Untapped potential: Efforts to raise international awareness and ensure sustainable growth

Home to iconic landscapes, natural beauty, cultural traditions and a history stepped in the legacy of its three past colonial rulers, Papua New Guinea caters to specific niche markets, earning it a coveted and loyal following among visitors. Fractured national infrastructure continues to frustrate the development of a cohesive tourism industry, however. Fledgling public-private tourism blueprints are undermined by both a paucity of funding and a small global footprint. Yet today, as internal coordination and collaboration between the industry’s actors continues to improve, PNG stands to leverage growing international attention arising from ExxonMobil’s $15.7bn liquefied natural gas (LNG) investment to promote the country and develop tourism.

GROWING PAINS: Beginning in 2010, the LNG project has been the catalyst for national economic growth after years of moribund activity, but the expected positive knock-on effects have yet to become clear for tourism. An uptick in international visitors has created better business conditions for many ancillary services, but these remain closely tied to the LNG project’s timeline of activities and growth in the industry remains relative.

The World Travel & Tourism Council’s (WTTC) 2012 “Economic Impact” report estimated tourism’s total contribution at 2.5% of GDP in 2011, equivalent to around PGK726.5m ($345.7m). Moreover, the industry’s direct contribution was 0.9% of GDP (PGK270.9m, $128.9m), and PNG is ranked 180th in the WTTC’s world rankings of relative contribution to GDP. However, the organisation sees strong potential in PNG’s future, and such figures are considered to be up on previous years.

BUILDING UP: The country is ranked 61st for growth in 2012 and 72nd for the next decade, with forecasts of 4.5% annual growth leading to a market value of PGK1.18bn ($561.6m) by 2022. Such expectations are not unfounded given strong growth in the past decade. However, the increase will come from a relatively low base. In 2001, PNG attracted some 5000 tourists. Today this figure is around 35,000, although central government statistics record 146,350 international “visitors” as of 2010. Consequently, domestic spending accounts for 98.1% of the industry’s GDP contribution, according to the WTTC, and with the exception of a few locations, PNG’s tourism industry remains local.

Things may start to change in 2012, however. The year marks the 70th anniversary of the Second World War’s Battle of Kokoda Track (fought in part by the Australia and New Zealand Army Corps). A pilgrimage site for Australians and New Zealanders comparable to Turkey’s Gallipoli (as well as American and Japanese nationals to a much smaller extent), the 2012 anniversary has received vocal public support from the Australian parliament and via promotional campaigns in collaboration with the national airline, Air Niugini. Tour operators along the 96-km mountainous jungle track are expecting 7000-8000 trekkers in 2012, a 50% increase on any previous year, with 2000 booked for April 2012 alone. Unofficial estimates are that 63% of all tourists visiting PNG trek the Kokoda Trail and the Tourism Promotion Authority (TPA) is attempting to leverage the anniversary to build PNG’s international profile and secure future sustainable tourism growth.

The British royal visit by Prince Charles in November 2012 will help sustain PNG’s spotlight. In 2015, it will host the Pacific Island nations’ South Pacific Games, which are returning to Port Moresby after 24 years.

MARKET NICHE: Such events are critical for raising PNG’s international profile. A lack of international awareness and interest has been a debilitating factor for the sector. Visitor arrivals remain too few to create the critical mass required for wider global attention, government support and funding for infrastructure upgrades.

Yet these issues are also considered central to PNG’s market positioning, according to Peter Vincent, the CEO of the TPA. “PNG is not in the league of Fiji and other Pacific Island countries,” he told OBG. “We are not after a mass market. We are not after the short stays. We are after a different market. We will never market ourselves as a tourist destination, because we are one of the world’s leading adventure destinations.”

“Adventure – that is what PNG offers,” he said. “We are after a high-end market and we target visitors who stay a minimum of 10 days and a maximum of 25 days – divers, trekkers, birdwatchers, village stays and cultural seekers. We are targeting particular segments.”

THE LAST FRONTIER: With more than 600 islands, a landmass of 470,000 sq km and a population of 6.85m, PNG remains one of the world’s last frontier destinations. Over 800 known tribes are the foundation of a linguistically complex matrix interlaced between volcanic peaks, rainforests, highland savannahs, swamps, coastal waters and atolls. The mountainous Central Range, forming the spine of the Highlands Region, which reaches 4500 metres, ends just short of the equatorial snow line. Its regions are host to a myriad of unique animal and plant species, including more than 3000 known species of orchids, that attract a dedicated following among wildlife enthusiasts, documentary filmmakers and anthropologists. Unsurprisingly, PNG retains a strong allure for a dedicated group of adventure and cultural tourists, but comparisons to its Pacific neighbours, given both PNG’s geography and ethnic heritage, are seen by some as misplaced. Vincent instead draws parallels to Costa Rica’s thriving adventure tourism portfolio. While PNG has just 5% of Costa Rica’s 600,000 visitors and trails far behind Fiji’s 2m visitors, its tourism master plan is building momentum.

AMBITIOUS GOALS: Published in 2006 and composed via a public consultative process in collaboration with PNG’s influential industry watchdog, the Independent Consumer & Competition Commission, the Tourism Sector Review and Master Plan 2007-17 (TMP) remains the industry blueprint. With 63 principal recommendations encompassing marketing, product development and investment, transportation, infrastructure, human resources and industry partnerships, the budget allocations are, however, only being considered for 2013, according to the 2012 budget.

Calling for greater national and provincial commitment, as well as public and private sector collaboration, the master plan seeks to double the number of tourists every five years. This is in line with PNG’s national Medium-term Development Plan, which set a sector target of 240,000 visitors over a five-year period, contributing PGK3bn ($1.4bn) in total tourism receipts and generating an additional 11,500 jobs.

By 2030, the government is targeting 1.5m visitors and PGK13bn ($6.2bn) in tourism receipts, but the growth in arrivals has plateaued and PNG missed its 2010 TMP targets to earn PGK1.1bn ($523.5m) in revenue.

MIXED PROGRESS: The plan remains ambitious and progress, while mixed, is being made. PNG exceeded an employment goal of 13,000 jobs by 2015, directly employing 21,000 in 2011, according to WTTC figures. Moreover, factors identified in 2006 as obstructing the industry’s growth have seen some improvements.

The 2012 Integrated Lands Group Act has for the first time provided a legal framework for developers to negotiate the use and purchase of customary land (see Construction & Real Estate chapter). Traditional landownership models remain a critical barrier to the development of new sites and continue to be the basis for arbitrary fees imposed by local tribes for use of their land or even passage through their territories. Investment continues in PNG’s transport capabilities – albeit focused on Highland LNG arteries – and liberalisation of the airline sector has seen improvements in cost and service (see Transport chapter).

Although PNG has high crime levels, foreigners are not the principal targets. Most crime is purely opportunistic. Security professionals and industry executives told OBG there is a business opportunity in providing security services to tourists, but the threat of actual physical violence is less than in some other developing countries, particularly outside of key urban areas.

The rapid roll-out of PNG’s 2G and now 3G mobile networks since market liberalisation in 2007 has also rapidly altered the national telecommunications landscape, connecting large swathes of previously remote regions with untapped tourism potential (see Telecoms & IT chapter). While the impact of these advances remains largely peripheral, the industry is beginning to profit under the strategic leadership of the TPA.

POWER PLAYS: Historically, the sector’s potential has been undermined by a lack of government support. The portfolio has been shuffled between the ministries responsible for commerce, industry and transport for the past 37 years. Consequently, the sector has received little funding, commitment, or strategic leadership, resulting in a fragmented framework of stakeholders.

The formation of the Office of Tourism, Arts and Culture (OTAC), proposed in the TMP and established in 2009, was intended to resolve this issue by incorporating three state agencies for tourism: the TPA, the National Cultural Commission, and the National Museum and Art Gallery. However, the 2012 national elections are likely to derail proposed timelines. In the interim, OTAC’s influence remains restricted and authority rests with the TPA, while a holistic review of legal frameworks surrounding these agencies as well as key government departments, including the Departments of Justice, Customs, Lands, and Environment and Conservation, was initiated in January 2012.

Once complete, reforms now under consideration will be the basis for a new legislative framework centred on OTAC. These will include an embedded monitoring system to ensure proper alignment with PNG’s national plan, Vision 2050, in which tourism, arts and culture are strategic pillars of wealth creation.

FRAGMENTED DEMANDS: As PNG’s tourism industry remains disparate, the TPA’s leadership has been formative. Leading firms remain principally local, familyowned operations, while the footprint of overseas tour operators and international brands, including hoteliers Holiday Inn and Crowne Plaza, is small. This has led to heavy demands on the TPA. “The tourism sector in PNG is totally fragmented,” Vincent told OBG. “Everyone in it expects the TPA to pay for everything in terms of sponsorship, coordination, marketing, attending overseas events and even grants for new projects.”

Allocated just PGK10.7m ($5.1m) in 2012, budgetary constraints prevent many of these demands from being met, although the TPA has established and administers a revolving fund for developers. It is disbursed by the National Development Bank and received an additional PGK5m ($2.4m) from the government in 2012.

Nonetheless, the TPA has been integral to developing a coordinated and holistic promotional strategy in cooperation with national industry organisations, including the PNG Tourism Industry Association, the Tour Operators Association, the PNG Diving Association (PNGDA) and the Surf Association PNG (SAPNG). Respected by tour operators and service providers, the partnership is now integral to respective international marketing campaigns, with the TPA providing financial support for marketing activities, including attendance of professional associations at travel fairs with the TPA.

The PNGDA has benefitted from this, explained Richard Knight, representative and CEO of Loloata Dive Resort, attending trade shows in France, New Zealand, Australia, the US, Russia, Italy, Japan and Singapore’s Asian Dive Show earlier in 2012. While representatives must pay for their own flights and hotels, incurring substantial budgetary commitments from the respective associations, such participation remains fundamental. “There is no better place in the world in terms of potential. PNG should be a mecca for tourism of all sorts, but the detractions, led foremost by a lack of interest, are equal if not overwhelming,” Knight said.

PROMOTIONAL EFFORTS: Attracting international arrivals remains critical to bolstering the industry’s long-term foreign-exchange receipts. The TPA has accordingly focused resources on high-profile travel fairs, including Berlin’s International Tourism Bourse and the New York Times Travel Show, avoiding generic events without value-added exposure. The TPA also employs local representatives in key markets in Tokyo, London, Los Angeles and Sydney. In collaboration with PNG tour operators, these promote the country through roadshows, web-based seminars and familiarisation trips for travel industry professionals, corporates and journalists from key mainstream and adventure publications.

The TPA has also tried to branch out through the “Survivor” television shows on the National Geographic and Discovery channels. A proven strategy used to great effect among its neighbours, funding was declined in the 2012 budget, but has been re-submitted for 2013.

Its most pragmatic marketing coup to date remains its photographic library, the South Pacific’s most comprehensive. Created on commission by travel photographer David Kirkland, the library encompasses almost all of PNG’s destinations. Acclaimed by tour operators, it is provided free of charge to TPA-registered firms for use in trade displays, websites, posters, brochures and advertisements; proving a success in illustrating PNG’s marketing tagline, “a million different journeys”.

REGULATION: While PNG’s international marketing is accelerating, regulation of the industry remains sporadic and in many cases private initiatives have superseded state-led action. PNG’s top tourist attraction, the Kokoda Trail, remains a case in point. Overlooked by the government, the Kokoda Track Authority was set up in 2001 by a private Australian initiative and is now a PNG Special Purpose Authority, commissioned by the government to develop and maintain the trail. This model has spawned further initiatives at other sites.

“The Kokoda Track Authority, which opened the trail to commercial operations 10 years back, regulates and promotes the trail. Growth in visitor numbers has seen economic benefits in villages alongside the trail that offer food and guesthouse accommodation,” Charles Abele, executive director of tour operator Kokoda Carriers Tracking and secretary of the Kokoda Track Porters and Guides Association, told OBG. “More recently we formed the Kokoda Track Operators’ Association and the Kokoda Track Porters and Guides Association, mirroring organisations in Nepal’s trekking industry, which regulate and license the operators, providing support to these communities and protecting local guides and porters from exploitation.”

Existing associations have likewise stepped in to regulate respective operators, health, safety and insurance concerns in the absence of government action. This has included the purchase of a decompression chamber installed in Port Moresby by the PNGDA, mandatory fitness tests for those undertaking the Kokoda Track, and sustainable tourism codes of conduct across the industry. While unsystematic, self-regulation remains notable in comparison to many other sectors.

The TPA’s initiatives have also turned to standardisation, employing external consultants to develop standards and providing training courses for guesthouses, backpacker/bed and breakfast, and traditional accommodation types. The PNG Tourism Accommodation Accreditation project, intended to provide clarity on available services, entered its second phase in 2012.

In addition to opening provincial centres in key destinations, the TPA has also backed tourism development strategies in five pilot provinces. These are Goroka in the Highlands’ region, Madang in the Momase region, Kavieng in New Ireland and Rabaul in East New Britain both in the Islands regions, and Milne Bay to the southeast of Port Moresby. These provide case studies and training models for national implementation. While they may be symptomatic of the sector’s nascent nature, this has not prevented PNG from developing a raft of diverse attractions across the country. Surfing, kite surfing, diving, game fishing and kayaking are all gaining traction, but remain either prohibitively expensive for the mass market or low-yield sectors.

CLEAR WATERS: PNG’s waters offer 30-metre visibility and pristine coral reefs, and shipwrecks dating back to the Second World War are an exotic attraction. The main competitor is now Indonesia’s West Papua, which is cheaper to access, but does not offer the same diversity according to industry observers.

“PNG, if not the best in the world, certainly ranks among the best diving locations in the region thanks to both the lack of development and its biologically diverse environment,” said Knight. But operational cost increases over the past six to seven years, notably for fuel, have hit the industry hard.

Costs are now comparable to the Maldives at an average $250 per person per night for accommodation and food, with three to four dives per day at $200. While just four live-aboard operators remain, one advantage of PNG’s expense is that the market now supports only professional firms with strong safety standards, backed by PNGDA regulation, said Knight.

GONE FISHIN’: Cost issues have also reined in game fishing enthusiasts, Robert O’Dea, president of the PNG Game Fishing Association, told OBG. “Game fishing in PNG may be comparable to Costa Rica, but PNG has yet to reach a critical mass in terms of profitable operations. Most commercial charters, of which there are only about four, are run for the love of the sport.”

Yet the sport still enjoys considerable international and domestic popularity with the PNG National Game Fishing titles held each Easter. Rotating between Port Moresby, Rabaul, Madang and Lae, 250-400 anglers attend each year, attracted by blue marlin, yellow fin and dogtooth tuna, and black bass. “Many game fishers come for the ‘cowboy factor’ and adventure that PNG has to offer,” said O’Dea, noting the competition’s 80% Australian and Japanese demographic. “However, interest has certainly picked up in the last few years since the black bass, which is endemic to the country, was recognised as a ‘world-record line-class species’ by the International Game Fish Association.”

SURF SCENE: Enthusiasm is similarly building around PNG’s surf scene. Currently a low-yield sector attracting a backpacker demographic to the north coast, Milne Bay and Port Moresby, attention is now focusing on Kavieng at the northern tip of New Ireland. Surfing attracts approximately 1300 visitors, primarily from Australia and Japan, with small percentages from Europe, the US and South America, according to SAPNG’s founder and president, Andrew Abel.

Participation has grown over the past 25 years due to the SAPNG’s efforts, and in the 2011 national competition 10 clubs and 220 male and female competitors competed in all divisions. Now a recipient of an annual marketing grant from the TPA, SAPNG’s surf scene also makes waves internationally. “The world premier of the PNG surfing documentary Splinters, which premiered at the 2011 Tribeca Film Festival, went on to take the 2011 best surfing documentary in Hawaii and is premiering in Australia in mid-May,” Abel told OBG. This has directly led to collaboration with Quicksilver Foundation USA and TIME magazine is set to cover PNG’s 2012 surfing competition.

WAR BUFFS: PNG also remains one of world’s few destinations with an abundance of well-preserved and accessible sites from the Second World War, notably downed aircraft. While attention has been focused on the Kokoda Track, a plethora of sites, including remote airstrips with Japanese and American aircraft are scattered across the mainland, New Britain, New Ireland and Bougainville, as well as numerous maritime wrecks. These sites continue to attract enthusiasts and contingents of Australian, American and Japanese tourists to Port Moresby and once-occupied Rabaul and Wewak.

COST ISSUES: National capacity remains constrained by airlift, airports, maintenance and operational fees, as well as PNG’s challenging terrain (see Transport chapter), but liberalising market sectors has made inroads in transport improvement. The country’s second-largest airline, Airlines PNG, has started “valley runs”, providing connections to secondary airports between Port Moresby, Lae, Goroka, Mount Hagen and Daru in one circuit. This no longer necessitates the hub-and-spoke routings through Port Moresby and has created an alternative to costly charter flights, which traditionally filled capacity gaps.

International routes have also seen changes, with Airlines PNG challenging flag-carrier Air Niugini on routes to Cairns, Australia. This has seen price reductions of almost 70%, according to Linda Honey, sales manager at Airlines PNG. Indeed, 2012 may see services launched to Manila as well. However, with Air Niugini still dominating international routes to Japan, Hong Kong, the Philippines, Fiji, Singapore and Malaysia, PNG’s principal low-cost gateway remains Australia. QANTAS and Virgin Australia have entered into code-share agreements with Air Niugini and Airlines PNG, respectively. Yet this came only after several years of negotiations over landing fees and associated charges, according to TPA’s Vincent. “We have had the branding ‘a million different journeys’ for about three years, but that alone is not going to encourage businesses to come in. People are looking for tangible incentives, and the only sectors that seem to have been doing well in terms of such concessions are mining and LNG,” he told OBG.

HOTELS: This has also affected PNG’s hotel sector. While local firm Coral Sea Hotels, a subsidiary of shipping line Steamships Trading Company, has cornered the high-end segment, tourism is not a critical factor in its business model, said Glen Murphy, general manager of Port Moresby’s five-star Grand Papua Hotel.

“Basically it’s all corporate, particularly in Port Moresby and Lae. Tourism is a small sector of the market. Most visitors come to walk the Kokoda Trail and being pricedriven, will stay in mid-range hotels and guest houses, depending upon availability. Other visitors are either few in numbers or are not big spenders.”

This has been exacerbated by capacity shortfalls brought about by the LNG development phase, with room rates topping PGK800-1000 ($381-476) per night for three- and four-star hotels. This represents a fivefold increase from 2001, and corporate clients within LNG hubs, Port Moresby, Lae, Madang, Goroka and Mount Hagan now dominate hotel demand and meeting, incentives, conferences and exhibitions (MICE) business. “Internationally, MICE is not a growth segment. However, Gateway at [Port Moresby’s Jackson] airport, the Bird of Paradise in Goroka and the Highlander in Mount Hagen – these rely almost totally on MICE and get good business from these events,” said Murphy.

While this has meant some knock-on benefits for smaller hotel owners as visitors have been priced out of city-centre hotels, it has also led to national rate increases. Based on consistency rather than demand, rates are expected to halve in 2014 when the LNG development stage is scheduled for completion.

NEW MARKETS: PNG’s small international footprint has meant a diversification of its markets has been slow to occur. Its sources continue to mainly be Australasia, Japan and the US, though it is also aggressively targeting three of the four BRIC nations.

In 2008 the TPA signed an approved destination status agreement with China, allowing both countries to build a relationship in terms of tourism, which led to the TPA hosting the first-ever Chinese familiarisation trip in March 2011 and a dive familiarisation trip in June 2011 for agents representing leading Chinese dive operators. This followed the TPA’s inaugural attendance at the Eighth World Travel Fair in Shanghai in May.

While Indian nationals are also beginning to visit, at Russia is at the forefront of TPA and operator’s minds. With high disposable income levels that are boosting other markets worldwide, PNG’s tourism sector is fighting apparent government recalcitrance on the issuance of visas for Russian nationals. Currently prohibited from receiving a visa on arrival (VOA), a courtesy extended to key markets, applications from Russian nationals are handled by Australian embassies and consulates in the absence of PNG representation. Industry executives complain that this has resulted in the siphoning of potential visitors by Australian authorities.

Despite years of lobbying by the sector, the PNG Department of Foreign Affairs has made no move to change the visa regulations. A breakthrough may occur in 2012, with the new director-general of immigration reportedly extending a pilot project initiated in the first quarter of 2012 to issue VOA for Russian nationals bearing letters of invitation from tour companies.

OUTLOOK: PNG’s tourism market has a diminutive profile, both nationally and globally. While this means it offers untapped potential and attractive business opportunities, these are likely decades distant. Patchy infrastructure and transport capabilities necessitate high capital costs for investors, which are then passed onto customers. This has polarised PNG’s market demographic. However, growing momentum, based on the national TMP, dynamic and pragmatic leadership from the TPA in collaboration with industry operators, and sectoral reforms in the pipeline, suggest a change in industry fortunes. While this will not alter PNG’s profile, nor accommodate a mid-range market, it may prove to be the catalyst for further sustainable future growth.