Pushing for more: Better offers attract more investors and visitors

Renowned for its stability and rapid economic growth fuelled by exporting commodities and foreign direct investment, Ghana hopes to capitalise on its image as a well-managed and peaceful West African state to further develop its tourism industry. The sector is buoyed by an increasing number of business travellers and is continuing to diversify its revenue stream through the development of other segments. Sustainable forms of community-based tourism are gaining ground, and a largely untapped potential around numerous beach spots is set to attract a growing number of leisure visitors over the coming years. Sector development will be accelerated by legislative changes that will increase financing for expanding and promoting Ghana’s tourism products across international markets.

EXPECTATIONS & CHALLENGES: The government is hoping to enlarge the sector’s contribution to GDP and enhance its role as a foreign exchange earner. International hotel chains are expanding operations in the capital and other cities, as an array of smaller homestay accommodation options are cropping up in rural areas. Accessibility is increasing, with a growing number of flights linking Ghana to the markets of Europe, the US, the Middle East and Asia.

For a continent that has long captivated travellers, Ghana has struggled to compete as an attraction. Tourism champions such as Kenya, Tanzania and South Africa rank high on the minds of Western visitors seeking the classic safari adventure vacation. Capitalising on its 55th anniversary as the first former colony in sub-Sahara Africa to gain independence and the welcoming nature of its people, Ghana can fashion itself as a leisure destination on the Gulf of Guinea. The priority will be to expand existing infrastructure and increase marketing efforts. Furthermore, a comprehensive redesign of Ghana’s tourism products will demand greater involvement of private sector investors.

IN FIGURES: Although the country still lags in terms of its capacity to attract large numbers of foreign visitors, political instability in the neighbouring countries of Côte d’Ivoire and Mali and continued insecurity in Nigeria have played a role in cementing Ghana’s reputation as one of the safest places in West Africa. Arrivals in 2011 reached 1.1m, a 16.5% increase compared with 2010 figures. Tourism revenues have more than doubled since 2006, totalling $2.2bn in 2011.

The sector’s contribution to GDP is modest compared to other activities, but projections underline its growth prospects. A 2012 report by the World Tourism & Travel Council (WTTC), a global tourism body, estimates that the industry directly contributed 2.3% to GDP in 2011 and had an overall impact (including direct, indirect and induced effects) of 5.4%. This puts Ghana at 144th place in a 188-country ranking measuring the importance of the sector to national economies. Regionally, the industry accounts for more than 17% of GDP in the Gambia and 12.2% in the case of Senegal.

“Ghana is only now realising the contribution that this industry can make to the national economy,” David Nana Anim, vice-president of the Ghana Tourism Federation and board member of the Ghana Tourism Authority (GTA), told OBG. Average expenditure per visitor increased to $2013 in 2010, up from $1344 in 2003, and the government wants to keep the upward trend through diversification of the tourism offer.

OPEN FOR BUSINESS: Promotional efforts are also being reinforced by the rising number of hotels springing up around the capital and other areas of the country. Conference and business visitors account for around 40% of arrivals. An additional 25% of the annual inbound traffic originates from visiting expatriate Ghanaians. With the potential to become an established conference destination, Ghana has yet to create a network of international-standard meetings and exhibition venues. At this time, however, the larger hotels are starting to develop event halls to complement their existing business facilities. The government hopes to capitalise on its enhanced profile to attract more leisure travellers.

According to the most recent data on arrivals collected by the GTA, the largest source market was the US with 86,800 visitors, followed by the UK with 58,100 and Germany with 26,400. Although these figures date from 2008, government officials and private sector representatives believe the trends have held largely steady. However, miscommunication regarding visitor data between immigration and tourism authorities makes delivering precise arrivals figures difficult.

An increasing number of Nigerians are looking at Accra as a convenient weekend destination, and the government expects this trend to bring more regional tourists in the coming years.

A PLACE TO STAY: Of the 400,000 hotel room nights sold in West Africa in 2011 via Expedia, an online travel service, approximately 40% were in Ghana. The traditionally underserved hospitality sector is proving a boon for international chains, as well as for local and regional hotels aiming to expand. Above-average prices and high occupancy rates are attracting more players to the sector and extending the range of accommodation. In 2011 there was a 17.7% increase in the number of units in Ghana, which now has 2100 hotels of varying quality. Accra remains the main destination, with demand for accommodation rising steadily.

“Between now and 2015 we might see the entrance of around five new hotels in the three- to four-star range,” said Stuart Chase, the general manager of the Mövenpick Ambassador Hotel in Accra. Holiday Inn, Best Western, Novotel and Golden Tulip are also present in the capital. Local and regionally established brands such as Labadi Beach Hotel and La Palm Royal Hotel have beachside accommodation close to the city. The high-end market will get a competitive boost from the opening of the new Kempinski Hotel Gold Coast City, set to open in the capital by early 2013, with 269 rooms and 6000 sq metres of shopping facilities. The 160-room Radisson Blu Hotel is scheduled for late 2014.

The average occupancy rate in the capital’s three- and four-star establishments is about 80%, indicating that there is still demand for additional quality accommodation. The market for small boutique operations is also showing promise. Prices typically range between $200 and $275 a night for a single room in the three-star segment and can go up to $350 for a single-night stay in a five-star hotel. “Prices for hotel rooms in Ghana are high because of a dearth in supply,” Reto Wittwer, the president and CEO of the Kempinski Hotel Group told OBG. “As the supply increases, rates should normalise. However, the expected growth of the economy also indicates that demand will continue to rise.”

Industry operators expect occupancy rates to remain at this level for the next four to five years and then slowly fall as new hotels come on-line. This should also push the level of service upwards, said Bruce Potter, the general manager of the Holiday Inn in Accra. “The customer will increasingly drive the price, and hotels will have to offer more amenities for what they charge.”

IN THE REGIONS: Takoradi, the capital city of the Western Region, where most of the oil and gas investments will take place, is also expected to attract new hotels. Royal PF Holdings, an Accra-based investor in the hospitality industry, is set to open a Best Western hotel before the end of 2012, with 200 rooms catering for business customers during the week and offering beach facilities and accessibility to weekend visitors. Tamale, in the north, could also become a site of new hotel ventures, given that plans to expand the regional airport into a fully fledged international hub were given the go ahead by the government at the end of 2011.

Hotels are also finding additional business from nontraditional stays. The Holiday Inn in Accra already rents out at least five rooms every day between 9am and 6pm, serving customers from Takoradi on daily visits to the capital for business. Potter expects the number of daytime room stays to increase as the oil industry attracts more investment to Takoradi and the number of passengers travelling between the two cities rises.

Although the demand for new hospitality offerings remains high and is expected to grow in the coming years, new operators will face the challenge of finding an adequate workforce to service new units. Each additional international-standard hotel will require between 300 and 400 trained staff. Already feeling a human resources crunch, the industry will need to increase the size of its recruitment pool.

EDUCATION & TRAINING: Developing skilled recruits in greater numbers will determine the capacity of local hotels to improve service quality. Much of this will depend on strengthening the level of education and training available for the tourism sector. Universities such as the University of Ghana, Kwame Nkrumah University of Science and Technology, Cape Coast University and Zenith University College all offer undergraduate degrees in hospitality. The Ghana Institute of Management and Public Administration (GIMPA) took over the state-owned Hotel Catering and Tourism Training Centre (HOTCATT) in an attempt to raise the level of teaching, but a recent decision by the Ministry of Tourism brought HOTCATT back under governmental administration. GIMPA is nonetheless producing 30 to 40 graduates a year through its own Hospitality and Tourism Management undergraduate programme. In a bid to expand capabilities, GIMPA plans to launch its Tourism and Hospitality Management MBA in 2013. Both undergraduate and postgraduate courses at the institute will include practical training through a partnership with the Mövenpick Ambassador Hotel in Accra.

Launched in May 2011, the Ghana College of Tourism and Hospitality aims to offer training courses with a professional component. However, the institution has had a slow start due to financial difficulties and low student registration. “Despite the existing hospitality courses offered by universities and schools, their effectiveness at producing graduates good enough to serve the industry still needs to be proven,” said Patrick Fares, the CEO of Royal PF Holdings.

POLICY: The 2009-12 National Tourism Marketing Strategy details Ghana’s goal to become West Africa’s top destination and lists some obstacles to that objective, such as inadequate infrastructure and poor tourism product quality. However, the establishment of the GTA in 2011 and the associated Tourism Fund should bring a fresh focus to the sector (see analysis).

In parallel with raising the number of visitors, the emphasis is moving to ensure the sector can attract private investment. In May 2012 the minister of tourism, Akua Dansua, partly blamed the lacklustre performance of the hospitality sector on the repeal of Law 1817, which had offered a five-year tax exemption to tourism operators and eased import duties on construction materials and equipment. Indeed, the annulment of the law in early 2011 made for a less favourable investment climate. However, the government is committed to implementing new policies and incentives before the end of 2012 that will encourage growth of tourism ventures through similar tax exemptions. These updated regulations will aim to promote the sector while avoiding the loopholes and inefficiencies of earlier schemes. In 2011 the Ministry of Tourism also announced intentions to reduce the hotel and hospitality sector’s corporate tax rate from 22% to 20%.

Additionally, unclear land ownership and titling have hampered the ability to attract investment into seaside tourism areas and increase the number and quality of existing resorts despite the abundant sunshine and extensive coastline. However, recently opened Beige Village Golf Resort and Spa in the Eastern Region or the exclusive White Sands Beach Resort are proof of demand for large-scale, high-quality developments.

CULTURAL TOURISM: Historical sites have been receiving more attention. Elmina Castle, one of several old fortresses classified as UNESCO World Heritage Monuments has seen tourist numbers almost double from 48,000 in 2006 to more than 81,000 in 2011. Cape Coast Castle, another historical site where visitors can learn about Africa’s slave trade, was toured by 97,500 people in 2011. Domestic tourists are equally gaining interest in the attractions. The number of Ghanaians and residents visiting major sites rose 5.3% in 2011, generating 763,461 visits and $987,000 in entrance fees.

On an international level, the GTA expects that increased promotion of festivals and traditional celebrations will eventually foster the emergence of a genuine tourism identity. “We are light years away from countries like South Africa or Tanzania in terms of the tourism products we can offer,” Abigail Tagoe, the marketing director at the GTA, told OBG. “To develop Ghana as a destination we must leverage the traditional events that are unique to our identity.”

ECOTOURISM: Natural resources will remain the foundation of the tourism industry. Ecotourism is proving an efficient way to increase expenditure and promote rural development. Unable to compete with the vast game reserves and safari opportunities in Kenya, South Africa or Tanzania, Ghana is nevertheless well positioned to develop its own version of the green traveller’s dream, anchored on densely forested areas and wildlife habitats, as well as 22 natural parks and animal reserves.

The Ghana Rural Ecotourism and Travel Office (GREET) is charged with promoting the growth of sustainable tourism. As part of the Nature Conservation Research Centre, GREET was established in 2002 with funding from organisations such as the US Agency for International Development and the German Development Cooperation, and is managing 32 ecotourism sites. These host visitor centres, accommodation facilities and attractions related to the area’s people and surrounding flora and fauna. The sites promote local community involvement in the sector, but eight of the 32 sites have become inactive due to underfunding or diminished involvement from local populations.

Historically driven by foreign visitors, ecotourism is becoming the choice of Ghanaians, as rising incomes and a growing number of lodges and home-stays encourage leisure travel within the country. “In 2005 only 30% of visitors to ecotourism sites were locals, but the ratio has now shifted and around 60% of the travellers to ecotourism locations are Ghanaian,” Douglas Odartey Nanka-Bruce, the director of GREET, told OBG.

GREEN CHALLENGES: Rising demand is exposing the segment’s weaknesses, such as lack of financing, insufficient rooms in certain destinations and the shortage of adequately trained staff. GREET hopes to capitalise on imminent legislative changes to collect a bigger slice of the Ministry of Tourism’s annual budget, but it also wants to create revenue streams to reduce dependency on state funds. Encouraging private sector sponsorship of rural tourism sites will help to maintain and upgrade some facilities, and GREET plans to market ecotourism lodges for corporate retreats.

To realise the long-term objectives of the segment, Ghana’s tourism industry must be able to attract high-end visitors, and an upgrading of existing accommodation options will be needed. However, recent plans to develop a network of luxury eco-lodges around the national parks and wildlife reserves have stalled due to a lack of private investors. The government’s decision to remove tax breaks for real estate development in 2011 cooled interest in the initiative, but the GTA expects that a new set of tax breaks focused on the tourism industry will revive national and international appetite for investment. GREET estimates there is potential for 14 luxury lodges around the country and expects the first of these, a four-star eco-resort in Mole National Park, to be completed by July 2013 at a cost of $5m-7m.

The Volta River Authority, the country’s biggest electricity producer, announced its intention to find private investors to develop some of its non-power assets. These include the Akosombo Hotel Company and several plots of land around Akosombo and Akuse, which could serve as hospitality destinations on Volta Lake.

INFRASTRUCTURE: The country’s location and rising role as a regional business powerhouse have seen an increase in the number of flight connections. Spanish air carrier Iberia started operating two direct weekly flights in July 2012 linking Accra and Madrid. China Eastern Airlines, Qatar Airways, Air Canada and Royal Jordanian Airlines are also expected to establish flights. Airline capacity has grown at a rapid pace, from 24 carriers servicing Ghana in June 2011 to 34 by July 2012, with expectations that six more will be added by the end of the year. Domestic flights have also received a boost. Internal traffic rose 60% in 2011 following an increase in the number of airlines connecting Ghana’s five airports and the offering of more affordable flights.

However, operational costs may become a deterrent. For example, in June 2012 United Airlines cancelled its Washington-Accra daily flight only one year after it had commenced operations, citing the route’s poor financial performance. Delta Airlines reduced the number of its weekly flights connecting Accra with Atlanta.

The rising popularity of air connections is rapidly constraining existing infrastructure at the capital’s Kotoka International Airport. Expansion plans for the airport’s capacity are part of the revamp of Tamale Airport. In June 2012 the Ministry of Transport signed a memorandum of understanding with Brazil’s Queiroz Galvao, which will carry out the $174m project. Once upgraded, the Tamale airport will become a viable option to channel international flights within the country. Expansion of airport infrastructure will be essential to managing passenger growth from East Asia.

Road connections remain a challenge. The lack of international-standard coach services linking regional centres restricts tourists who wish to visit the hinterland independently, and long travel times to some of the most famous attractions is an additional limitation.

OUTLOOK: Ghana’s tourism sector looks set to receive heightened investment. This should release financing for infrastructure development, assuming the regulatory framework is developed to make it more attractive to potential investors. Marketing and promotion will be a priority, as will enhancing the quality of tourism offerings. Small initiatives could have a big impact. Reducing the price of tourist visas, currently averaging between $150 and $250 per person, would make travelling to Ghana more attractive. Overall, prospects for growth are strong, and the WTTC expects the sector’s total GDP contribution to rise by 4.3%, in 2012, and at an annual rate of 5.4% over the following 10 years.