It is unclear if a ban on lakeshore conferences will reduce expenditures, as it does not prevent conferences/meetings involving GoM staff from being held out of Lilongwe at alternative venues such as Liwonde, Zomba, or Blantyre. One large conference hotel operator confirmed a big shift in demand from lakeshore to non-lakeshore venues.
109.
34

Majority owned by GoM, with a proportion of the shares trading on the MSE. It encompasses seven hotels (urban and lakeshore)
35

The lake is one and one-half to four hours from Lilongwe, and two to three hours from Blantyre.

42

Although GoM has to consider its budget priorities, the ban on using lakeshore meeting/conference venues may not achieve the aim of reducing expenditure, as meetings can be moved to other locations. With additional demand on already high-occupancy venues, this may also further increase room and day delegate rates. The lakeshore ban is clearly an issue for private sector operators, but against these concerns are the expenditure pressures on GoM, which has development partners broad support. Of greater overall significance, the lakeshore conference ban raises the issue of how consultation with stakeholders is undertaken and the quality and degree of dialogue over policy decisions that impact the T&T sector. Private operators express frustration having no opportunity to make their case before major decisions are made that impact them. This may result in suboptimal implementation and policy aims that are not being met. Both the lakeshore conference ban and the reversal of tax incentives, both done without any visible consultation, suggest that dialogue is currently very weak.
110. 111.

If the sector is to develop, there is a need for more substantial dialogue, perhaps through a more formal forum and process than exist at present. Although the MTA exists as a generic association for operators, there are also other T&T associations representing different segments such as car hire and travel operators. The private sector is not well organized and its associations are run on limited budgets and through the dedicated work of a few committed individuals. MTA has been struggling for resources, and this has impacted its effectiveness.

Market Positioning 112. The Tourism Strategic Plan for 200206 placed a heavy focus on eco-tourism, which had a high profile internationally at the time the plan was being formulated. The plan contained details of projects for eco-tourism development, but none have come to fruition, and the strategic review that led to the 200813 Tourism Strategic Plan concluded that the eco-tourism plans were overly ambitious and not the right focus. Instead, individual operators have improved the ecological credentials of offerings by improving energy utilization, water supply and disposal; sourcing local produce; and recycling. Over time, it has become apparent that the international market segment for genuine ecologically based tourism was very small and that Malawi had no basis to attract the few visitors that select vacations primarily on their eco-tourism credentials. However, offering a more ecologically sound and sustainable product has been incorporated into most segments of the market, even if in a diluted manner, as this is of some concern to international tourism visitors. That more widespread and diffuse environmentalism is probably the best outcome for Malawi, as it never had pure eco-tourism offerings that would have been able to compete in this segment. It appears that international clients are satisfied to see attractions and services with that are greened rather than purchase only pure ones.36 For
113.

36

Due to the impact of flights on carbon footprints, visitors with a strong ecological basis for decision making tend not to travel far and not by air if they can avoid it. On this basis, a pure eco-tourism positioning is no longer viable.

43

the providers, attention to the environment is necessary to preserve the attractiveness of their holdings and help reduce costsfor example, reduced use of fuel-consuming generators by installing more solar facilities. Many operators have made this into a virtue, with Mumbo Island and Mvuu Camp, Liwonde, as good examples of extensive greening of facilities. Ecological issues are now mainstreamed, and many visitors regard environmental sensitivity as a minimal integral requirement; they would be dissatisfied if they found that their visit left a significant ecological footprint. There is still progress to be made by many operators, but market forces are exerting a useful pressure to change, reduce costs, and meet visitor expectations. In this regard, Malawi needs to accelerate and keep up with the best in the region. The revised positioning in the new Tourism Strategic Plan is to present Malawi as a diverse multi-experience destination. This fits with the analysis of Malawis current T&T attractions and the competitive region it is located in, with better known natural attractions outside of Malawi. This positioning has not yet worked its way fully through Malawis promotional stance. For example there is a stronger emphasis on the natural assets and attractions, but less on the cultural and heritage. As noted, the latter have been supplemented by more events that are now part of Malawis overall attraction. Perhaps inevitably, promotion tends to focus on Lake Malawi and the major national parks, with less focus on the lesser known natural assets. There is an ongoing requirement for good research, supported by good media skills, to identify and present these lesser known assets to attract niche visitors.
114.

Positioning based on diversity responds to international trends for niche marketing opportunities. The Worldwide Web enables people with very specialized interests to find niche and customized opportunities. One example was of a Belgian tourist who came to Malawi to learn about local pottery skills and methods. The visit was facilitated by Paragon Ceramics, including a stay in a village to learn skills first hand. The latter is an example of a high (ultimate) level of customization and indicates that there are niche as well as mass market opportunities. The Worldwide Web also enables the destination marketers to put a wider range of opportunities into the public domain, and those who are interested will find them through the search engines.
115.

F. Product Offerings T&T clients buy a range of goods and services, from standardized to completely customized and personalized packages. As noted earlier, it is difficult to specify standard products because individual services and goods are assembled (bundled) in a complex array of combinations in an essentially customizing sector. Bundling creates a wide array of actual product combinations and, therefore, makes it very difficult to quantify and price the individual component services and goods that include accommodation, food, drinks/refreshment, entertainment, road and flight transfers, car hire, taxis, boat trips/hire, guided tours (with standard and option additions), porterage, water sports, curios/clothing, and access to cultural sites/parks/forests.
116.

44

Within the T&T sector some firms specialize in the individual services, such as car hire; others combine products, such as accommodation and hospitality; and some firms, such as travel agents and tour operators, specialize in bundling services and products into packages tailored to users needs. The choice of whether a client buys a package, a partial package with some individually sourced elements (say, a tour but with the visitor arranging his/her own flight), or puts together the package him/herself depends on a range of factors, including knowledge and experience of sourcing, access to information, time, and cost factors. Data for the levels of each of the component products are not available. Although there are various associations, such as the Malawi Tourism Association (MTAc), that aim to be umbrella bodies and subsector associations, such as for travel agents and car hire firms, these do not track information consistently or comprehensively and are mostly unable to share it in a usable form.
117.

For the purpose of this study, four product lines with potential were identified for analysis, namely, (i) a lakeshore vacation, (ii) an urban business trip, (iii) a conference visit, and (iv) a national park stay. These are analyzed in section 2 through a value-chain approach that includes the supporting products and services contributing to each category of visit. Unfortunately, data for conferences were not made available by operators, and therefore an alternative activity, hiking tour of Mt. Mulanje, was substituted.
118.

Individual firms provided data on revenues and demand, but these were insufficient to produce overall revenue data by product line. However, data from one major urban and lake accommodation provider found that business/work and conference visitors represented 93 percent of this operators revenue and bed nights, with the balance being leisure related. This relative share of business/conference and leisure clients was supported by another major conference operator. Other smaller lodge operators reported a higher proportion of leisure visitors but still relied on business/work and conference delegates for the majority of their business.37
119.

Although the international visitor statistics barely registered visitors for conferences in 2009,38 the domestic meeting/conference market is reportedly very significant for accommodation and related service providers. The client groups for conferences are development partners, Government and NGOs, and to a lesser extent businesses. Although it is common that T&T stakeholders refer to tourism and to think primarily of international visitors, the core business of most T&T operators in Malawi is providing services to business and conference guests.
120.

37 Although business/work and conference are distinguished in the statistics collected for MTWC, for the operators these are closely related and therefore not always separately recorded and classified. The main difference is whether there is a day delegate fee charged for use of meeting rooms, refreshments, and lunch. 38 There were 717 refistered conference international visitors in 2009. Similar to the levels in 2005 and 2006, though there were 44,900 recorded in 2007 and 5,800 in 2008. Inconsistenciy in annual volume of conference visitors is somewhat attributable to data collection limitations.

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G. Human Resources and Training Interviews with T&T operators highlighted the importance of human resources, even more strongly than in general business-enabling-environment studies, such as the ICA (2006) study. T&T is service dominated and good quality well-trained people are essential to successful delivery.
121.

The Malawi Institute of Tourism is a government-owned tourism and hospitality training school, with its main campus in Blantyre and facilities in Lilongwe and Mzuzu. MIT offers a number of courses at the certificate and diploma levels to regular students (see table 11) and short courses to those working in the fields of hospitality, tourism, and travel. These courses include food production, food and beverage service, accommodation services (front of house, housekeeping), ticketing, tour guiding, and others. MIT uses its hotel facilities in Blantyre, Lilongwe, and Mzuzu to train students and with the aim of generating net income for its operations.
122. Table 11: Malawi Institute of Tourism Student Enrolment, 200510 2005 2006 Number of full-time students 87 119 Source: Malawi Institute of Tourism. 123. 2007 162 2008 141 2009 268 2010 285

The number of students enrolled has increased substantially since 2005 with a wider range of programs offered. These are mainly young people that have recently left school. Tourism, travel, and hospitality are seen as attractive careers to enter, with many more applicants than places. Those not accepted into MIT have the option of several private sector training providers, but generally at higher fees. MIT funding partly comes from student fees but mainly from GoM subvention, which has the effect of subsidizing student places. MIT also gets direct support from donors for various capital projects.39 Unfortunately, the Alendo Hotel at the Blantyre campus burnt down and closed in 2008 and has not been rebuilt due to inadequate insurance and lack of alternative funding sources. There is a goal to create a more extensive teaching campus at the site of the MIT operated Lingadzi Inn in Lilongwe, but again lack of funding is the primary constraint. MIT reports difficulties in recruiting and retaining good caliber staff, which is indicated in the operators comments about the mixed quality of MIT graduates. There is a bachelors degree program in hospitality and tourism run by Mzuzu University. The program faced difficulties integrating its courses with the university, and many students failed the compulsory university statistics course, but this is expected to be a temporary problem.40 This is aimed at a higher level of student than the MIT certificate and diploma courses. As this is a new program, with the first group yet to graduate, there is no feedback on the quality of the graduates from hiring operators.
124.

Feedback from a small selection of private sector operators is that the caliber of graduates from MIT is not generally sufficient and that these recruits need to be further
125.
39 40

For example, the Scottish Government recently funded the refurbishment of the training kitchens and library at MIT. The course is a university-wide requirement and not specifically related to the hospitality and tourism program..

46

trained by their new employers. One operator indicated that he saw no discernible difference between MIT graduates and those it recruits without qualifications. One major employer takes MIT graduates for entry level positions, but recruits supervisors from other countries in the Region, as there is a shortage of suitable applicants. It should be borne in mind that the sample of operators was limited by the scope of the assignment. Although there are some negatives about MIT, there were also positive comments about the role it plays. Clearly some of its graduates are able to meet their employers requirements and go on to develop their careers in the sector. Overall, there was general support for an industry training organization with a remit like MIT, as the employers recognized the importance of a steady flow of trained and motivated staff in all the skill areas they have.
126.

Once staff members are recruited, retention is problem, as reported by several firms surveyed. One employer expected to retain its bar staff and waiters for an average of only four months. Staff members once trained were reported to move to less formal T&T employers and in some cases to transfer their skills to other sectors, particularly those involved in front office services.41 It is not clear why staff would move to less formal employers, if indeed this is a correct general statement. Rather, it may be anecdotal and it may reflect issues over pay and tax deductions.
127.

There were incidences of dismissals for theft and fraud that were reportedly common. Part of the high turnover could be due to remuneration packages, generally unsociable working hours, and the pressures that are a function of a service industry. Remuneration consisted of a basic wage plus direct and/or shared gratuities from guests. In some jobs, and for some employers, the basic wage was low and the staff rely heavily on gratuities, which are rarely declared for tax and therefore more valuable to the employee. Additional benefits varied, with some employers offering pensions in addition to the normal statutory requirements. Although it was not possible to undertake a detailed analysis of wages, from a sample of eight southern lakeshore operators, over 50 percent of the staff complement could be classed as skilled and likely to be receiving more than the minimum wage (around US$0.80/day).
128.

Some staff turnover was due to poor quality of service they provided. The result was that many new staff recruits do not make the grade and are released. T&T guests often have experience in other countries, and so any weakness in Malawi service standards is very apparent, and service providers feel the need to continually raise standards in response to regional and international competition. Although Malawi promotes itself as a welcoming and friendly place, that positioning is not sufficient in the T&T market, as many other countries can and do make similar claims.
129.

One consequence of the poor quality of staff recruits and relatively high staff turnover is increased recruitment and training costs. For highly skilled positions, like chefs, many high-end operators turn to foreign recruits. Although this is disappointing
130.
41

The reasons for this were not clear, as no formal exit surveys were done by operators, but probably other employers paid more as they had not incurred training costs and/or were not deducting tax.

47

from a Malawi perspective, the numbers are very small, and bringing in expertise does enable learning and technology transfer to take place. Due to the extra costs associated with employing expatriates, such as flights for the employee/family, employment permits, accommodation, and so forth, most T&T operators avoid hiring expatriates if they can, but that is offset by the need to operate to the internationally required standard. On the counterbalancing side, Malawians work in T&T outside Malawi, particularly in South Africa. From the sample of eight lakeshore operators, employment levels were at least one employee per bed available and in some cases as high as 2.1/bed available. Managers and supervisors accounted for 1015 percent of employees, with skilled employees (front office, accounts, chef, guides, water sports instructors, drivers, kitchen/bar/waiters) accounting for 50 to 75 percent of staff and unskilled staff (guards, gardeners) accounting for 1550 percent. The number of employees and the split depended on the nature of the product line, with those targeting high-end international visitors with the highest ratio of staff to beds and a wider range of skilled positions, such as water sports instructors and tour guides. This is particularly the case for lakeshore and game park lodges.
131.

Service providers with an international clientele generally had one to three expatriate managers or skilled staff (chefs, water sports instructors, and so on) depending on the size of the operation, the service range offered, and the ownership structure. Quite a number of these expatriates were owner-operators, resulting in relatively small numbers of expatriates in employed managerial or skilled positions. Obtaining work permits was generally not regarded as a problem, but some operators at times found that they could face difficulties with immigration officials over certain cases. As the cost of bringing and employing an expatriate is higher than employing a national, the operators felt that they would only be recruiting expatriates when they were unable to recruit to the right standard domestically.
132.

H. Visitor Analysis In 1994, Malawi received 162,600 international visitors.42 By 2007, this had increased almost fivefold to 734,000 (Ministry of Tourism 2009). See Table 12 and Figure 4. Despite the global economic downturn, visits have continued to increase, albeit at a slower rate: 742,000 in 2008 and 752,000 in 2009. This equates to a 1.5 percent year-onyear growth in 200709 is in stark contrast to the 4 percent downturn in travel experienced globally (MDPC 2010) and has helped to insulate Malawi from global economic problems.
133. Table 12: International Visitors Annual Growth Rates, 200409 Year 2004 2005 2006 2007 International Visitors 427,360 437,718 637,772 734,000 Growth Rate (%) Baseline 2.4 45.7 15.0 Source: Department of Tourism, NSO, and Department of Immigration.
42

2008 742,000 1.1

2009 752,000 1.5

Including visitors for tourism/leisure, business, visiting friends/family, and conferences.

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Figure 4: International Visitors to Malawi, 19942009

Source: Department of Tourism data (2009).

The long-term increase in visitor numbers partly reflects international trends toward increased travel. In turn this is a function of increased real incomes enabling more tourism; increased accessibility of air travel and improved land routes; growth in the world economy through and supporting increased international business and trade activity; and increased regional trade and business opportunities through Southern African Development Community and the Common Market for Eastern and Southern Africa (SADC/COMESA). For Malawi, that trend has accelerated since 2001, with higher growth rates in the past nine years though, as noted, at a slower rate of growth in 200809 linked to the global economic downturn in that period.
134. 135. The flattening of the growth trend from 200305 can be better understood from the breakdown in types of visits (see Figure 5). This was a period of economic instability and considerable uncertainty for business in Malawi and the otherwise upward growth in business/workrelated visits leveled off. It is also noteworthy that visitors for holiday/vacation fell in 2004 and recovered only in 2005. Similarly, there was a fall in visitors for family and friends in 2005 before resuming its upward trend. This combination of trends resulted in a relatively flat period in the otherwise impressive increase in visitor numbers, making the ultimate bounce back in 2006 and 2007 all the more impressive.

The reason for the relatively robust performance of visitor numbers in the past two years reflects that Malawi is not heavily reliant on visitors for T&T from outside the ESA region, so it was less impacted by the global economic downturn than otherwise would have been the case. In addition, its robust economic growth over recent years has stimulated more business visits. Holiday/vacation visiting and visiting friends or relatives have grown, though the former fell in 2008 and the latter in 2009, linked to the global economic crisis. High growth rates experienced by neighboring countries,
136.

49

particularly Mozambique and Zambia, provide resources for and stimulate more visits for reasons of family/friends and tourism. The progressive increase in middle and high income groups in these neighboring countries will be a domestic and regional stimulus to increased international and domestic travel.
Figure 5: Purpose of Visit, 19942009

Source: Department of Tourism data (2009).

Caution is needed in interpreting these trends. Visitors may have multiple purposes, but they are asked to provide the primary purpose only. It would be common for a business/work visitor to add on some form of tourism activity to their visit. It is also common for visitors to combine a visit to friends/relatives with some business, particularly if they are from a neighboring country. The data are based on self-reporting and subject to error and deliberate misstatement, for example to hide that the trip is primarily for business in Malawi. More research into purpose, behaviors, and spending would be useful to add more depth to the visitor data and enable operators to better respond to it.
137.

As seen in Figure 6 and Table 13, Africa is Malawis most important source market (76 percent of all visitors), followed by Europe (14 percent), and North America (6 percent). Africa provides 88 percent of business visits and 84 percent of visits to family and friends, but proportionally less visits for holiday or vacation (53 percent). However, in raw numbers, at 131,143, Africa is the most important source market for tourism visits. The main reason for visiting Malawi from Europe and North America is for holiday or vacation67 percent of European visitors and 62 percent of visitors from the US/Canada visit for holiday or vacation. There are relatively few visitors from Europe and North America for reasons of business (about 34,000).
138.

50

Figure 6: Source of International Visitors (2009)

Source: Department of Tourism Data (2009). Table 13: Reason for Visit by Source Market, 2009
Total No.
Africa Europe US & Canada Asia Australia & NZ Rest of the world Total 574,178 104,699 43,765 15,938 11,838 4,612 755,030

%
76 14 6 2 2 1 100

Holiday or Vacation No. %

131,143 70,055 26,956 6,611 8,251 2,511 245,527 53 29 11 3 3 1 100

Work of Business No. %

335,877 23,471 10,762 6,816 2,562 1,640 381,128 88 6 3 2 1 0 100

Visit friends or relatives No. %

106,595 11,069 5,996 2,511 1,025 461 127,657 84 9 5 2 1 0 100

Conference/ Convention No. %

564 102 51 0 0 0 717 79 14 7 0 0 0 100

Source: Department of Tourism Data (2009).

South Africa, Mozambique, and Zambia account for 38.7 percent of all visits for holiday/vacation, while the United Kingdom and United States account for 23.5 percent (see Table 14). These five countries account for over 62 percent of all visitors for holiday/vacation. While it is desirable to attract visitors from a wide range of countries, these are countries where there is a critical mass and where marketing efforts have had and probably could have most effect.
139. Table 14: Top Five Source Countries for Visitors on Holiday or Vacation, 2009 Rank Country Number of Visitors 1 South Africa 38,231 2 United Kingdom 35,463 3 Mozambique 31,261 4 USA 22,293 5 Zambia 20,653 Source: Department of Tourism Data (2009). Percentage Share 15.6% 14.4% 12.7% 9.1% 8.4%

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The ESA region is by far the main source of work/business visitors, with Mozambique dominating as the source: 32.5 percent of all work/business visitors (see Table 15). The source of work/business visitors is highly concentrated, with five countries in the region accounting for over 80 percent of all work/business visitors. This reflects trading and business opportunities, but these are less likely to be responsive to promotion; rather, they respond to growth-related trading opportunities.
140. Table 15: Top 5 Source Countries for Visitors on Work or Business, 2009

Rank 1 2 3 4 5

Country Mozambique Zambia Tanzania Zimbabwe South Africa

Number of Visitors 124,019 54,527 52,324 42,433 41,101

Percentage Share 32.5% 14.3% 13.7% 11.1% 10.8%

Source: Department of Tourism Data (2009). 141. The ESA region is again dominant as the source of visitors for family reasons (Table 16). The leading five countries for business/work visitors account for almost 80

percent of all family visitors. These are not likely to be responsive to promotional efforts, nor are they like to be adversely impacted by either an economic downturn or drought in Malawi, as they have a strong other reasons to visit. However, this category is likely to spend less than others on accommodation and other T&T services, such as hospitality.
Table 16: Top Five Source Countries for Visitors to Friends or Relatives, 2009

Rank 1 2 3 4 5
142.

Country Mozambique Zambia Zimbabwe South Africa Tanzania

Number of Visitors 33,055 27,725 16,553 13,529 11,274

Percentage Share 25.9% 21.7% 13.0% 10.6% 8.8%

Source: Department of Tourism Data (2009).

The economic value of T&T is a function of visitor volumes and average length of stay. The average reported length of stay is 8.2 days over the past five years and is not substantially different by reason for visit. Business visitors tend to stay the least time (5.6 days, in 2009), with those visiting friends or relatives the longest (10.8 days). There are data on spending by type of visitor, but it is self-reported and therefore not verified.43 In broad terms, it shows that conference visitors spend the most per day and per trip, followed by visitors for business, then holiday and vacation visits, and predictably those visiting friends and relatives spending least. Data on spending by source market were not available but probably would show relatively higher spending by visitors from Europe and North America.

43 At over $450 million, it suggests T&T is a much higher share of GDP than WTO and WTTC statistics. However, it is likely that WTO and WTTC data are more accurate, therefore, the breakdown of self-reported spending is not provided.

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In conclusion, while it is tempting for those promoting Malawi to focus only on potential higher value visitors from Europe and North America, it is clear that even for non-work-related visits, Africa is the most important source of visitors for Malawi and that business visitors are very important. Therefore, key messages should be adapted to them, not only to promote Malawi, but to inform these types of visitors with information that will make their visit easier and encourage them to stay longer and spend more.
143.

I. Marketing and Promotion Activities Destination and Operator Marketing Destination marketing creates the background awareness and desire for potential travelers to consider a particular country. This can include a range of activities: Web site development, hosting, and management; producing promotional films/adverts and paying for air time; placing adverts in print media; producing brochures, posters, and promotional giveaways (T-shirts, pens, key rings, and so on); participating in trade exhibitions to stimulate trade responsiveness; visiting travel shows/exhibitions to provide information to target groups of potential travelers; sponsoring events that raise the profile of a country; and conducting public relations activities that seek to influence journalists to write or produce material about a country, including paying for them to visit the country. Destination marketing is very competitive between countries but also has to compete with the consumers attention to nondestination marketing advertising and promotion. Finally, it is also becoming technically more sophisticated and expensive, as seen in the ambush marketing stunts performed at the 2010 World Cup.
144.

In addition to background promotion for a destination, operators have their own marketing activities that seek to draw those that are interested in a country to use their particular services. Although there is often fierce competition, operators can work together verticallyfor example, on flights, accommodations, and car hire operations or horizontallyseveral accommodation providers with a joint Web site but different locations within the country, or in some cases the same location. The classic difficulty with destination marketing is knowing what marketing activity gives the best yield in terms of incremental visits and spending and how much to spend. This does not appear to be well tracked yet in relation to Malawis spending. It can also depend on factors beyond the countrys control and predictability, such as positive or negative publicity. In Malawis case, the adoption of two orphans by Madonna illustrates this very well, with the media in Europe shifting from an initial negative to a more positive stance as the media in Malawi went from broadly positive to a more negative stance.
145. 146. Destination marketing is a collective responsibility, but it is difficult to ensure that individual providers pay their share of the overall budget, as there is a potential gain from free-riding. To overcome this free-rider problem, destination marketing is often funded by a mixture of government funds and private money, raised by compulsory levies. In Malawi, prior to 2004, there was a marketing levy of 4 percent on sales, which was first reduced and then removed, substituted by a subvention to the MTWC. From 2009, a

53

tourism levy on all T&T sales was reintroduced at 1 percent. This is projected to generate marketing resources of MK 100 million (US$660,000) in fiscal 201011. The marketing budget has been used mainly to support attendance at T&T-related trade fairs that seek to promote Malawi to the travel trade. Some money has been used for catch-up expenditure on more up-to-date brochures, guides, and listings. MTWC is currently getting some technical support for upgrading the Malawi tourism Web site. There are also efforts by individual embassies to support tourism, but these depend on each mission and are not coordinated.
147.

The reintroduction of a marketing levy at 1 percent of sales value is generally accepted as fair and necessary to generate resources for promoting Malawi as a destination, but several operators are not paying it, due to weak (though improving) enforcement, and some operators are charging clients but retaining the levy. If there is unequal application of a levy, then it can disadvantage compliant enterprises to the benefit of the noncompliant. Although some parties would like to see an increase in the levy or introduction of more levies such as for training, it is necessary to focus on compliance and enforcement first. Increasing the rate of the levy would probably not be broadly supported by the private sector and if increased could encourage greater evasion. Including as many operators in the levy would build broader acceptance of the levy and engagement in how it is spent.

In addition to the GoM efforts, there are also private efforts to promote Malawi on behalf of groups of operators, such as the Malawi Travel Consortium, which is a grouping of private sector T&T operators that have pooled some of their marketing funds. Private efforts are complementary to public efforts, raising the awareness of Malawi and the opportunities for travel. However, the global T&T industry is very competitive, making it difficult to raise Malawis profile. Additional spending would help to some extent, but Malawi cannot compete or sustain spending on a scale comparable to more developed destinations, even in the region (Botswana, South Africa, Mauritius), let alone beyond. This implies that it has to be rely on greater creativity and targeting rather than force of spend to get the attention of travelers.
148.

The clear global trend is for marketing and promotion resources to be focused on Web-based presence, seeking to raise presence in different search engines to become a top 10 page. Due to the nature of T&T and its target clients, effective Web-based access is by far the most important place to be found for destination and firm level marketing. Malawis presence is currently very poor, with the official Web site being not accessible during the period of this study, leaving on a few private sector operators to raise the profile.
149.

Destination Positioning The positioning of Malawi was previously as an eco-tourism destination (200206 Strategic Plan), but that has diminished in relevance. The long-standing promotional slogan for Malawi is The warm heart of Africa, and the stress is on the friendliness of the countrys people. While this is not a bad positioning, it is not particularly distinctive or strong. It would be rare for international tourists and visitors to presume that there would be an unfriendly welcome for visitors, unless the country had so gained that
150.

54

reputation, which Malawi clearly has not. The slogan says what the visitor already would expect and therefore misses an opportunity to add something more to the message. To differentiate itself from competing regional destinations, Malawi needs clear and attractive product and service offerings and to promote the diversity of T&T opportunities. Although there is information available on reasons for visits, there is limited or no data that look deeper than this into key areas such as the visit decision (source of information, key factors in deciding, competing alternatives, minimum/necessary requirement, and so on) and visitor activities and spending while in Malawi. More detailed research into visitor decision making, profiles, behaviors, service and facility uses, and net spending could benefit all stakeholders. This is constrained by a combination of lack of resources and limited operator interest in this type of research. Operators generally rely on internally generated information and judgment of what is required,
151.

J. Conclusions Malawi has some underutilized T&T assets, particularly accommodation outside the main cities, and a relatively underdeveloped T&T sector. High costs of access and poor accessibility by air are major factors in the relatively small numbers of long-haul international tourists. These may also inhibit other categories of international visitors, although high economic growth has stimulated and been stimulated by increases in international business/work visitors.
152.

The analysis finds that the largest T&T market segment is the domestic business/work and conference segment. International visitors are primarily from the region and not beyond, though the United Kingdom and United States are important source markets for the tourism subsector. Visitors arrive in Malawi predominantly by road, not air (ratio of 2:1), though of course air travelers generally include the bigger spending visitors (European, Asian, and North American tourists).
153.

The above analysis suggests the following: a need (1) to broaden thinking about the tourism sector to include travel and tourism; (ii) to think more about attracting domestic and regional visitors rather than focusing solely on long-haul international visitors; (iii) and to think about both air and road access. Thinking primarily about international tourists arriving by air is seeing the sector and its potential too narrowly. A shift in focus and its translation into policies and programs for GoM and development partners could reinforce the growth and impact of the T&T sector.
154. 155.

The analysis also helps to think about the key promotional messagesthese are predominantly geared to attracting international tourists, when in fact regional business/work visitors are much more common and there are opportunities to extend the business trip to include leisure activities within the windows of opportunity these visitors have in the country. Web sites tend to be geared to attracting tourism-only visits, not to providing information that the business/work visitor needs for a smooth business visit or

55

information on tourism opportunities that can be fitted into such visits. It is not a case of substituting one for the other, but rather widening the information available to the visitor that is coming for business. Targeting of international tourism visitors has been relatively dispersed in relation to source markets, yet the data show that five countries account for 60 percent of tourist arrivals, suggesting the need to focus on markets where there has already been a response to Malawis products. It is these countries where there is some critical mass of demand and probably good supporting word-of-mouth promotion.
156.

The analysis also highlights that Malawi needs to maintain, improve, and sustain its product offerings. This is a shared responsibility among public, private, and development stakeholders. The positive experience of the rehabilitation of Liwonde and Majete parks is a significant marker for the way forward. The response to improved management of the game and natural resources has been private sector investment and more sustained and sustainable comanagement of resources as a community-operatorpublic partnership. Recent investment by regional operators, such as Robin Pope Safaris in the lakeshore and Majete, suggest that Malawi has potential as a high-end destination. The establishment of the Nyika Transfrontier Conservation Area (TFCA) and the concession of GoMs Nyika accommodation assets to a reputable Malawi-based operator, combined with the opening of opportunities in other areas such as Nkhotakota, suggest there is progress to rebuild and conserve key natural assets on which the tourism segment depends.
157.

Malawis positioning in the global tourism market needs to reflect its aspirations, its attractions, and also the reality of its competitive position. The previous focus on ecotourism has been superseded with a more appropriate positioning around the diversity of attractions requisite for a viable and economically productive sector. Malawi has no iconic sites, like Victoria Falls, and few attractions known beyond the region. Malawi can be promoted as a destination in its own right, but probably through focusing on the range and quality of diverse activities that are possible within its borders. Many of these are still underdeveloped, such as sites and events linked to Malawis rich cultural, colonial, and religious heritage. Malawi could also benefit from the profile and destination marketing of other countries in the ESA region by positioning itself as a combination destination with those countries. These countries generally focus on their unique assets (Victoria Falls, Okavango Delta, high-quality game parks, and so forth), leaving room for Malawi to offer complementary activities such as its lakeshore, mountain hiking/climbing, and unusual niche accommodation (tea estates).
158.

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2. Value-Chain Analysis
A. Definitions and Methodology 159. The difficulties of identifying a common product in a customized and package industry have been highlighted. An approach to value-chain analysis is adopted that utilizes typical case studies to review typical T&T packages.44 A review of (i) lake based, (ii) nature-based (national park and mountain hiking), and (iii) urban accommodation offerings are presented. This section reviews value-chain data gathered from a number of operators in a comparable analysis to inform strategic decision making and identify areas where value could be increased. A standard package for each segment was defined in discussion with leading operators. This enabled the costing, pricing, and value calculations to be based on a specified and, as far as possible, standardized product line. The assumption in this approach is that it is illustrative of the typical profile of offerings in that category. Getting costing information was not easy, as there was a degree of commercial sensitivity over sharing it. There were also differences in how costs were categorized and labeled, making it more difficult to undertake meaningful comparison. What is most useful is that the analysis should not be regarded as definitive, but as a practical contribution to analysis of cost structures within the sector.
160.

44

Value-chain Analysis is a method for accounting and presenting the value that is created in a product or service as it is transformed from raw inputs to a final product consumed by end users. FIAS (2007). This incuded an approach for tourism value-chain analysis using typical packages.

57

B. Analysis of T&T Product Lines 161. Product Line #1: A five-day, four-night safari in a national park for an international visitor, including transfers to and from an urban starting point but excluding overseas airfare and related costs.45 Package cost: US$1,046.83 per person sharing (see Figure 7).
Figure 7: Safari Cost and Revenue Analysis

Source: Consultants data and calculations.

The highest single cost element is transfers at 26 percent of the revenue. Transfers include moving guests into and out of the lodge from the urban starting point and the cost of the transport means within the park for game viewing. The capital cost of vehicles is high, partly due to high import duties; also, the required level of comfort and safety for high-end visitors is more demanding than that provided in normal vehicles, so game viewing vehicles have to be custom built. Vehicle purchase costs in Malawi are already high, and this has increased following the removal of the duty exemption for tourism vehicles (201011 National Budget). Vehicle maintenance costs are also high, particularly for spare parts that are subject to high duties and tariffs. Fuel for transport is included (vehicles/boats) in the transfer costs, but not for the generator and cooking (gas), which is 7 percent.
162.

The second most significant cost category consists of taxes, licenses, and levies, at 23 percent of total package cost. The major part of this is VAT, which is 14 percent of the total revenue.46 In addition, there is a 5 percent fee paid to GoM for the concession, plus park fees at 2 percent, tourism levy at 1 percent, and permits/licenses at another 1
163.
This involves transfer to a high-end lodge in a national park, with two inclusive game viewing excursions per day, on a full board basis. A tour guide and driver is dedicated to each group of visitors.
46 45

VAT is charged at 16.5 percent, but not on all package elements, resulting in a lower overall percentage of revenue.

58

percent. These are the directly incurred taxes. PAYE on staff wages is included not here but in the wages section (about 3 percent). Corporate tax on profits (about 1.2 percent) is excluded from this total but included in the profit for the operator. Customs and excise duties and tariffs on imports and sale of alcohol are also excluded and included in the transfer cost (for vehicles/boats) and food/beverages total for alcohol, which are conservatively estimated to add another 3 percent. There are also tax and levies on fuel. Taking into account these particular indirect taxes, the tax share is approximately 30.2 percent of operator revenue. Wages represent 14 percent of revenue, which will have a significant pro-poor impact.47 Maintenance and depreciation at 12 percent represent the cost of maintaining the facility. Due to its relative remoteness, the cost of obtaining items is relatively high because of transport costs. The high specifications and standards of fittings and fixtures, also mean that a relatively high proportion of these are imported, estimated to be at least 50 percent in this case.
164.

Food and beverages represent 11 percent of revenue. As in most cases, the provider seeks to purchase local produce,48 such as vegetables and fruit, wherever possible. This is more cost effective, supports the local communities on which the enterprise is to some extent dependent, and is logistically necessary given the perishable nature of some of these goods. Purchases in the locality are estimated by the operator at 20 percent by value. Other items are produced within Malawi but brought from the major cities or neighboring town. Some high-end luxury items are imported, including some alcoholic beverages not produced in Malawi. The local sourcing of produce is communicated to guests as a positive message.
165.

The gross profit after all costs but before corporate tax is 5 percent, suggesting a net profit of around 3.5 percent after tax. This is not necessarily the actual profit for the service provider, as this will depend on volume of business over which overheads and indirect costs will be spread. At higher volumes, profits will be higher and vice versa. The dip in volumes due to the global financial crisis in late 2008 and into 2009 resulted in lower profits or losses on this package. There may be other revenue opportunities associated with this package, including some commission on other onward bookings made, sale of curios, and other add on sales, though there would also be costs associated with these.
166.

Product Line #2: Lakeside package for an international visitor for seven days and six nights, including transfers to and from an urban starting point, but excluding overseas airfares and related costs. Package cost: US$1,110.17 per person sharing (see Figure 8).
167.

47 48

In this case it includes the proportion of Pay as You Earn (PAYE) and other employee monetary benefits.

Local in this context means from the immediate locality, including any villages or trading centers. Other Malawi produced foodstuffs and beverages is sourced from the main cities (Blantyre, Lilongwe, Zomba, or Mzuzu as most convenient) and is termed national sourcing,

59

Figure 8: Lakeside Cost and Revenue Analysis

Source: Consultants data and calculations.

As with the safari package, transfer costs are the largest single element, at 31 percent of total package. The distance travelled from the urban center to the lakeshore lodge is greater than to the safari lodge, which increases the cost. Although the length of stay is longer, the overall package price is the same as the safaris.49 As with the safari package, taxes, licenses, and levies are the second largest cost item, at 21 percent of total package cost. VAT is the most significant of these at 13 percent, while the lease fee is higher at 6 percent due to the particular agreement in place. Permits and the tourism levy are 1 percent each.
168.

Wages (15 percent) and food and beverages (13 percent) are similar to but slightly higher than the safarithis is in part because there is no profit to the operator on this package, and therefore the other percentages are proportionally higher. As with the safari product analysis, wages and food and beverages have a pro-poor impact. A similar estimate was given for the proportion of local produce used at around 20 percent, though in this case it includes fish as well as vegetables, fruit, and other fresh produce.
169. 170.

Fuel costs (6 percent) are similar to the safari package. Although the lodge has an Electricity Supply Corporation of Malawi (ESCOM) connection, the intermittent power supply results in high usage. Whereas lack of electricity at a safari lodge can in some ways be part of t he wild experience, guests at a lakeshore lodge require more electricity for cooling (fridges and air conditioning), as well as for televisions and other appliances. In addition to higher fuel costs, the lakeshore lodge had a higher utility bill (6 percent) compared to the safari lodge (1 percent).

The safari lodge has to pay a more substantial concession fee. It is more remote and costly to reach, to employ staff, and supply. It also has less competition and more unusual offering due to its location.

49

60

This package did not give the operator a profit before tax, but there are other opportunities to make some profit on added-on services, purchases (drinks), and excursions. In this particular case, the operator offers the lakeshore lodge option as part of a wider menu of products to international visitors but risks losing money if the volume of business falls or the operation is unable to sell additional profitable services. The data are also from 2009, when business volumes were low and, therefore, the overhead and indirect cost allocation was higher than in a typical year.
171.

Product line #3: Urban Lodge targeting domestic business/work visitors for one night full board.50 This package does not include any transfers, as these are normally up to the guest, who is travelling from another location by his/her own transport means. Package cost: US$85 per night, single person only (see Figure 9).51
172. Figure 9: Urban Lodge Cost and Revenue Analysis

Source: Consultants data and calculations.

As there was no transfer cost within the package, there was no transfer income opportunity for the operator. Taxes, permits, and licenses were the largest single item, at 27 percent. These are proportionally higher than the safari and the lakeshore lodges mainly due to the absence of transfer costs that would otherwise increase the package costs in total and reduce the proportion of taxes and all the other cost items.
173.

This is a full board package, so food and beverages are relatively high at 25 percent of the total package. This provider estimated that only 5 percent of food purchases are produced locally (within the city boundaries or the immediate hinterland), with the remainder mostly bought nationally, with around 15 percent being imported
174.

50

An estimated 85 percent of visitors are work/business related, but the lodge also accommodates some tourists, typically sharing a room, whereas work/business guests would not generally be sharing at this lodge. This is the lowest rate charged.

51

61

produce.52 Maintenance and depreciation are higher proportionally in the absence of transfer costs, but also due to the urban location where labor is more expensive. Wages are at a similar level to those at the safari and lakeshore lodges, but this conceals that urban lodges do not employ some of the additional staff needed at the safari lodge (tour guides, drivers, and so forth). Utility costs (2 percent) are lower than the lakeshore, which reflects the particular usage rates, for example, less air conditioning. There is still a significant fuel bill for the generator, but electrical supply is more regular, reducing the requirement for generator use, although it still runs for approximately one to two hours per day. As with the lakeshore lodge, the urban lodge did not show a profit based on this package. The above is a standard offering, but the price for the room is negotiable. This price, including full board, is the minimum this operator charges, so at any price over $85 per night there would be a profit. At $90$95 this would yield a profit of 510 percent before tax. If the room were on a shared basis, typically for a nonbusiness/work guest,53 then there would be a significant increase in revenue, but only increases in the food and beverages, and the VAT components, yielding a substantial profit. Also there is the opportunity for a profit on sales of alcohol and soft beverages and any other add-on services, such as airport collection and drop off. The data for this lodge were also based on 2009, which, as already noted, was a poor year due to lower volumes of business and therefore a higher proportion of overhead and indirect costs for each bed night. In a typical year, the overhead would be shared over the extra 1520 percent revenue, giving a calculated net profit before tax of around 810 percent.
175.

Product Line #4: Mountain hiking/climbing package for international visitor but excluding overseas airfare for four days/ three nights on Mount Mulanje including local transfers. Package cost: US$350/person, minimum group of six people (see Figure 10).
176.

52 53

An accurate record and allocation was not kept, so this is an informed estimate by the owner. This is estimated to be > 15 percent of the bed nights sold.

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Figure 10: Mountain Hiking/Climbing Package, Costs and Revenue Analysis

Source: Consultants data and calculations.

In contrast to the case with the other packages wages, for the guides and porters, are the biggest single item, at 25 percent and will have a significant pro-poor impact. In addition, this operator separates out administration and management costs at 15 percent, mostly in wages and office costs. The package includes food, mostly from a national retailer, courtesy drinks, walking sticks, air time, batteries, candles, kerosene, tips for watchmen at mountain huts, and other incidentals accounting for 18 percent of the total revenue. Of these items, only batteries and kerosene would be imported. Accommodation is paid for at local lodges at the base of the mountain and, as fees, for use of the various huts on the mountain. The fees are relatively low, reflecting what is offered being offered in a hut: a place to cook, light a fire, and sleep.
177.

In this case, park fees are the only form of direct revenue for the Government. At only 2 percent of total package ($3 per person per day) these are very low in absolute and percentage terms. They also contrast very significantly with fees at Mount Kilimanjaro, where park fees are the largest single item of tourist expenditure at 47 percent of the total cost. Each climber of Kilimanjaro pays an average of $649 in park fees built into the package.54 Mount Kilimanjaro receives an estimated 40,000 climbers per year, compared to an estimated 5,000 for Mulanje. Clearly these are not directly comparable situations, but indicate that higher fees are probably attainable.
178.

The operator of this package gave calculated rather than actual data and was working on a 15 percent markup on costs to give a relatively high profit margin (13 percent) before tax compared to the other three products analyzed. However, it should be noted that the overall package price is lower than for the corresponding safari and the lakeshore lodge. The volume of business is currently very low, at least compared to a well-developed hiking destination like Mount Kilimanjaro.
179.

54

ODI (2009).

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Mulanje Case Study The Mulanje massif is located in the southeast of Malawi, bordering Mozambique. There are six locations around the mountain to start a climb, with 15 paths to choose from. Climbers generally hike up in one day and stay in one of the 10 huts on the massif run by the Mountain Club. It is possible to hike down again the next day or stay on the mountain to climb one of the 59 adjoining peaks or walk from hut to hut. Annual climber numbers recorded at Likhubula Forest Station, one of the six stations (but one of the most used), show a 20 percent increase in climbers from 2,000 to 2,500 between 2008 and 2009. The Ministry of Tourism representative in Mulanje town recorded enquiries about the mountain at 3,100 in 2008 and 4,800 in 2009. Interestingly, 38 percent of those climbing Mulanje from Likhubula were recorded as Malawians, though possibly including foreign residents. The monthly visitor numbers recorded are lowest in January but pick up in April to the peak months of June and July before slowing down for the rest of the year. The following broad points can be made. First, aside from the Mulanje hiking tour, the margins are not high on the core packages, and in a low volume year such as 2009 operators may only break even or make a loss. Second, operators rely on the sale of add-on services (excursions), products (beverages), commissions, or other package elements to supplement profits from the core product. Third, transfer and transport costs are a major cost element, along with taxes. Wages range from 1425 percent of costs, with food and beverages at 1125 percent. Wages and food and beverages are the major items of pro-poor expenditure, with evidence in three of the four analyses of high local employment and significant local purchases of foodstuffs. Fourth, direct revenue for GoM is a major cost element in three out of the four product lines at 2127 percent of the overall revenue. When other taxes are included, such as PAYE on wages, corporation tax, duties and tariffs on imported items, and levies and tax on fuel, the share represents at least an additional 6 percent of revenue. The high proportion of tax and high transfer/transport costs contribute to the low multiplier effects detailed earlier.
180.

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3. Poverty and Environmental Impacts

This section looks at the impacts of the T&T sector, notably on poverty and the environment. There is considerable debate about these categories of impact at an international level. The study considers this debate in brief but focuses more on the observed and reported impacts in Malawi.
181.

A. Pro-Poor/Poverty Linkages and Impacts There has been considerable debate about the poverty linkages and impact of the T&T sector. A presentation by J. Mitchell (2010) of the Overseas Development Institute (ODI), London, to the World Bank in July 2010 drew on a set of 12 studies that used a value-chain approach to identify pro-poor impacts PPIs. Some of the key findings were the following:
182.

a. external leakages were lower than many previously thought; b. different types of tourism impact on the poor quite differently with pro-poor impacts (PPIs) ranging from 728 percent of expenditure; c. tourism wages are nearly always above the poverty line, but being relatively low, they enable the poor to access to these jobs which might otherwise have gone to middle income families; d. the political economy may allow the capture of benefits by elites; and e. the vulnerable can be exploited in poorly regulated situations; In summary, these findings provide the basis for ODIs view that many of the negative claims about tourism and its limited pro-poor impacts are exaggerated (see Figure 11).

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Figure 11: Extracted Table on Negative Claims and Responses

NegativeClaims
Upto85%ofthesupposedbenefitsoftourism leakoutofdevelopingcountries(citedin BolwellandWeinz,2008),duetothepowerof Internantionaltouroperators(Broham,1996), Foreignownership,andhighimportpropensity oftourism(Jules,2005) Tourismemploymentisseasonal,lowpaying andexploitative(Clancy,2001;SlobandWilde Ramsing,2006) Tourismemploymentissecuredbythosewith Skills,andisnotaccessibletothepoor(Dwyer etal.2000) Poorpeopleareparticularlyvulnerableto thecostoftourismwildlifedamageto agriculture,opportunitycostsofland,lost accesstoanddepletionofnaturalresources. Tourismexpansioncrowdsoutotherdomestic Sectors,leadingtodeindustrializationand longtermreductionsinwelfareforthe population(Dwyeretal.2000;Chaoetal, 2006.)

Positiveclaims
Servicesgenerally,andtourisminparticular areamongthemostviablegrowthpathsfor developingcountriesduetorelativelylowentry barriersandbuoyantgrowth(Benavidesand PerezDucy,2001) Althoughweneedtobecautiousof generalizations,tourismledgrowthisa realityandthesectoroftenoutpacesthe manufacturingandagriculturalsectorsin Itsrelativecontributiontoeconomicgrowth (LajarragaandWalkenhost,2006) Comparedwithothersectors,arelatively Highshareoftourismdevelopmentisunskilled orsemiskilledandavailabletoawidercross sectionofthelabormarket. Tourismcreatesopportunitiesforperipherally locatedmarketsbecausethecustomercomes Totheproduct(thetouristdestinationor Excursion)andmakesdiscretionaryexpenditure Tourismhasbecomeoneofthemajorsources OfGDPgrowthinmanyoftheleastDeveloped Countriesandakeycontributingfactorfor ThosethathavegraduatedoutofLDCstatus (Encontre,2001)

Source: Mitchell and Ashley (2010).

Operators in Malawi reported a range of pro-poor impacts. The degree to which an operator focuses on activities that impact poverty was much more evident for enterprises located at the lakeshore and in the parks than in the cities. This reflects the stronger community context within which these enterprises operate, with greater interdependence between operator and community. It is also a consequence of operators and communities being colocated, so problems in the community are more visible and there is a sense of shared responsibility. In contrast, lodges in urban areas are often located in higher income areas where workers and employers have some physical separation. Operators in the parks and along the lakeshore reported employment as the most important pro-poor impact (PPI). As indicated, wages (and other employment costs) in the typical cases ranged from 1425 percent of costs, but in addition there are staff gratuities that are received directly by the staff member. In the T&T sector these can be considerable, particularly when serving international tourists. Estimates for Mulanje based on wages and number of trips suggest that porters receive around $340 per year and guides $510 per year, which is a higher income than average, given that it is not yet a full-time occupation.
183.

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All lakeshore and national park operators interviewed recruited extensively from the communities in which they were located. For example, Sun n Sand (lakeshore conference hotel) employed over 200 people from the lakeshore community in which it is located. Drawing on local communities was seen as a considerable benefit to communities and operators, as it ensured that the community directly accessed benefits from giving up land for the enterprise, that the community has a major stake in the success and continuation of the enterprise, and that local people have no difficulties with relocating and finding accommodation. The logic for local employment is very strong, but for skilled positions this required that staff, supervisors, and managers be recruited from outside the community. The presence of these outsiders living in that locality has the spin-off benefit of additional local spending, particularly as these are relatively high earners. While community members may generally be initially restricted to lower skill and lower paying jobs, there was one example given by CAWS of a gardener who had progressed through their operation to become a manager. This was clearly no ordinary individual, but it does demonstrate that it is not only low paid jobs that are available to communities and that there are opportunities to progress for those with potential. This highlights the dynamic impacts that tourism can have at the local level.
184.

Operators also highlighted opportunities for local businesses, including fishing and farming households, to supply produce. In some cases, there was frustration that the offers of local purchasing were not taken up, due to a lack of interest and unrealistic expectations on pricing. However, there were examples given of purchases of fresh foodstuffs, with one operator claiming that 90 percent of the food provided to the workforce was locally purchased, though with lower levels for food purchased for guests. There were regular mentions of the use of local tradesmen for building, ongoing maintenance, and repair/refurbishment work. There were examples of hiring local entertainersdrummers, musicians, and dancers. There were also opportunities for selling souvenirs to visitors, particularly curios, art, and cloth, with most lodges providing an area where sellers could set up their wares. One lodge provided ideas and demonstrations of additional curios that they thought would have more appeal to guests than current products.
185.

Several operators supported local farmers in producing for their lodges by supporting agricultural initiatives, including seed, fertilizer, and agronomic linkages. This extended to helping with food security, all with mixed success. There was evidence of health related help to community members in need and more structured initiatives around malaria (bed nets), HIV/AIDS, and hygiene. Some reported that they were supporting local clinics, including contributions to wages of the clinic staff. There were many mentions of support for local schools, including improving facilities, supporting vulnerable individuals, paying teacher salaries, and providing some education linkages, particularly relating to the environment.
186.

All operators interviewed were involved in some way with local PPIs. CAWS had gone much further and commissioned and paid for its own study into its impact on the local communities and their own staff, following similar studies for their group outside of Malawi. Two separate studies were undertaken on staff and communities by S. Snyman, a regionally based socioeconomic consultant. The community study was
187.

67

extensive (Snyman 2009), with 251 interviews in the six community areas impacted by Mvuu camp. It aimed to determine community understanding of the tourism enterprise and its impacts, as well as views on the environment. In summary, community respondents that had heard of Mvuu stated that Mvuu Camp was good for jobs (74 percent), brings tourists (87 percent), helps communities (65 percent), was good to work for (70 percent), but could do more for communities (77 percent). The results were not universally positive. For example, 62 percent felt that there had not been an improvement in their community since Mvuu began operations, while 31 percent felt there had been. This study, plus comments from other operators, suggests that communities have high expectations of what T&T operators will do for the community and for members of the community. Although there is evidence of a many different types of support, some operators identified problems with and within communities over (i) resources, (ii) limited community inputs, (iii) unrealistically high expectations of the operators, and (iv) limited initiative by communities.
188.

The Snyman (2009) study of CAWS staff covered Mvuu Camp and Lodge and Chinteche Inn and included 102 out of the 151 staff. Average monthly pay in mid-2009 was MK 8,668 (US$62.40),55 with an average gratuity of MK 595 (US$4.30), which, combined with other income sources, gave an average monthly household income of MK 12,198 (US$87.75). Fifty-seven percent of staff stated that this was their first permanent job, and 44 percent stated that they had received some form of training from CAWS. The mean average period working for CAWS was 7.2 years. Reported spending was 39.0 percent on food, 11.6 percent on education, 7.3 percent on dependants, 6.8 percent on accommodation, 5.9 percent on cellular phone airtime, and 5.9 percent on clothes. Other items included personal items, cleaning materials, transport, and savings. This profile of spending suggests a higher multiplier than presented earlier in section 1A. Economic Review. It should be borne in mind that these data are for staff of one employer, albeit one of the leading tour operators and lodge managers.
189.

It is noteworthy that CAWS sees it of importance to commission such studies, particularly as these were conducted at a time when the global economic downturn was impacting profitability. There are others that are taking a similarly engaged approach to their impact on poverty. The Pumulani Lodge56 is considering hiring a community manager to assist in various projects, as has been done by its owners in Zambia.
190.

In conclusion, Malawis current operators include those that are engaged in a wide array of actions and organized initiatives that impact communities beyond the immediate impact of employment and purchasing. This involves support for infrastructure for communal benefit (water, roads, clinics, and schools) and softer initiatives involving education and health. Communities have mixed views, partly due to their high expectations that are not always fulfilled. Of the jobs that are created, it is noteworthy from the CAWS studies how many of these are the first formal employment for many
191.

55 56

Exchange rate July 2009 of MK 139: US$1. Lakeshore lodge, opened in 2009, owned by Robin Pope Safaris, Zambia.

68

people. While average earnings may not appear high, these levels are above minimum wages and provide consistency of income that other livelihoods, notably farming, do not. B. Environment and Land Environment The T&T sector is inextricably bound to the natural environment in Malawi. From a tourism perspective, operators depend on maintaining and even restoring the natural environment in a sustainable way. All enterprises leave a footprint, but the evidence from the interviews for this study suggests that T&T enterprises, particularly in the case of parks and the lakeshore, make significant attempts to improve the natural environments within which the enterprises operate and seek to minimize their own environmental footprints. This approach is for good business reasons, as it ensures that the surrounding environment is more attractive to guests and reassures guests that their presence is environmentally sustainable and responsible. Although T&T firms targeting business and conference guests also seek to limit their footprint when this has cost benefits, they did not give the same level of attention to environmental impacts as did other subsectors, particularly when it came to improving the wider environment (typically urban). This is not necessarily surprising given the nature of the business. Where environmental activities were undertaken, these were in collaboration with communities, the Department of Parks and Wildlife (DPW), and development partners.
192.

Malawis parks and reserves have been undergoing considerable change over the past 10 to 15 years, and in most cases for the better. Concessioning national park lodges and camps in Liwonde, Lengwe, and Majete has attracted investors that have a direct stake in maintaining and improving the park or reserve environment, particularly the wildlife. This has created and supported opportunities for wildlife protection and restocking efforts, such as the rhino sanctuary in Liwonde and the major efforts to restock and protect game in Majete by African Parks. While there is still illegal harvesting/collecting, poaching, and fishing, the evidence of improved game numbers and reduced degradation is strong. By any measure, these have been success stories through effective public-private partnerships.
193.

Building on this public-private approach, World Bank Global Environment Fund (GEF) resources have been obtained for the Nyika Transfrontier Conservation Area (TFCA) Project, which seeks to enhance private and nongovernmental inputs for a unique ecosystem with considerable biodiversity that spans the Zambia-Malawi border. Nyika is a high undulating montane grassland plateau that rises 2,000 meters above the bush land and wetlands of the Vwaza Marsh. It offers a very different and arguably unique visitor experience in Africa, but faces all the usual pressures on land use and natural resource usage (legal and illegal). The Nyika TFCA project seeks to build institutional management arrangements, attract and promote tourism concessions that can fund activities, improve protection of the natural resources through working with communities, and address and support community livelihoods. This integration of public, private, and community resources seeks to achieve an equitable and sustainable balance among the environment, tourism, and community livelihoods and engagement. CAWS, with a track record of good environmental and pro-poor impacts in Liwonde, is the new
194.

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concessionaire for Nyika (Malawi) and has invested heavily in the tourism facilities. It expects to employ 60 full-time staff initially, of which 57 will be nationals, and the majority of these from the surrounding communities. There are examples where collaboration of private actors, public actors, and communities through a concessioning arrangement have not been successful, notably Kasungu National Park, where the concessionaire had reportedly given up the concession, and where game numbers are very low. The low game numbers make Kasungu an unattractive park to visit, resulting in low visitor numbers and low revenues, reinforcing the decline in the parks infrastructure and wildlife. It is too much to expect most private sector operators to provide the resources to get a park up to an adequate standard, as this requires a large upfront investment, with only slow recovery in game numbers and an even slower response from visitors until a critical mass is reached. This suggests that any recovery program requires a combination of government and development partner resources that can be added to by private sector resources once a critical mass is achieved. In many ways, this is what transpired at Majete, though with development resources channeled through the private operator. Majete has now started to recover its game numbers and is attracting visitors to the newly refurbished tourism infrastructure. The decision of Robin Pope Safaris to invest in a new high-end lodge in the park is a sign that Majete is moving toward realizing its tourism potential, which could be possible only if the environmental and natural resource base had recovered sufficiently.
195.

There are also examples of new investment in Nkhotakota Game Reserve, which is another area that had faced neglect. There are two new concessions that will open up the reserve to visitors and provide a greater degree of environmental management and protection opportunities.
196. 197.

It is important to recognize that environmental protection can and does result in conflicts with communities as there are inevitably restraints placed on the communities access and use of the land and natural resource base. Community-based natural resource management (CBNRM) is a well-established development discipline, with several examples of operation in Malawi. There are benefits to the community from sharing park and concession fees, employment, and trading opportunities that usually outweigh the losses from restricted use of natural resources, though this can take time to come to fruition. The sustainable use of the natural resource base is also in the communities medium- and long-term interests, though that is not necessarily fully recognized or understood compared to the loss of short-term harvesting income. Malawi has sufficient past and current experience to support more integrated environmental protection and management through combining tourism and CBNRM. This may need an initial investment of resources in the selected areas and the willingness of GoM to undertake activities that might be perceived as negative by communities in the short term.

The rehabilitation of the natural environment is an important stepping stone to investment and the longer term maintenance of that environment. Rehabilitation makes an area attractive to investment, which then involves private sector actors who have resources and a strong motivation to maintain and improve the environment in partnership with the public sector and through engaging with communities. This in turn
198.

70

stimulates incremental and new investment by the private sector and progressive improvements in the environment. Liwonde and Majete provide good models that Malawi can build upon. Land Land for T&T development is an issue for operators, notably in the major cities, the lakeshore, and national parks/wildlife reserves. In all cases the supply of land is limited, but for different reasons. In the urban areas where T&T operators want more land for hotels and lodges, land availability is strictly controlled by the city assemblies and allocated according to the city plans and applications made. Land is now mostly registered and titled. There have been new hotel developments in both the major cities in recent years, with two more underway in Lilongwe. This suggests that while supply of land is not easily available, developments are possible, particularly for larger wellplanned developments that add value.
199.

Most of Malawis high-end lodges in the urban areas are house conversions. Malawi is fortunate to have several low-density housing areas, with large, single-storey houses and gardens. These have been utilized as the basis for lodge conversions, usually with the addition of several rooms and an upgrade of facilities. Number of rooms range from a minimum of five to around 12, usually in a mix of sizes to accommodate singles, twins, doubles, and shared/ensuite facilities. There has been a major expansion of such lodges, particularly in Lilongwe. There are also a number of middle and lower end lodges, some of which have been purpose built, but often utilizing existing buildings, more typically in middle and higher density areas. These generally have more rooms per unit. There are examples of permission being refused, but city assemblies seem willing to sanction developments and conversions, probably due to the revenue potential as a result of the new developments.
200.

Lodge development in the national parks and wildlife and forest reserves is considerably more difficult. New developments are rare, with the focus mainly on concessioning of existing facilities when these come up for renewal, as recently occurred at Nyika and at Chinguni Hills Lodge in Liwonde. These are competitive processes, with the focus on the plans for investment and employment by the potential concessionaires. In the past two years, there has been considerable activity in concessioning. A new lodge/camp is now operating in Majete on the site of an old, underutilized scout camp, following considerable investment in fences, wildlife, and game scouts by development partners, government, and the private sector. Prior to this, there were no visitor facilities in the reserve. A second camp/lodge has been sanctioned and is being developed by Robin Pope Safaris. This is a high-end lodge accessible from Blantyre, which has international flight access. There have also been new concessions in Nkhotakota, again, for utilizing old/underused camps. Overall, there has been an appropriate level of concessioning and development within the parks and reserves. Too much development would undermine the environment and the attraction of the parks and reserves. It has also been highlighted through bed occupancy rates that such areas are often underoccupied, suggesting that demand from visitors is only sufficient to justify selective new developments at present.
201.

71

202.

For national parks and wildlife and forest reserves, there are issues about land-use rights. GoM policies generally respect the rights of communities to access land where there has been traditional access rights to gather natural resources, such as grasses, honey, plants, and so forth, usually through the sale of permits. There are inevitably conflicts over access, and community members evade payment for access, even though the rates are generally low. However, all stakeholders recognize the need to maintain and improve on these systems of access, and tourism is seen as an excellent way to engage with communities in managing the environment sustainably. Communities act as informal enforcers against exploitation of resources and poaching from within and outside the communities. These partnerships are integral to the Nyika TFCA project, which recognizes the role of CBNRM in preserving Malawis natural resources.

The most contentious land issues are around the lakeshore, where most land is customary, and therefore up to the traditional authorities (chiefs) to allocate. The historical context is of individuals and organizations (private and public) making deals with local chiefs for land to be allocated.57 Usually these are beach properties, where local communities fish from and/or land their catches and use the lake for washing. Most of the best beaches, particularly on the southern lakeshore, now have privately owned cottages, leaving only relatively small and poor quality beach areas for communities to use for fishing, washing, and recreation. The quality of such developments varies considerably, and most are not sympathetic to the local environment. Those owned by organizations, such as banks, parastatals, and other companies, are used by employees on an agreed internal basis, possibly with a small contribution to costs. Some, owned either by individuals or organizations, are rented out on a semicommercial basis. This is not usually as a dedicated T&T facility; rather, renting is a means to partially defray the costs of facilities that have to be staffed and maintained when not being used by the owners. These are also generally a cheaper option for those visiting the lake, reducing the demand for formal registered accommodation.58 Although this may not be the best use of the sites, it does stimulate local employment for cooks, gardeners, and watchmen, as well as trade for fishermen, curio sellers, and other traders.
203.

There have been a number of attempts to control developments, but in practice much of the development has already taken place, making it difficult to control other than to insist on appropriate standards where units are used for tourism visitors. A key issue for continued development is the availability of quality lakeshore sites for formal T&T development. This is possible in less developed and generally less accessible areas, as is the case with Pumulani on the (south) eastern lakeshore and the northern lakeshore. Zoning and land registration of the lakeshore, urban areas, and other locations with T&T potential has not been done. This can lead to conflicts with local communities and in particular the traditional authorities that benefit from their control over the allocation of land at present. However, a more formalized process would bring benefits to the sector via predictable and better quality developments. The communities would stand to benefit from the employment and income opportunities created, as long as they are not deprived
204.
57

Annecdotally this has often been for small amounts of money, but there is no records to check and there is little alternative use for the land other than providing more space to existing community social and economic activities. Probably many of these visits would not take place if the only options were formal accommodation at high prices.

58

72

of their core livelihoods, such as fishing, by being forced to give up their land access rights.

73

4. The Case for Travel & Tourism

This section provides a justification for an increased focus from the GoM and its development partners on how they can best facilitate the growth and development of the T&T sector to meet the stated goals of the MGDS. It is argued that T&T provides an important channel through which GoM can diversify the national production and export base. Such diversification is recognized by GoM as central to the implementation of theme one of the MGDS: Sustainable Economic Growth. To generate wealth and employment and become a middle-income country, it is envisioned that Malawi will be transformed from a predominantly consumption-based economy to a predominantly production-based economy. It is, therefore, necessary for Malawi to increase domestic and private investment in productive sectors, promote exports by addressing supply-side constraints, and diversify the economy. Tourism is highlighted in the MGDS as a sector with significant potential to contribute to Malawis economic development. Yet this prominence in the GoMs strategic vision has not resulted in significantly increased budget allocations. It is also noted in the research for this study that no development partners have substantial current T&T related programs.
205.

A. Malawis Commodity Dependence A key conclusion of the World Bank Malawis Country Economic Memorandum (World Bank 2009a) in 2009 was that Malawis past growth has been export led. Despite structural changes in agricultural production from estates to smallholders and relative liberalization of prices and finance, a longstanding relationship exists between exports and overall GDP. A central driver of the economy has been positive multiplier effect of exports and onward demand for local goods and services (see Figure 12).
206. Figure 12: GDP and Export Relationships, 1960-2007

In contrast, although maize consumption is central to the welfare of Malawis population, there is a weak link between maize production and economic growth, due to
207.

74

the low proportion of maize that is marketed, which limits multiplier effects. This does not ignore that the impact of additional production is beneficial to the economy and wellbeing of the many smallholder farming families; it recognizes that maize has been less important as a driver of economic growth over time than other factors, such as export development. However, while exports are central to sustained economic growth in Malawi, concerns exist over the composition and size of the countrys exports. The CEM noted an increasing trade deficit coupled with depletion of foreign exchange reserves as a key problem for Malawi going forward. Further, the structure of Malawis export basket is almost entirely based on agricultural primary products, and in particular tobacco. As the CEM notes, since 1994 tobacco has accounted for around 60 percent of export revenue. A wide range of literature exists detailing the problems associated with commodity dependence, and in particular a dependence on a small number of commodities. These include volatility of export value, especially when there is a high export concentration (UNCTAD 2008); long-run decline in terms-of-trade relative to manufacturing goods (Jansen 2004; Giovanni and Levchenko 2008); and high weather dependence for agricultural goods where less than 10 percent of land is irrigated.
208.

Particular concerns exist about the tobacco industry that constitute a medium-term threat to Malawis recent economic progress, such as (i) the World Trade Organizations ruling on flue-cured tobacco, (ii) the recent decision by the World Health Organization on burley tobacco as a mixer/flavoring, and (iii) recent volatility in supply and pricing of burley tobacco, with the risk of overproduction in the subregion. Therefore, it is improbable the economy can grow based on any further expansion of tobacco production.
209.

Diversification of Malawis exports is recognized by GoM and most stakeholders as necessary, but Malawi has failed to make much ground in diversification, particularly in agriculture. As the CEM states, failure to diversify into new export products thus constrains Malawis growth into a narrow channel and renders the economy vulnerable to adverse price shocks when they occur in the future (World Bank 2009, p. 9). Yet the GoM and its development partners are financially constrained, and so policy must inevitably focus on a few sectors with potential to drive export revenues and, therefore, growth. Mining is an example of GoM and development partners working to improve the policy and business-enabling environment. This has helped facilitate major investment at Kayelekera for uranium yellow cake.
210.

One option is to diversify within agriculture and begin production of higher value cash crops for export. This will be more possible if GoMs Greenbelt Initiative comes to fruition and smallholder farmers can be enticed to move away from maize. There has been progress in exports of selected major crops in recent years, notably sugar, but others have experienced continued volatility in production and prices, such as tea. Cotton also has potential, but the uncertain policy environment and recent withdrawal of the largest cotton ginner has created uncertainty over the sectors prospects. As already indicated, despite the positive developments in these other sectors, Malawi is still highly concentrated in its agricultural production on tobacco and maize. So far, agricultural diversification and development has not fundamentally shifted that balance. Moreover,
211.

75

high dependence on agricultural production, even if more diversified, would not reduce Malawis vulnerability to weather impacts and volatile commodity-priced goods. The long-run decline in commodity terms of trade suggests that Malawi will not fundamentally change its prospects through diversified and intensified agricultural production, other than if it can move up the value chain to more agricultural processing. Mining and minerals has potential to be a significant source of export and government revenue growth. World Bank estimates are that output could reach US$500 million1,000 million beyond 2020 with GoM revenue at US$50 million100 million by the same date (see Table 17).
212. Table 17: Mineral Sector Direct Economic Benefits Annual Constant US$ , 200820

However, like agriculture, the mineral sector is susceptible to price volatility and long-run decline in the terms of trade. Concerns were raised in the recent World Bank Malawi Mineral Sector Review (2009b), including pressure on transport, power, and water infrastructure. The sector requires major investment to ensure the projected benefits can be realized. Malawi already faces the highest level of power outages among its SSA peers, at 63 days compared to the median of 30 days. Mining is generally power intensive and Malawis power supply is already over stretched. A second major area of concern in the review was environmental and social impacts. There are considerable risks over social and political conflicts, as well as threats to the environment and conflicts over benefit sharing. Third, it was noted that the employment potential in mining is relatively small. Data for mining in 2008, including construction (temporary) at Kayelekera, show it maintained only 4,850 formal jobs. Mining is still worth pursuing for its export and revenue potential, and because it helps Malawi diversify its overconcentrated export base. However, mining has limited pro-poor impact with limited employment opportunities for local people and considerable environmental risks relative to other sectors.
213.

B. Travel and Tourisms Transformative Potential The potential transformative economic impact of T&T is generally underestimated. T&T is one of the worlds fastest growing industries, with 924 million tourists annually. It is expected to account for 9.2 percent of global employment, 9.6
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percent of global GDP, and 5.2 percent of global exports by 2020 (WTTC 2010c). T&T also represents a major transfer of resources from rich to poor, as 40 percent of international tourist journeys end in developing countries. An estimated US$295 billion was spent by tourists/travelers in developing countries in 2007, three times level of official development assistance. Section 0A highlighted the economic contribution that T&T makes to Malawis economy and the high rate of growth predicted by the WTTC. Section 2 provided a microanalysis that supports and further develops the economic contributions of T&T through looking at key value chains and identifying some of the transmission mechanisms. Section 3 looked at the pro-poor and environmental impacts of the T&T sector.
215. 216.

The benefits and positive impacts of T&T can be summarized as follows:

a. A significant and growing direct and economy-wide contribution to GDP at 2.9 percent and 5.8 percent in 2009 respectively b. High predicted T&T growth rates of 8.7 percent per annum through 2020 c. Growth that is less susceptible to variable weather and climactic conditions, to which Malawi is very vulnerable d. Growth that is less susceptible to international commodity price volatility, as experienced by Malawi in recent years e. 140,000 T&T jobs, directly and indirectly, projected to grow to 178,000 by 2020, all things being equal f. Many T&T jobs in rural areas with limited formal employment opportunities (One study for a major operator showed that it offered the first formal employment for many of its employees, suggesting T&T creates entry level opportunities.) g. Many opportunities in and around poor communities beyond employment for supply of farm and lake produce, services (carpentry, plumbing, repairs, taxis/transport, and so forth etc.), sale of curios and other goods to tourists, and supply of services, such as entertainment and transport h. US$39.5 million in visitor spending, equivalent to 63.4 percent of Malawis service exports and estimated to account for 3.5 percent of Malawis total exports in 2010, well below the SSA average, indicating considerable potential i. Primarily a service export, an area of high strategic interest for GoM j. High tax yield and major contribution to GoM revenue (The product line analysis demonstrated that a two-week safari/lakeshore vacation yields US$519.71 (23.67 percent) in direct taxes59 and at least US$164.61 (6.83 percent)60 through indirect taxes on a package of US$2,327.00)

In this calculation, direct tax includes VAT, tourism levy, concessionaire fees, permits and licences, and park entry fees that are included in the package.

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k. Communities engaged in preserving and improving habitat and biodiversity of natural assets that are under pressure from overexploitation l. T&T promotion and maintenance of Malawis rich and diverse culture T&Ts actual and potential impacts are considerable and warrant careful consideration of the case for GoM and development partner attention to the sector.
217.

Indirect tax in this calculation includes PAYE on wages/salaries, estimated duties and excise on vehicles, beverages, and other luxury items used.

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5. Constraints, Opportunities, and Recommendations

A. Summary: Constraints, Opportunities, and Strategic Actions Table 18: Summary Constraints, Opportunities, and Strategic Actions
Objective/Outcome Opportunity Strategic Actions Responsibility/ Key Stakeholders MTWC, with Min of Industry and Trade and Malawi Confederation of Chambers of Commerce and Industry MTWC with MTAc and (T&T) private sector operators, MIT, Univ. of Mzuzu and MoF. Proposed Timing Implement within 36 months. 1. Improving the Economic Performance of the T&T Sector 1.1 Improve supply chain Stimulate a stronger Analysis of supply linkages (multiplier) supply chain response chain operation and and pro-poor to opportunities by areas of low response; impacts. existing T&T providers development of a T&T by using more domestic supplier initiative. goods and service supplies. 1.2 Increase the quantity Improve the flow and Review of T&T sector and quality of trained quality of entry level training provision and staff, supervisors, T&T graduates from demand forecasts; and managers. MIT and Univ. of institutional review of Mzuzu. MIT; agreement on publicImprove short-term private funding of T&T training for employed sector training. staff, supervisors, and managers. 1.3 Increase response by Target investment More focused international T&T promotion to domestic investment promotion; investors and train and smaller T&T implementation of the existing, domestic specialist regional grading system; non-specialist T&T investors, with training and technical operators. standards progressively support for domestic tightened to encourage non-specialized increased operators to professionalization. professionalize. 1.4 Restore and improve Restore and maintain Restoration and tourism and cultural key national parks, management plans assets. forest, and wildlife developed for targeted reserves through public- natural and cultural private-community assets. partnerships; preserve and promote cultural sites and events. 2. Improving Public Sector Performance and Policies to Promote Investment 2.1 Balance and maximize Comprehensive and short- and medium-term regionally comparative tax revenue through review of tax policy for Stimulate investment encouraging T&T sector; in the T&T sector to investment, foreign restructured incentives generate tax exchange, jobs, and to balance jobs, revenues. longer term GoM investment, foreign revenues. exchange, and tax revenues.

Implement within 36 months.

MTWC with Malawi Investment Promotion Agency, THB, and MTAc and private sector operators.

Implement within 36 months.

Dept. of National Parks and Wildlife and Dept. of Culture with MoF, MTAc and private sector operators, and community bodies.

Within 60 months.

MoF with MTWC, MTAc, and private sector operators.

Implement within 12 months.

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Objective/Outcome 2.2 Improve T&T institutional performance.

Opportunity Transfer regulatory and destination marketing role from MTWC to a functioning publicprivate body.

Strategic Actions Policy decision on institutional housing of regulatory and marketing roles; development of shared public-private funding mechanism. Assessment of key policy and decisionmaking information needs and capacities; development of linkages with UNWTO Africa Statistical Capacity Building Program develop capacity building program. Review of alternative approaches that limit meeting expenditure in ways that do not disproportionately impact particular groups of investors, employees and communities; establish regular mechanisms for dialogue on key T&T policies. Refinement of positioning statement and communication of position through all available media.

Responsibility/ Key Stakeholders MTWC with MTAc and private sector operators, and MoF.

Proposed Timing Implement within 12 months.

2.3

Increase data gathering and analytical capacity for decision making.

Improve capacity at MTWC, NSO, Dept. of Immigration, Tourism and Hotel Board (THB)/Malawi Tourism Authority (MTAu), private sector associations, and Univ. of Malawi (Mzuzu).

MTWC.

Implement within 24 months.

2.4

Improve dialogue on T&T policies and mechanisms.

Engage in dialogue on key T&T policy changes with private sector associations/representat ives to determine impacts and best methods to implement

MTWC and MoF.

Within 12 months.

3. Improving the Effectiveness of T&T Marketing 3.1 Position Malawi as both a multi-experience destination in its own Improve destination right and as a positioning. complementary product to the regions iconic attractions. 3.2 Utilize the WWW with better targeting of Improve effectiveness business visitors and of limited resources more focus on key to promote Malawi. current source countries. 3.3 Stimulate innovation in product offerings. Increase the extent and diversity of visitor T&T options.

MTWC with MTAc and private sector operators.

Within 6 months.

Increased compliance with levy through better collection and incentives to comply; technical support for destination marketing initiatives. Technical support for product innovation; challenge fund to support innovative T&T product development.

MTWC with MTAc and private sector operators.

Within 12 months.

MTWC with MTAc and private sector operators.

Within 24 months.

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Objective/Outcome 3.4 Use and promote cultural heritage as part of Malawis main visitor attractions.

Opportunity Increase attention for Malawis cultural heritage and events as a key part of its diversified attraction.

Strategic Actions Improved recording and preservation of cultural sites; improved presentation of cultural events; increased attention in marketing. Review of how competitiveness can be increased, including implementation of the Yamoussoukro declaration. Identification and prioritization of key roads by T&T stakeholders; lobbying within GoM for higher priority. Implementation of zoning on the lakeshore; improved prioritization of sites for urban accommodation units.

Responsibility/ Key Stakeholders Dept. of Culture with MTAc and private sector operators, and cultural associations/ bodies.

Proposed Timing Within 36 months.

4. Improving Competitiveness 4.1 Increase competition in air transport and Improve accessibility improve facilities. and reduce air access cost. 4.2 Improve road quality and access to key T&T locations. 4.3 Improve key border crossing facilities and linking roads. Improved access roads to natural assets and T&T resorts. Increased supply of lodging in urban areas where demand is highest; improved management of remaining undeveloped lakeshore sites suitable for tourism.

MTWC, Min. of Transport, Dept of Civil Aviation, MTAc, private sector operators, Airlines. MTWC, Ministry of Transport, MoF, MTAc and private sector operators.

Within 36 months.

Within 36 months.

Increase the competitiveness of the lodging sector,

MTWC, City and targeted District Assemblies, MTAc and private sector operators.

Within 24 months.

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B. Constraints 218. In the analysis in the foregoing sections, this study identified key constraints to the T&T sectors development that are summarized below. These include (i) data collection and analysis limitations; (ii) a weak multiplier; (iii) insufficient supply of welltrained staff; (iv) fluctuating and high tax share of revenues; (v) weak institutional arrangements; (vi) non-specialist investors; (vii) underdeveloped destination positioning; (viii) limited effect of destination marketing; (ix) insufficient attention to cultural sites and events; (x) weak product innovation; (xi) natural assets facing degradation; (xii) risk of community-investor conflicts; (xiii) high cost of air transport and poor air access; (xiv) (some) below-standard local and international access roads; (xv) poor quality utility supply; (xvi) insufficient zoning of land for T&T; (xvii) high operating costs; and (xviii) inconsistent dialogue on key policy changes and implementation At the economy level there are considerable difficulties in defining and measuring the T&T sector contributions to the economy, both direct and wider economic contributions. WTTC data are helpful to gauge the sectors economic role, as the methodology is comprehensive and used consistently across countries to enable better comparisons. However, there is a gap in domestic data collection and analysis that makes it difficult for policy makers to be able to fully determine the underlying value of the sector or priorities for its most useful interventions. For example, the WTTC and other external data highlight a weak multiplier effect, yet there is no domestic data and analysis that can shed light on the nature and causes of this low multiplier. This makes it difficult to identify what interventions could have the most effect.61
219.

The economic data suggest that T&T is making a valuable and increasing contribution to GDP, jobs, GoM revenue, and export earnings. This positive overall trend, seen, for example, in international visitor arrivals, has been maintained despite the global economic crisis in 200809. However, the economy-wide multiplier effects are much lower than might be expected based on comparisons with other countries. This suggests that there is a constraint on the multiplier. Addressing this constraint would generate significant benefits for the economy.
220.

The employment contribution from T&T is substantial, at an estimated 140,000 jobs across the wider economy. Many of these jobs are especially valuable for their propoor impact, being in rural and remote areas. They may also be the first formal jobs for many people. Although many are low paid, this makes them more likely to be taken by people in the locality, and, therefore, they provide valuable entry level jobs. Overall, the availability of well-trained staff with necessary T&T sector skills was identified by stakeholders as a key constraint. Staff with low capacity required higher levels of supervision and additional internal training. For the highest skill levels, operators have to draw from outside of Malawis human resource base for relatively expensive expatriates.
221.

MTWC faces a considerable difficulty over the resourcing and rehabilitation of MIT. The focus is on developing the infrastructure, which is part of MITs problem,
222.
61

UNWTO has been building capacity in this manner in a number of African countries.

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particularly the rebuilding of Alendo and establishing a Lilongwe campus. However, the private sector is more concerned about the graduates quality. The issue of quality goes beyond MITs infrastructure into questions concerning MIT staff caliber, curriculum quality and relevance, and management capability. This constraint encompasses the quality of graduates from the University of Mzuzu degree program and from private training providers.
223.

The amount of revenue for GoM from T&T is not easily determined, and improved data collection would improve quantification. Recent changes to tax treatment in the T&T sector, particularly for new investment in facilities, have made investment in T&T less viable. Investments in hotels, lodges, and capital items such as boats and vehicles for transporting visitors are substantial and require significant front-end funds. The investment cost for facilities and guest rooms to be fitted to a standard that is attractive to international visitors is high. For example, Sunbird recently announced it was investing US$89 million in room refurbishment across its properties, while CAWS is investing US$1.2 million to refurbish Chelinda Camp and Lodge at Nyika. The change in duty for tourism investments adds a significant additional cost, reducing the number and/or standard of facilities that can be refitted. The level of tax taken is a constraint to the T&T sector, as it adds to the package costs and contributes to the impression that Malawi is a high-cost destination. This also deters some new entrants to the T&T sector.

The institutional arrangements for the T&T sector are not fully effective. The MTWC is undertaking operational activities in licensing, grading, and destination marketing that are generally agreed to be more appropriately housed in a joint publicprivate tourism body responsible for regulation and promotion. The current THB does not have its own secretariat, depending entirely on ministry staff for its activities. The issue of resources and a sustainable funding mechanism are major parts of the problem. The risk for the GoM and the MTWC is that it can become embroiled in conflicts with operators over operational matters such as licensing, grading, and promotional spending, rather than focusing on its policy and facilitation roles.
224.

The implementation of the accommodation grading system has taken time but was coming to fruition in the second half of 2010. Many of the operators in Malawi are not specialist T&T organizations, with many having diversified business portfolios, as is common in the business community. Many appear to have entered T&T, particularly accommodation, opportunistically, often because they had a piece of land or building in the right place or they had construction skills and resources. So far, Malawi has not attracted investment by the multinational hotel and tourism groups, probably due to the limited market size and its stage of development. At present many operators have limited T&T experience beyond what they learned through their current operations. However, they are the ones that have been willing to invest, and until Malawi has a much bigger T&T sector, it will depend heavily on these homegrown, small non-specialist operators.
225. 226.

Malawi is changing its destination positioning by presenting itself as a diverse multi-experience destination. The range of potential natural, cultural, and event attractions is substantial, but many of these are not yet sufficiently researched, developed, or presented. The marketing focus tends to be on the major attractions that Malawi

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currently has, such as Lake Malawi and the national parks and game reserves. Although it is appropriate to promote and emphasize these, the less well-known attractions have low or no visibility. Malawi cannot successfully compete head-to-head with the game parks of Zambia, Botswana, Tanzania, or most other ESA countries. Nor does it have iconic natural attractions such as Victoria Falls. This suggests the positioning needs to be refined and strengthened for Malawi to compete more effectively regionally and globally. The limited amount of destination marketing and low international visibility of Malawi constrains the numbers of international visitors. The reintroduction of the marketing levy is generally welcomed by operators, though there is little enthusiasm for further increases. The most important presence in destination marketing is through the Web, and Malawis Web site is not among the top 10 in a Google search. The analysis also shows that a large majority of international visitors are for work/business. However, Web sites promoting Malawi generally target mainly leisure visitors. Thus, international work/business visitors may have difficulty finding all the services they would like to use on a visit and miss add-on leisure packages during the primarily work visit. Facilitating international work/business travel is a neglected opportunity.
227.

Alongside its natural attractions, Malawi has a range of diverse cultural attractions, including ethnic and cultural festivals and villages, a range of museums, colonial era buildings, independence struggle monuments, and religious heritage sites. However, the Department of Culture has limited resources to document, conserve, and restore key cultural sites. This represents a loss to the nation of its cultural heritage, but also is a missed opportunity for promoting domestic and international visits. The potential vibrancy of Malawis culture is evident. New cultural events have been initiated in recent years that attract both domestic and international attention to different degrees, such as the Lake of Stars music festival that is now part of the international music festival circuit, and the Lake Malawi Yacht Marathon. Finally, there are small special interest events such as the Mulanje Porters Race, Luwawa-Lake trail bike race, and the Mangochi Bicycle Race that attract domestic and some international attention. Many of these are relatively new and have been steadily gaining in popularity. While each of these events does not draw very large numbers of visitors, they do add to the diversity of special interest offerings available and collectively do contribute to T&T visits and incomes. They also serve to increase awareness of and linkages with the sector that can expand over time. These are currently not well supported, promoted, or integrated into the mainstream T&T attractions, which focus on key natural assets.
228.

If Malawi is to compete as a more diverse destination, then it requires more product innovation. While there is an enduring attraction for Africas safari and beach holiday, visitors are also looking for new and unusual activities and places to stay. There are some interesting attempts to innovate and diversify products. For example, Satemwa Tea Estates have formed a partnership with Ulendo Travel to upgrade and rebrand the former managers accommodations as high-end lodging, marketing the opportunity to stay in a colonial era accommodation in an unusual and attractive visitor environment (a working tea estate). Around this have been built other attractions such as tours, walking, quad biking, and special events, such as full moon luxury dinning. It is this kind of innovative offering that can enable Malawi to truly position itself as a place with diverse,
229.

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unusual, and exciting visitor opportunities, while its neighbors continue to promote their iconic offerings. However, there are insufficient examples of product innovation, resulting in Malawi continuing to rely on and be compared to others in terms of its mainstream products, such as safaris, which are less attractive than those of its main competitors. For the operators serving tourists, the generally low quality and past degradation of Malawis natural resource base was a major reported constraint. The tourism segment is built on clients accessing the natural environment; therefore, any degradation is a major problem. The problems experienced by the operator in Kasungu National Park may be illustrative of the outcome if the natural environment or key natural resources (in that case, the wildlife) are degraded. The DNPW has responsibility for the overall management of the parks and reserves, which it does on a limited budget. The DNPW has been able to bring poachers to court, but this has often resulted in lenient sentences as magistrates have tended to side with the poachers who are seen as pursuing a livelihood. Conflicts with poachers can be violent, and communities are often complicit with poachers who are part of the community. This leads to some community members not being inclined to intervene or support the authorities in their efforts to stop poaching. Enforcement has therefore yielded mixed results.
230.

Malawis operators have made progress in the greening of their products, at least those focused on international visitors. The mainstreaming of environmental issues has replaced the attempt to become an eco-tourism destination, but this greening is not universal and in many cases not very deep. Environmental impacts are increasingly important in leisure visitor decision making, so Malawi needs to improve and intensify its efforts and the quality of its green offerings if it wants to be considered as an environmentally acceptable destination.
231.

Although not highlighted in research conducted for this study as a major current constraint, deterioration of the relations between operators and communities is a potential threat to the stability of sector investments. There appear to be many examples of positive community engagement between operators and communities, but there is an undercurrent in some areas, such as the lakeshore, where communities have higher expectations than operators are able or willing to meet.
232.

Transport infrastructure was identified by the private sector generally as a key constraint, increasing operating costs and expansion initiatives. The same issue was specifically raised by T&T operators, but with greater focus on international air access, cost of air travel, and access roads. The cost of air transport to Malawi and poor access options were identified as major constraints for operators targeting international business/work and tourist visitors. The concern covers long- and short-haul flights. With less than 30 international departures a week, many with inconvenient and poorly timed connections, Malawi is not very accessible to the international traveler. Malawi is also a relatively high-cost destination, even if it is not the most expensive on some routes, due to the very high cost for the ESA region overall. It is small comfort to be slightly lower cost than others, but this is a problem that afflicts the whole region and makes it less visited than it could be. As one of the less attractive destinations in a region that is
233.

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already one of the most expensive to reach, arguably Malawi has most to gain from much lower access costs. Lack of volume, lack of sufficient competition, and high operating costs all need to be addressed. Outside the urban areas and major towns, the access roads are a key constraint for particular operators, though there have been major improvements over recent years, such as the MangochiMonkey Bay road. The value-chain analysis found that transport costs are often the highest single cost category, especially when including transfers and moving guests on excursions and game viewing. The costs include capital costs of vehicles for transfers, vehicles and boats for game viewing and excursions, maintenance costs and fuel. Poor quality roads increase maintenance bills and decrease average operational lifespan of vehicles. As noted in the analysis, international road access for international visitors is much more important than air. Although there were not major problems reported with border post processes and facilities, there is a need to continually improve these. For example, at Chiponde, the road between the Malawi and Mozambique border posts is a dirt road, which is difficult to negotiate in wet conditions. Yet Chiponde is Malawis sixth most important border post by number of departures: 46,638 in 2008.
234.

In relation to the business-enabling environment, operators state their main constraints to be poorly functioning power (and water), particularly for urban and lakeshore accommodation units whose clients expect and require these as a very minimum. The cost of alternative generation is seen in relatively high fuel consumption in the value-chain analysis. These areas are already national priorities and therefore not addressed specifically in this study, beyond stating them as constraints.
235.

Allocation of land for T&T purposes is important, particularly in urban areas, lakeshore, and in the national parks and the game and forest reserves. Allocation appears to be broadly working in urban areas and in the national parks reserves, but is more problematic on the lakeshore, particularly the southern lakeshore. The process of zoning in urban and lakeshore areas is important to attract investment and make progress with the sectors ability to have greater sustainable impact.
236.

Many operators indicated that Malawi is a relatively high-cost destination. In the past, GoM has been critical of the prices charged, particularly for accommodation. High prices may be deterring demand for high-end accommodation, as evidenced by the trend for visitors to stay in rest houses and private houses. However, the value-chain analysis highlights that transport/transfer costs and taxes are the two major cost items in lakeshore and safari packages. It is noted that the level of direct tax ranges between 21 and 27 percent of the revenue. There are other indirect taxes that are included in other cost items, including in transport/transfers. While this gives GoM a high revenue yield per unit of expenditure by the user, it may be deterring supply and demand for accommodation. The high prices may also be a function of the relatively tight supply situation, particularly in urban areas, though there is a steady supply of new accommodation units coming on stream. Added to the high costs of inputs, operators report difficulties over obtaining forex for imported goods that are not available domestically. The strength of the Malawi kwacha over the recent past has contributed to
237.

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making Malawi relatively expensive compared to other destinations for international visitors. For the business and conference segment, the policy decision to ban GoM conferences and meetings held at the lakeshore has substantially impacted lakeshore operators to a point where they might cease or mothball operations. In addition to the immediate impact of this particular decision, a broader concern for operators is the absence of an effective dialogue over policy decisions where these so directly impact their investments. This shows the vulnerability of operators to policy decisions that are reached with limited or no dialogue and implemented without full consideration of the implications. That absence of discussion makes operators concerned and uncertain about the future and can discourage and constrain future investments.
238.

C. Opportunities and Recommendations

Opportunities and Recommendations 1. Need for investment in data collection and analytical capacity in the key organizations that operate in and support the sector, notably the MTWC, NSO, THB/successor body, University of Malawi (Mzuzu), and private sector associations. 2. Supplier initiative to be developed that raises awareness of the demand opportunities in the T&T sector and the standards required, with training where required, as a means to increase the multiplier response. 3. Independent review of the demand for and supply of graduates and the capability of the current providers be undertaken, with the aim to provide more T&T graduates with the required standards and to upgrade existing staff working in the sector through delivery of short professional development courses. 4. Need for a complete and comparative tax review to be undertaken to determine the structure of incentives and taxes that will best develop the T&T sector commensurate with GoMs tax revenue needs. 5. GoM implement the institutional structure in its strategy by providing the necessary resources and establishing an appropriate funding mechanism. 6. Malawi focuses on attracting domestic investment in T&T and smaller specialized operators from the region. 7. The grading system implementation is used to encourage existing operators to improve standards and professionalize their operations progressively. 8. Destination positioning of Malawi fully reflect its diverse offerings and range of visitor opportunities. 9. Destination marketing place more emphasis on Web-based presence, more focus on nontourism-related travel, more focus on the diversity of offerings (cultural, heritage, and so forth), and more focus on the key source markets.

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Opportunities and Recommendations 10. Resources be increased for researching, documenting, and presenting Malawis diverse cultural heritage; for preserving and restoring sites of cultural significance; and for supporting events of cultural importance, both traditional and modern, as part of widening the diversity of offerings that encourage and engage travelers not only to visit but to stay longer in the country. 11. Support be given to innovative tourism products to support a more diverse and unique product range offered to visitors. 12. Need for more investment to restore natural assets (national parks and game and forest reserves), building on the successful models of Liwonde and Majete and the innovative approach in the Nyika TFCA, to attract private sector investors and fully involve communities in maintaining and improving the reestablished parks and Reserves 13. Operators have access to technical assistance to improve environmental responsibility. 14. Malawi identifies and establishes measures to improve the competitiveness of air transport and improve international access, such as implementing the Yamoussoukro Declaration. 15. T&T stakeholders prioritize domestic and international access roads that are important for the sector and lobby collectively for these. 16. A concerted effort be made to establish zoning and land allocation for T&T, particularly in urban and lakeshore areas. 17. GoM review the effectiveness of its ban on lakeshore conferences and meetings and determine its impact and if it is the best means to reduce expenditures on conferences and meetings.

Improved national data availability and analytical capacity would provide a stronger base for informing policies and interventions for the T&T sector. Data availability and analytical capacity are arguably necessary building blocks for good policy, improved sector interventions, and successful attraction of new investment. Capacity could be strengthened at the MTWC, at NSO, at immigration,62 at the THB or any successor body like the MTAu, and at the University of Malawi, including Mzuzu, where the degree program is delivered. There is also an opportunity to assist the various sector associations to improve their data collection and analytical capacity, perhaps in conjunction with a body such as the proposed MTAu. The paucity of data on sector revenues, volumes, and contributions results in stakeholders perceiving the T&T sector contribution to be (much) lower than it actually is. It is recommended (#1) that there be investment in data collection and analytical capacity in the key organizations that
239.

62

Where data on internatinoal visitors originate.

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operate in and support the sector, notably the MTWC, NSO, THB/successor body, University of Malawi (Mzuzu), and private sector associations. The multiplier on T&T-related spending in Malawi is disappointing relative to other countries, but this in itself suggests considerable potential to increase economic impact through improving the multiplier. This could be achieved through stimulating a stronger supply chain response to opportunities generated by the existing T&T providers, notably by utilizing more domestically produced goods and service supplies. Such an approach would be particularly valuable where the supply is from the locality of the T&T operator. This can strengthen community links and support for T&T as an alternative livelihood source rather than, in some cases, basing livelihoods on overexploitation of the natural resource base through poaching or tree cutting. Goods such as food and beverages already have a local content, but this could be further increased. As an example, the Coffee Association of Malawi (CAMAL) has sponsored short events with hotels, lodges, restaurants, and cafes to train staff in brewing and serving coffee, as well as promoting Malawis coffee brands at the same time. Over the past five years there has been a noticeable increase in the profile of Malawis coffees at hospitality outlets. There are also many other opportunities, such as stimulating more local content in the supply of building materials and fittings. This process would probably require further sensitization of domestic T&T buyers and potential suppliers to the opportunities and the relatively high standards required. It is recommended (#2) that a supplier initiative be developed that raises awareness of the demand opportunities in the T&T sector and the standards required, with training where required, as a means to increase the multiplier response.
240. 241. As noted in the constraints section, human resources are key to the T&T sector, yet the graduates from MIT and private schools are not sufficient in range of skills, their quality, and even their numbers. Some level of operator-funded training of new and existing staff members is to be expected in any sector, but the poor quality of T&T program graduates requires more training than ought to be needed, at high cost for operators. It also results in poaching where low investing operators brandishing seemingly higher salaries attract the staff from those operators that invest more in training. As well as the training of entry level graduates, there is a need to provide more regular and better quality short course training to upgrade the knowledge and skills of T&T staff, supervisors, and managers. MIT provides an established institutional structure that could be developed and built upon. However, the concern of the private sector is that while MIT remains primarily a public institution, it will be short of resources and insufficiently responsive to market requirements. It is noteworthy that even Utalii College in Kenya, long reputed for the quality of its graduates, is facing considerable difficulties and quality problems. At this time, it is worth reviewing the overall institutional approach for addressing the quality of human resources available to the sector. The status quo is not producing the quality and quantity of T&T graduates required, and MIT perpetually struggles to raise funding. This presents an opportunity for fresh thinking by the public and private sector on how to address T&T human resources constraints to achieve a vibrant institution through an enduring public-private partnership. It is recommended (#3) that an independent review of the demand for and supply of graduates and the capability of the current providers be undertaken,

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with the aim to provide more T&T graduates with the required standards and to upgrade existing staff working in the sector through delivery of short professional development courses. Based on the defined product lines in section 2, for a visitor that combines a safari and lakeshore stay, including an urban lodge at the beginning and end of a two week trip, the direct taxation yield is US$519.71 (23.7 percent) and at least US$164.61 (6.8 percent) through indirect taxes on a package priced at US$2,327.00. This excludes additional tax and levies on fuel, international flights, and guest discretionary spending. Although this is a major and welcomed revenue contribution to GoM finances, the removal of front-end incentives on capital investment in T&T buildings, equipment, and fittings may reduce investment and ultimately the incremental tax yield for GoM. The calculation of tax yields from different scenarios suggests that a review of the structure of taxation in the sector is warranted. A similar review was undertaken for the mining sector prior to several major investments being made to determine the best approach to generate short, medium, and longer term revenues. This review should be a comparative analysis as tourism, like mining, involves international investment that can easily locate in neighboring countries. It is recommended (#4) that a complete and comparative tax review be undertaken to determine the structure of incentives and taxes that will best develop the T&T sector commensurate with GoMs tax revenue needs.
242.

The study highlighted that the MTWC through the DoT provides the secretariat for the THB and was commencing the exercise of grading hospitality units. The Tourism Sector Strategy 200813 included an institutional review that proposed the establishment of the MTAu as a body that would undertake the licensing, grading, and marketing activities currently executed by the Department of Tourism. Establishing a functioning THB and/or MTAu would assist MTWC in focusing on its core functions. It could function similar to the Tanzania Tourist Board and the Kenyan Tourist Board, which have been able to regulate and promote the T&T sectors in those countries effectively through a public-private partnership. The key difficulty has been accessing steady and adequate resources for such an institution.63 This is an appropriate time to implement an improved institutional structure based on the review findings. This requires addressing the financing and funding mechanism for the new body. It is recommended (#5) that GoM implement the institutional structure in its strategy by providing the necessary resources and establishing an appropriate funding mechanism
243. 244.

It is possible to focus investment promotion efforts on efforts to attract large multinational T&T groups, and this would be appropriate for the soon-to-be-completed, government-owned international conference center and hotel in Lilongwe. However, beyond this conference center there are few opportunities for the large groups to invest. The limited amount of international traffic makes Malawi less attractive than competing investment opportunities in the region. Based on the type of investor in T&T in recent years, investment is most likely to come from domestic investors and selected smaller specialized regional operators. These are more likely to be interested in the relatively small market and niche opportunities in Malawi than multinational hotel groups would
Funding would require legislation.

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be. It is also more realistic to seek to progressively professionalize the sector rather than seeking to squeeze out inexperienced operators and/or invest heavily in attracting international groups at this point in the T&T sectors development. The grading system that is being implemented is a good opportunity to drive up standards progressively. However, if it is used too aggressively with existing operators, it risks creating a gap in provision by forcing smaller, less professional operators out of the T&T sector with no alternative provider to step in. It is recommended (#6) that, except for the international hotel and conference center at Capitol Hill, which has the potential to attract an international operator, Malawi focuses on attracting domestic investment in T&T and smaller specialized operators from the region. It is also recommended (#7) that the grading system implementation be used to encourage existing operators to improve standards and professionalize their operations progressively.
245. Malawi is competing in a global T&T market against many better resourced, more established, and better known destinations. Yet Malawi offers relatively undiscovered attractions that collectively could offer a visitor a different and diverse package compared to competitive offerings in the ESA region. The overall positioning is important and could be improved to present Malawi as a multi-experience destination in its own right and as a complementary destination to other countries for those that have visited the iconic attractions of its neighbors. It is recommended (#8) that the destination positioning of Malawi fully reflect its diverse offerings and range of visitor opportunities.

A much larger destination marketing expenditure, properly targeted and executed, would undoubtedly increase the visibility of Malawi internationally and translate into more visitors over time. However, it is difficult to determine if there will be a sufficient response to any extra spending, because there is limited information about how potential visitors might respond, how many incremental visitors there would be, and how much more they would spend. As the budget is likely to be constrained for the foreseeable future, the focus should be on how best to utilize it. The importance of Web presence is well established in international marketing, particularly for destination marketing. The analysis also highlighted the importance of business travelers and the region as the main source marketing. Therefore, some retargeting of spending to improve Web presence, to attract the main current source markets, and to expand the focus of promotion to business/work visitors is likely to be a useful first step to improve effectiveness. It also could help if there were improved dialogue with operators on the use of the marketing funds. Better integration of public and private initiatives would also contribute to improved effectiveness. It is recommended (#9) that destination marketing place more emphasis on Web-based presence, more focus on nontourism-related travel, more focus on the diversity of offerings (cultural, heritage, and so forth), and more focus on the key source markets.
246.

Several cultural events have emerged or been revitalized in recent years based on celebrations of ethnicity, music festivals, sports, and endurance events. These events provide opportunities to promote Malawis uniqueness and diversity attract more visitors. There is a richness in any society that has the potential to attract visitors, no matter how small the nicheone major benefit of the Web has been that individuals can find any and
247.

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every small niche.64 One operator is promoting art tours; another is promoting development tours of the Millennium Village Project; and NGOs and faith organizations already organize visits for supporters, as do a number of schools seeking to give their students a North-South exchange experience. Malawi has a history of missionary work, colonialization, and struggle for independence that is of interest and could be packaged and promoted. Malawi also has important hominid and dinosaur sites in and around Karonga, as well as cave art. The point is not that these are necessarily the only areas to highlight, but that there are many areas of niche interest that could be developed, packaged, and promoted. To transform and maximize this resource opportunity requires research, documentation, attractive presentation, and packaging. In the case of Malawis antiquities and significant sites, this would require more resources to conserve, preserve, and maintain them. But it also requires more funding for research, documenting, and presenting this rich heritage. It is recommended (#10) that resources be increased for researching, documenting, and presenting Malawis diverse cultural heritage; for preserving and restoring sites of cultural significance; and for supporting events of cultural importance, both traditional and modern, as part of widening the diversity of offerings that encourage engage travelers not only to visit but to stay longer.
248.

Malawi does not have the natural assets and attractions to compete directly and effectively with other ESA regional destinations. Therefore it needs to both change its destination marketing focus and improve the supply of innovative products on offer. Instead of comparing like products such as game parks and competing in highly competitive product lines, Malawi should be offering experiences that are not found elsewhere, or at least are not being widely promoted by others. Overall, a more ambitious and integrated approach is needed to develop and promote Malawis diverse range of attractions. Technical assistance in product innovation and marketing can assist in creating improved products and better positioning. This could also assist in maximizing the impact of the current marketing funds. It is recommended (#11) that support be given to innovative tourism products to support a more diverse and unique product range offered to visitors. This could achieved be through challenge fund support and technical assistance.
249.

Although a more diverse offering encompassing cultural sites, events, and more innovative products is called for, the core natural assets of national parks, game reserves, forest reserves, and other natural attractions need to be restored and improved if Malawi is to strengthen its competitive position. There is fierce and growing competition from other countries in the ESA region based on their more pristine natural environments. The Liwonde and Majete success stories and the Nyika TFCA are models for going forward. It is unlikely that there is a single model for success, but rather these successes need to be discussed in the light of the particular situation and analysis of particular natural resource assets. For example, the solution for reinvigorating Kasungu National Park is probably a hybrid that draws on different approaches that appear to be
250.
One Belgian visitor met during the study had come to Malawi to study local forms of pottery and had been assisted by Paragon Ceramics to visit a number of places and stay in villages to study local methods.
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already working in Malawi. Few private operators would consider taking on a facility where there has been such a loss of wildlife and habitat. Public and/or development partner investment is a necessary first step, supported by more effective protection and enforcement. The key is to design the approach with a particular set of assets in mind. Experience has demonstrated that effectively addressing the degradation of natural resource assets needs a partnership approach among public, private, development, and community actors. This kind of partnership is both desirable and necessary as the basis for restoring and maintaining natural resource assets. Restoring the natural environment and rebuilding the resource base has been shown in Malawi to increase T&T opportunities in the medium term. Operators have shown their willingness to invest, as long as there is a credible program for addressing environmental degradation, as evidenced in Liwonde, Majete, and more recently potentially in Nyika. It is recommended (#12) that there be more investment to restore natural assets (national parks and game and forest reserves), building on the successful models of Liwonde and Majete and the innovative approach in the Nyika TFCA, to attract private sector investors and fully involve communities in maintaining and improving the reestablished parks and Reserves. It is also recommended (#13) that operators have access to technical assistance to improve environmental responsibility.
251.

Malawi is a high-cost air destination and relatively inaccessible by air, even within a region that is one of the most expensive in the world to reach. Yet Malawi already acts as an access point to Zambias Luangwa Valley game parks and could do the same for other tourism attractions beyond its borders if access was more competitive. Being more competitively priced would enable Malawi to package itself alongside other countries in the ESA region as a complementary destination for extended itineraries. Malawi has more to gain from being the most competitively priced destination, as it does not have the iconic attractions and pristine natural assets of its neighbors. Acting as a gateway to the region, or at the very least to some of its neighbors assets as well as its own, could increase the volume of traffic and increase the likelihood that Malawi is part of any twocountry trip, as favored by many visitors that are willing to overcome the cost and access difficulties of getting to the region.
252.

Malawi is a signatory to the Yamoussoukro Declaration on open skies, yet it has not implemented the declaration as a policy. Air Malawi maintains its monopoly of domestic flights, and the five airlines that fly into and out of Malawi maintain high fares relative to non-SSA countries. Adopting measures to increase competition, reduce access costs, and improve access options would be a significant step to attracting substantially more visitors. With access being expensive and difficult, visitors who do not have a strong reason to come to Malawi will continue to go to other destinations. Just as important, tour operators will not include Malawi in their packages or promote it if they see that clients are deterred by the cost and difficulty of accesstour operators want to put forward packages that are going to be attractive to their clients, not packages that clients are likely to reject. Although politically difficult, a solution has to be found that would enable a substantial increase in access at lower cost. It is beyond this study to state what that might be, other than to say that it should not necessarily signal the end of Air - 93 -

Malawi. Easier air access at more competitive rates is fundamental if Malawi is to increase its visitor share of the ESA region. It is recommended (#14) that Malawi identify and establish measures to improve the competitiveness of air transport and improve international access, such as implementing the Yamoussoukro Declaration. In relation to roads, the objective for the T&T sector should be to get important domestic tourism roads prioritized in national decision making. There needs to be a consensus by T&T stakeholders about priority road infrastructure needs and support given to the appropriate economic analysis of T&T impacts. Making international road access as easy as possible is important not just for the T&T sector, which receives most of its visitors this way, but also for the overall economy that relies on trade. This requires prioritization of busy border post infrastructure and staffing. It is recommended (#15) that T&T stakeholders prioritize domestic and international access roads that are important for the sector and lobby collectively for these.
253.

Accommodation cost is a function of a range of factors, mainly the relatively tight supply in urban areas and the high input costs as seen through the value-chain analysis. In the urban and the lakeshore areas, measures to increase supply require effective planning and zoning. Adding opportunity for more supply could be done in such a way as to encourage better quality and more appropriate T&T accommodation development, which might over time help to restrain the high prices of accommodation. The high tax proportion of revenue needs to be addressed under the tax review that is recommended. It is recommended (#16) that a concerted effort be made to establish zoning and land allocation for T&T, particularly in urban and lakeshore areas.
254.

The ban on GoM lakeshore conferences should be reviewed and alternative ways considered to reduce GoMs legitimate concern over travel, accommodation, and per diem expenditures for attending such meetings. The evidence available so far it that this has resulted in conferences being shifted to other destinations outside of Lilongwe, resulting in an undue disadvantage to lakeshore operators, including two hotels in the GoMs majority-owned Sunbird group. It is appropriate that GoM look at the best way of achieving a budgetary reduction without undue and unfair impacts on investors that were responding to the demand. This also highlights the value of full and proper stakeholder consultations over decisions that impact on the T&T sector. It is recommended (#17) that GoM review the effectiveness of its ban on lakeshore conferences and meetings and determine its impact and if it is the best means to reduce expenditures on conferences and meetings.
255.

D. Way Forward 256. This report has passed through a rigorous process of consultation and discussion to sharpen the analysis and findings, to form the basis for a shared understanding of the T&T sector, and to define the way forward for stakeholders. The study has been peer reviewed and received input from GoM, specifically MTWC, before it was shared more widely with other GoM ministries and bodies, development partners, and the private sector. At each point, comments and insights were incorporated.

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The report is being disseminated to a wider range of stakeholders as part of a process of focusing attention on the T&T sector in Malawi and the opportunities it presents for impacting growth, GoM revenues, the poor, and the environment. The analysis supports the case in section 4 for increasing the priority given to T&T because of its proven track record of delivering growth, jobs, foreign exchange, and revenue, as well as having very positive pro-poor and environmental impacts.
257.

The agenda for action is summarized in section 5A. Essentially there are four key areas for action:
258.

a. Improving the economic performance of the T&T sector through the following: improving supply chain linkages (multiplier) and pro-poor impacts; improving the quality and quantity of trained staff, supervisors, and manages; increasing the response by international T&T investors and training existing, domestic non-specialist T&T operators; and restoring and improving natural and cultural assets. b. Improving public sector performance and policies to promote investment through the following: stimulating investment in the T&T sector to generate tax revenues, improving T&T institutional performance, increasing data gathering and analytical capacity for decision making, and improving dialogue on T&T policies and mechanisms c. Improving T&T marketing effectiveness through the following: improving destination positioning, improving effectiveness of limited resources to promote Malawi, stimulating innovation in product offerings, and using and promoting the cultural heritage as part of Malawis main visitor attractions. d. Improving competitiveness through the following: improving accessibility and reducing air access cost, improving road quality and access to key T&T locations, and increasing the competitiveness of the lodging sector.
259.

More details on how this can be achieved, the key partnerships, and the timescale are set out in Table 18: Summary Constraints, Opportunities, and Strategic Actions presented earlier. T&T has the potential to increase its already considerable impacts on the economy, poverty, and the environment and contribute significantly to a more diversified and developed economy.

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Annex 1: Persons and Organizations Consulted

GOVERNMENT OF MALAWI Jeffrey Kanyinji, Principal Secretary, Ministry of Tourism, Wildlife and Culture Isaac Katapola, Director of Tourism, Ministry of Tourism, Wildlife and Culture Leonard Sefu, Director of Parks and Wildlife, Ministry of Tourism, Wildlife and Culture Dr. Elizabeth Gomani, Director of Culture, Ministry of Tourism, Wildlife and Culture Patricia Liabuba, Assistant Director, Standards and Safety Division, Ministry of Tourism, Wildlife and Culture Sosten Lingwalanya, Deputy Director Tourism, Ministry of Tourism, Wildlife and Culture Leonard Kalonga, Director of Planning, Ministry of Tourism, Wildlife and Culture Charles Kachelenga, Principal Tourism Officer, Ministry of Tourism, Wildlife and Culture Richard Buya, Tourism Officer (Mulanje), Ministry of Tourism, Wildlife and Culture Liz Chikoti, Regional Officer for the Central Region, National Statistics Office Mark Miller, Adviser, Budget Division, Ministry of Finance TRUSTS AND ASSOCIATIONS Sam Botomani, Executive Director, Malawi Tourism Association M. M. Matola, Executive Director, Malawi Institute of Tourism Carl Bruessow, Executive Director, Mulanje Mountain Conservation Trust Lansen Chikopa, Project Officer, Mulanje Mountain Conservation Trust Wonderford Mmambo, Chairman, Mount Mulanje Porters and Guides Association PRIVATE SECTOR Alissa Makawa, Managing Director, Alexander Hotels Josiane LeClerk, Managing Director, Cape Mac Lodge Chris Badger, Managing Director, Central African Wilderness Safaris Chrispin Khonje, Finance Director, Central African Wilderness Safaris Nicholas Dumba, Manager, Club Makakola Michelle Massey-Hicks, Managing Director, Danforth Yachting Paul Kite, Managing Director, Gecko Lounge

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Clive Bester, Managing Director, Kayak Africa Taffy Chatterton, Manager, Norman Carr Cottages Ton de Rooy, Financial Director, Robin Pope Safaris Fiona Parker, Solicitor, Shepherd and Wedderburn Solicitors, Edinburgh Abdul Rashid, Managing Director, Siku Group Stan Phiri, Director of Sales, Marketing and Communication, Sunbird Group Moses Mwale, Managing Director, Tiyende Pamodzi Rob McConaghy, Managing Director, Ulendo Safaris

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Annex 2: Sources
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Regional Programme on Enterprise Development. 2006. Malawi Investment Climate Assessment, Africa Private Sector Group, Washington, DC: The World Bank. Snyman, S. 2009. The Socio-economic Importance of Tourism: Malawi; Preliminary Report on the CAWS Case Study, Community Survey. Lilongwe: Central African Wilderness Safaris. Tourism Intelligence International and Commonwealth Development Corporation. 2008. Malawi Tourism Sector Program; Tourism Sector Plan Revision; Institutional Review; Human Resources Development Plan; and Marketing Plan. Trinidad, WI. UNCTAD (United Nations Conference on Trade and Development). 2008. Trade and Development Report 2008: Commodity Prices, Capital Flows and the Financing of Investment. Geneva, UNCTAD. United Nations Statistics Division, Statistical Office of the European Communities, Organisation for Economic Co-operation and Development, and World Tourism Organization. 2008. Tourism Satellite Account: Recommended Methodological Framework. New York: United Nations. http://unstats.un.org/unsd/statcom/doc08/BGTSA.pdf. World Bank. 2006. Investment Climate Assessment (ICA): Malawi. Washington, DC ______2009a. Country Economic Memorandum: Malawi Washington, DC. 2009b. Malawi Mineral Sector Review. Washington, DC. 2010a. Kenyas Tourism: Polishing the Gem. Washington, DC. 2010b. Sub-Saharan Africa Tourism Database, 2010 Washington, DC. 2010c. Sustainable management of Nyika Transfrontier Conservation Area Project. Washington, DC. ______2010. Doing Business: Malawi Washington, DC World Economic Forum. 2009. Travel and Tourism Competitiveness Report for 2009. Geneva. WTTC (World Travel and Tourism Council). Database, available at www.WTTC.org. 2010a. Travel & Tourism Economic Impact 2010: Malawi. London. 2010b. Travel & Tourism Economic Impact 2010: Sub-Saharan Africa. London. 2010c. Travel & Tourism Economic Impact 2010: Executive Summary. London.

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