YESTERDAY, 11th June 2020 in Kampala, UGANDA’S Finance Minister, Matia Kasaija, read out the National Budget for Financial Year (FY) 2020/21.
The Ministry of Tourism Wildlife and Antiquities was allocated 198 billion Uganda Shillings which is about 0.44% of the total amount that the Government of Uganda projects to spend (45.5 trillion shillings) in the new FY.
The tourism sector areas of focus for the last five years remain aggressive promotion and marketing of Uganda to unlock the country’s tourism potential; diversifying the product range; enhancing skills along the value chain; improving tourism support infrastructure and strengthening conservation of natural and cultural heritage assets.
Last year Uganda’s tourism sector received 193.7 billion shillings (approximately 0.48% of the total budget – UGX 40.5 trillion in that FY 2019/2020).
This industry that is one of the key growth sectors to propel Uganda’s economy to middle-income status by 2040 (as per the National Development Plan I, II & III) contributed about $1.6 billion (approx. shillings 5.8 trillion) and about 10% to GDP according to the Annual Tourism Sector Performance Report for 2018/2019.
Treating tourism as the business that it should be.
Now, I like to look at; discuss, and do tourism more from a businessman’s point of view. There’s a lot of street-knowledge you get from getting your hands dirty and breaking a sweat.
It’s fine to think of tourism in light of policy as well, like other Government Ministries or as we quite often call them sectors, but I think greater results (not just monetary) would be attained if we thought of our country’s tourism (both public and private sector) as a sustainable tourism business.
My outlook is premised on the Travel and Tourism Industry’s potential to generate revenue both locally and in foreign currency, that can go a long way in supporting the economy, providing livelihoods to local communities, contributing to conservation and preservation efforts as well as enabling the advancement of national projects through Government revenue collections, among other benefits.
A steady growth according to the World Tourism Organization
The UNWTO World Tourism Barometer (January 2020) reveals that international tourist arrivals (overnight visitors) grew 3.8% in 2019 compared to the previous year, a growth that outpaced the world economy (+3.8% vs 3.0%). “2019 was the tenth consecutive year of sustained growth since 2009”, the report says.
The World Tourism Organization estimates that destinations worldwide received about 1.5 billion arrivals in 2019, about 54 million more than the previous year, the greatest growth being in North Africa.
The case of Egypt, Africa’s second most important destination
Speaking of North Africa, nearly 9 million tourists visited Egypt in 2018 and more than 6 million were predicted for the first half of 2019. The country’s total tourism revenues in 2019 were about $16.4 billion, and was estimated to jump to $29.7 billion over the next five years.
That’s at least $1 billion every month!
Unfortunately, several tourism experts have estimated that the monthly losses to Egypt’s tourism sector as a result of the coronavirus pandemic are 1 billion dollars (approximately 3.7 trillion Uganda shillings).
This desert nation that receives leisure tourists mainly for its preserves of ancient civilizations is the most visited African country after Morocco. About 88 percent of the direct travel and tourism contribution to Egypt is derived from leisure spending compared to 12 percent of business spending. The travel and tourism sector is also a major employer in the country with, a workforce of over 1.25 million people directly engaged.
A sector that depends on but also supports and benefits others
Back to my notion – tourism should be done as a sustainable business because then it is easier to make sense of its humongous potential.
“It is known the world over that when the tourist shilling or dollar comes into a destination, it multiplies 10-fold or more to benefit a wider landscape along its wide-ranging value chain”.
For that revenue to come in, however, there are some basic underlying factors should be in place, and these are not limited to the availability of a rich tourism resource (attractions and activities), a safe and secure destination, advanced tourism infrastructure especially to facilitate accessibility whether by road, water or air; the adoption and use of technology, with a bonus of ancillary services like medical facilities, banks, forex bureaus, etc. This is why it is still important for Governments to also fund infrastructure projects, security, the health sector, etc. for tourism to thrive.
The question of funding for promotion against a fine list of KPIs
Most busy tourism entrepreneurs around the world will attest that their most important costs are in their marketing budgets. Why? Because when done well, it’s principally what drives revenues.
This also explains their vested interest in what the Destination Marketing Organization is doing. It’s plain and simple. Their businesses directly depend on and benefit from the successes of the Tourism Board in pushing positive vibe locally and internationally. Tourism Boards obviously need a reasonable financial resource base to keep that vibe alive but they must also be held accountable for the money they receive; they must be kept in check, evaluated against major actions, Key Performance Indicators (KPIs) and deliverables.
So how do we help African destinations to see the importance of improving their budget allocations towards tourism development but more specifically, the promotion component, in an accountable and incorruptible arrangement?
Maybe I should first ask. How much do countries spend to get you to show up?
If you find yourself suddenly wishing you were on an airplane headed to Dubai, it may be more than just the jazz around Burj Khalifa or the Dubai Aquarium.
Is it the tête-a-tête with a friend that led you to learn about the Dubai 2020 Expo? I bet it was through deliberate efforts by Dubai Tourism, including Mariah Carey’s slay performance at the expo’s Countdown? Unfortunately due to the bummer that is COVID19 the expo may not happen this year. They had, however, pumped up some really good publicity.
Let’s come to East Africa…
What could have inspired you to take a safari to Kenya? Was it a sequence of TV ads, or a screen advert on your recent flight, could it have been a pamphlet in your cab or a banner in a train; perhaps it was that article in a popular news website? In this day and age, it’s also quite possible that the ‘destination promises’ and visitor reviews shared through the internet especially on social media may inspire more and more tourists to dream about places they never would have before.
Could such actions (for instance) be a deliberate effort by Kenya Tourism Board aimed at getting tourists to consider the “Magic in Kenya” when planning their next vacation?
What some popular destinations are doing
In addition to very aggressive and well-crafted digital marketing efforts, did you know that destinations around the world run modern-advertising campaigns worth millions of dollars on commissioned music, or through narrations by Hollywood actors, articles by travel bloggers, YouTube videos by vloggers, hosted trips for NatGeo photographers and contracts with renown cinematographers plus many other promotional efforts involving “jaw-dropping imagery and stirring content?”
You may have heard famed Marvel Actor, Chris Hemsworth inviting you to visit Australia, or the fastest man on the planet, Mr. Usain Bolt luring you to the ‘beachy and reggae-wrapped paradise’ that is Jamaica.
These aren’t just celebrities patriotically flaunting the virtues of the countries they call motherland. These are huge-budget ad campaigns targeted to get you packing.
Jamaica spends a hefty portion of its national budget, more than 17 percent on destination promotion. Singapore, Iceland, and Jordan allocate at least 10 percent of their national finance cakes towards tourism marketing.
A 2016 article by CNBC revealed that total government spending on just tourism marketing, promotion, and visitor-related infrastructure topped $413 billion that year, according to the World Travel and Tourism Council. That was 10 percent more than what countries were spending five years ago. The forecast was that this figure would increase by another 29 percent over the next decade.
The Financial Tribune reveals that countries with a high number of inbound tourists spend fewer dollars on ads, per visitor than those in unpopular destinations; around $2 per visitor, while the figure is closer to $9 in countries such as Malaysia and Turkey that need to expand their global profile. Little-known destinations spend anywhere between $14 and $40 per head because of the hustle in penetrating or making that first entry.
This can be explained by how great the value of word of mouth becomes over time; and how important it is for destinations to invest in attracting visitors, offering them high-value experiences, and sending them home with unforgettable memories. A happy customer becomes a formidable force to reckon; providing countries and tourist destinations around the world with ‘free marketing’, recommending holiday options to their friends and relatives.
Prioritization of tourism has to also be shown in African Governments’ budgetary allocation to marketing and promotion
5 years ago, Egypt’s tourism budget for purely promotional activities was over US$60 million in addition to over US$126 million for new branding campaigns, global marketing, and associated initiatives.
I am not talking about a compounded budget for salaries to ministry and agency officials, neither am I discussing operational costs. This is purely for promotion.
Seychelles, one of the archipelagos located northeast of Madagascar, spends at least 22 percent of its budget — excluding defense and welfare costs — on total travel and tourism expenditures, according to World Travel & Tourism Council (WTTC) figures reported by the World Economic Forum.
So what’s the rule of thumb?
A Harvard-based online marketing course that I am currently taking part in, reveals a general rule of thumb; and this is how businesses in the private sector think and operate. “Companies spend around 5 percent of their total revenue on marketing to maintain their current position. Companies looking to grow or gain greater market share should budget a higher percentage — usually around 10 percent“, the course reveals.
Let’s use Uganda as an example.
In Financial Year 2018/2019, the country attracted about 1.5 million tourist arrivals and generated about 5.8 trillion shillings (the equivalent of $1.6 billion), also leading all sectors in foreign exchange inflows (over 23%) according to the sector statistical bulletin. Earlier in 2017, Uganda had set a goal to attract four million tourists by 2020 which would obviously translate in bigger tourist receipts and a larger contribution to the country’s GDP through this ‘priority sector’, plus the many other benefits to the population often accrue when tourism thrives.
Uganda’s tourism sector in yesterday’s budget received 3.41% of what it generated the previous year (5.8 trillion shillings) and was given less than 0.5% (198 billion shillings) of the national budget (45.5 trillion shillings). Matter of fact, this figure has been allocated to an entire sector; not just its marketing function, but must be shared by its many agencies. This figure includes operational costs, salaries as well as costs for other activities and functions.
Of this budget, it’s more than definite that less than 50% will go towards the agency that is mandated to promote and brand the country, the Uganda Tourism Board (UTB), and a significant amount of UTB’s share will go towards other functions like product development and quality assurance.
Although the sector allocation has improved over the years from 0.001%, it deserves a whole lot better, especially at a time when the world is discussing post-lockdown recovery.
Of course, different factors influence the budgeting process including what the political leadership considers as priorities for their regimes, as well as whether they possess a vested interest in a given sector at a given time.
There were definitely sentiments as early as 2017 that Uganda’s target of four million tourists was a wild one. Despite wanting to set something to work towards, it is necessary that African government priorities (as presented on paper) are backed by a serious effort to hit those set targets, and this includes making reasonable resource allocations within the National budgeting framework. Priorities should align with the research-backed decisions by international donor and funding agencies who have realigned their funding frameworks to sectors that make a visible positive impact like tourism and recommendations by international organizations like the African Union, European Union, and the United Nations to support things like sustainable tourism all around the world.
Spending millions on marketing campaigns makes sense for many countries around the world and it should make sense for African nations that rely on tourists for a significant share of their nations’ Gross Domestic Products (GDP). A simple business rule reads that “A modest investment can also yield a solid return”. Actually, smaller countries like Uganda may have little choice if they want to keep their economies working.
The next question would then be how these monies should be spent, which ads should target the domestic market, which campaigns should be channeled at attracting the regional and continental market and what type of actions should be crafted for rich populations in places like the United States of America, Germany, Luxembourg, Singapore, Japan, Spain, France, China, etc.
Below are the top 10 countries where tourists spend the most (per tourist). SOURCE: Travel Pulse 2019
These nationalities are the Biggest Spenders on Tourism. SOURCE: UNWTO
These are the top 10 countries that make the most money from tourism. SOURCE: Travel Pulse 2019
Japan – $34,054,000,000
“These can be model nations for African destinations to benchmark on for marketing actions.”
Funding tourism marketing and branding is a necessity
With countless other travel destinations available, African destinations are going to have to put in the extra effort to entice travelers to the continent instead of heading to a turquoise-watered beach in the Bahamas or a remote resort in Thailand and Indonesia.
Tourism sector players, Ministries, and associations have to help African Governments and economists to achieve a better understanding of the level of competition among destinations and how quickly possible it is for a tourist to change their mind about a destination because of the availability of a “better promise”. It’s a game and quite a competitive one.
National marketing and branding aimed at the domestic and international traveler has to be looked at as a necessity for attracting revenue, investment, creating employment, and improving the livelihoods of the people in our countries.
There’s not a better time to compete than now when most destinations are having to restart, re-plan and re-strategize their marketing efforts as a result of the shocker brought about by the COVID-19 pandemic.