PNG tourism to diversify source markets and broaden investments

While Papua New Guinea’s economy remains dominated by the agriculture, fisheries, forestry and extractives industries, tourism has been identified by government actors as an important source of economic diversification and sustainable development. With around 462,840 sq km of largely untouched land, a wide variety of indigenous flora and fauna, and immense cultural diversity as evidenced by its 852 known languages, PNG has promising tourism potential.

LONGER-TERM VISION: Nevertheless, PNG’s tourism industry is seen by many as a key area of potential with significant development opportunities. According to the PNG International Visitor Survey (IVS), released in April 2018 by the World Banks’ International Finance Corporation (IFC) in partnership with the PNG Tourism Promotion Authority (TPA), 86,403 tourists arrived into the country by air in 2017, accounting for $205m in visitor spend, or $2370 per person. The country’s high season runs during the dry months, from April until November, which coincides with winter in Australia and New Zealand. Some 75% of total annual tourist arrivals come from Australia and Asia. Australians continue to make up more than half (54%) of visitors, although relying on a single country offers limited potential for long-term, sustainable growth, especially as Australia represents just 1% of the global tourism market.

Air Niugini, the country’s national airline, is working to attract more visitors by concluding codeshare agreements and establishing connections with new international destinations. “We need to open the skies,” Clarence Hoot, acting managing director of the PNG Investment Promotion Agency, told OBG. “Opening more tourism destinations to international and domestic air travel will not only make travel cheaper, but also change the image of the country, since visitors don’t have to travel via Port Moresby, where there are fewer tourism-related activities and concerns over security.”

APEC SUMMIT: In November 2018 PNG will host the APEC summit in the capital city Port Moresby, marking the first time the conference will be held in the Pacific region. APEC events are expected to attract some 20,000 visitors throughout the course of the year, providing an opportunity to promote the country’s tourism offerings and showcase various investment opportunities. In May 2018 Rimbink Pato, the minister for foreign affairs and trade, told international media that he hoped the summit would put PNG on the map and help boost long-term tourism.

Commenting further on the summit’s potential, Yiannis Nicolaou, general manager of the Lamana Hotel in Port Moresby, told OBG that, “In addition to the anticipated boost to investment, tourism and trade, respective forums are being held to raise awareness of the opportunities that APEC is presenting in 2018, following the APEC Policy Development Dialogue between PNG, Australia and senior regional APEC officials”.

Preparation for the gathering has spurred a raft of new developments, including the newly built APEC Haus, which will serve as the reception centre for summit leaders, as well as the construction of the Hilton Port Moresby, the country’s first Hilton Hotels & Resorts property, set to open in September 2018. The hotel will offer 212 rooms and the Kutubu Convention Centre, which features a banquet hall for up to 800 guests. In general, new hotel construction is welcome, especially in the capital as occupancy rates run high. Organisers have hired three cruise ships that will be used to house visiting delegates as capacity on land is expected to fall short. “The hotel occupancy rate hovers around 90% for large hotels in Port Moresby and other hotspots, and around 70% in rural guesthouses and lodges,” Noah Mikmik, coordinator of research at the TPA, told OBG.

STRUCTURE & OVERSIGHT: PNG’s tourism sector is managed by the TPA, a statutory body governed by a board including its CEO, the chairman of the parliamentary committee on tourism, a deputy head of the Department of Finance and Treasury, and seven other members representing sector stakeholders, including hoteliers, financial institutions and tour operators. Reporting to the Ministry of Tourism, Arts and Culture, it is the sole government authority responsible for tourism after it was merged with the now defunct Office of Tourism, Arts and Culture in 2016.

The TPA is tasked with implementing the country’s tourism strategy including global marketing, undertaking visitor surveys and providing support to local businesses. While the government’s Tourism Master Plan (TMP) 2007-17 proposed the replacement of the authority with an industry-led body, Tourism PNG, and the setting up a new Tourism Policy Secretariat, neither had been implemented as of August 2018.

POLICY & PLANS: PNG’s TMP 2007-17 appears to have been successful in addressing a number of key areas, such as immigration, Customs and border protection, and law enforcement, to boost visitor numbers while maximising sustainable tourism growth for the social and environmental benefit of citizens.

Over the past decade arrivals increased 62%, from 104,122 in 2007 to 197,632 in 2016. These figures can party be attributed to the easing of visitor visa regulations. Since 2013 the government has offered free 60-day visas on arrival for nationals of 70 countries, including EU citizens, many Pacific and ASEAN member states, Japan, Israel and the US. Australians have been able to obtain a free visa on arrival for 30 days since 2016. All visa types can also be extended for a fee.

Meanwhile, the government has earmarked new tourism hubs in the provinces of East New Britain and Milne Bay. Allan Tobalbal Oliver, agriculture specialist for PNG at the World Bank, told OBG that these areas were chosen because they were already receiving interest from travellers and posed relatively less risk to tourists in terms of crime and personal safety. However, Sioni Sioni, Milne Bay tourism bureau manager, told local media in March 2018 that tourism in the province continued to face challenges, including a lack of promotion capacity, telecommunications problems, and law and order issues. Additionally, the number of beds in Milne Bay and East New Britain remain insufficient, with each area currently offering less than 100, Oliver told OBG.

The World Bank is assisting PNG’s government in developing a viable plan for tourism development, and has pledged $20m to support the promotion of East New Britain and Milne Bay. Oliver told OBG that the funding will be used in three ways. First, to develop a strategy for both provinces and build tourism-related infrastructure, such as walkways and a potential shopping mall-like development housing a tourism information centre; second, to invest in product development via a grants facility for micro-, small and medium-sized enterprises (MSMEs) and community groups, offering amounts of between PGK20,000 ($6240) and PGK60,000 ($18,700); and lastly, to build capacity at the TPA, which is the implementing agency of the project and is managing the flow of funds.

While acknowledging that $20m is not a huge amount, Oliver says that interest in the grants is very high among local tourism operators. In addition, the project will work with financial institutions and microbanks to support MSMEs and community groups in accessing potential follow-up financial support.

PERFORMANCE: According to the “Economic Impact 2018” PNG report from the World Travel & Tourism Council (WTTC), the sector directly contributed $148.1m to the economy in 2017, representing 0.7% of GDP. Taking into account indirect jobs, tourism’s total contribution to the economy was $413.7m, equivalent to 1.8% of GDP, with this figure expected to reach 2.2% in 2028. The sector directly supported 17,500 jobs in 2017, or 0.5% of total employment, and some 53,000 jobs indirectly, or 1.6% of total employment.

Taking into account the sector’s ability to generate jobs and revenue, promoting growth will likely remain a key priority, especially as PNG still trails behind its regional counterparts. According to the PNG IVS, tourists accounted for around 25% of the country’s overseas arrivals in 2017. To compare, the global average is around 53%, with even higher rates seen in some neighbouring Pacific states. “Holidaymakers to PNG make up only about a quarter of all visitors. It’s clear the country is lagging behind its regional competitors, Fiji and Vanuatu, where tourists account for 75% of all visitors,” John Vivian, the IFC resident representative, told local media in April 2018. “Greater investment can help PNG boost holiday arrivals and close that gap, increasing revenue, diversifying the economy and spreading the benefits to rural areas where tourists like to travel.”

The IFC’s survey found that out of visitors arriving into PNG by air, 37% of these arrivals were business travellers, 26% were holidaymakers and 19% were visiting friends or family, with the remaining 18% unknown. More than half (54%) of the visitors to PNG in 2017 came from Australia, followed by Asia (12%), North America (10%), New Zealand (9%), Europe (7%), the Pacific (7%) and the remainder (1%) from other countries.

The survey found high levels of visitor satisfaction, with 74% reporting that they were satisfied with their trip to PNG, and an overwhelming majority (92%) saying they would return. Out of the $204.8m direct economic impact of tourism, according to the IFC, $80.3m came from accommodation, $61.2m from airfares, $20.4m from food and beverages, $10.8m from local transport and $9.6m from domestic travel, with the rest coming from areas such as tours, retail and souvenirs.

Upon the release of the survey findings, the TPA acknowledged that future opportunities will rely on attracting more high-end holiday visitors from Australia and Asia, as well as promoting long-haul trips for those in North America and Europe.

MARKETING STRATEGY: The TPA has also recognised the importance of working to promote other multi-pronged tourism initiatives. Between May 28 and June 3, 2018 the APEC Tourism Week was held in Port Moresby, starting with a “Women in Tourism Dialogue” event. Jerry Agus, CEO of the TPA, said that the dialogue was aimed at enhancing women’s economic participation and productivity in tourism, with a focus on sustainability, inclusivity and the adaptation of the sector to the digital age, according to local media reports.

In the lead-up to the tourism week, the TPA’s “Boldly Go Papua New Guinea” online marketing campaign was also launched. The campaign invited social media users and visiting delegates to share their experiences of attending APEC events by using specific hashtags, and was aimed at promoting cost-effective ways to advertise the country to an engaged audience.

Improving the global image of the country is also a major goal. Addressing local media in May 2018, tourism, arts and culture minister Emil Tammur urged journalists to gravitate away from crime and issues with tribal groups, as such stories add to the negative perception of the country internationally.

Recognising the importance of embracing innovative promotional efforts, Nicolaou told OBG that the TPA had made progress in certain areas, such as awareness training and product development. However, infrastructure still remains a major hurdle. “Much more needs to be done to address impediments to tourism growth, particularly in relation to infrastructure for land, air and sea transportation,” Nicolaou said.

KOKODA: The Kokoda Track has been a mainstay of PNG’s tourism economy for decades. The 96-km trekking route runs through the Owen Stanley Range located in the south-eastern part of the country’s central mountain chain. It is primarily Australians who trek the path to commemorate the battle between Allied forces and Japanese troops in 1942 during the Second World War. Data provided by the Kokoda Track Authority (KTA) shows that 40,726 people hiked the trail from 2007 to 2017, averaging 3930 people per year, with the route taking between four and 12 days to complete.

While Australians continue to provide a steady stream of visitors for the Kokoda Track, Michael O’Kave, operations manager of the KTA, told OBG that they are currently focusing on a review of operations to build the authority’s capacity and deliver better tourism outcomes by attracting more global visitors. “Kokoda is a brand, and we need to reshape our product development process to enhance the experience of trekkers.”

A number of problems needs to be addressed, however, as the track has experienced periodic closures by local communities in protest of the lack of government support and minimal economic benefit for those living along the route. “Problems arise when there is a lack of consultation with local communities,” O’Kave told OBG. “The stakeholders need to address these issues, and there needs to be ongoing consultation with those affected.” Still, optimism that such issues can be resolved for the mutual benefit of everyone is high. The World Bank’s Oliver told OBG, “We really believe that tourism can trickle down to the grassroots level in the villages. Villagers can be involved right across the industry, as drivers, tour guides or vendors, and jobs will especially benefit women and young people.”

PAGA HILL: Meanwhile, Port Moresby is set to house a new tourism city on Paga Hill, a 1.7-ha gated estate of luxury apartments overlooking the city’s coastline. As well as serving as the location of APEC Haus, the Paga Hill Estate development will include a cultural centre, a Second World War museum, hostels, a night market, a resort, marinas, a waterfront promenade and a cable car. The government has granted a lease to the Paga Hill Development Company, a joint venture of local and international investors, and is working with the company to attract private sector development for the site. If executed properly, the area should positively impact job creation and new attractions, ultimately boosting Port Moresby’s reputation among high-end business travellers and tourists. Peter Barge, Australian property developer and Paga Hill advisory board member, told local media in December 2017 that the centre would “help transform a city and country into an emerging tourism destination, while creating many local jobs and boosting the national economy.”

CONVENTION CENTRE: In another bid to attract more high-end business travellers and tourists, in April 2018 Prime Minister Peter O’Neill officially opened the new International Convention Centre (ICC) in Port Moresby. The $27m ICC was built by the Chinese state-owned contractor China Jiangxi Corporation for International Economic and Technical Cooperation in preparation for the APEC events. The Chinese government also provided $33m for the development of a six-lane motorway in the capital. Australia and China have been vying for influence over PNG’s APEC preparations, resulting in strong flows of investment into hard infrastructure and capacity building. Prior to APEC 2018, PNG had little in the way of a meetings, incentives, conferences and events (MICE) segment; however, the ICC and the training of human resources in tourism and security could potentially lay the groundwork for the further development of this nascent and lucrative segment.

CHALLENGES: While tourism has been identified as a growth industry by PNG’s government, its contribution to GDP still pales in comparison to the agriculture and extractives industries. The major challenge for tourism is the high costs involved for overseas visitors, of which airfares are a major contributor, as there are insufficient direct flights and all visitors must transit through Port Moresby, Mikmik told OBG. “When they want to go to Rabaul or other major cities in PNG they have to spend a night in Port Moresby, which is expensive,” he said. According to the TPA’s “Visitor Arrival Report”, the first quarter of 2017 showed almost all visitors (92%) arrived into the country by air. Some 90% arrived into Port Moresby’s Jacksons International Airport, with a further 8% arriving on cruise ships. Further investment in regional airports across the country would help the government to address this challenge.

Safety also remains a concern for foreigners, with the governments of advanced Western and Asian economies consistently warning their citizens to exercise caution on visits due to the risk of violent crime. While the PNG government recognises these risks, the use of precautions can greatly mitigate the likelihood of danger. “Safety is an issue, but when you take a closer look, this is a problem faced by many other countries as well,” Mikmik told OBG. “When tourists come on a tour or with a travel agent they are safe.”

Just over a quarter (28%) of tourists surveyed in PNG’s IVS reported that safety and security was the least appealing aspect of the country, just ahead of environment and rubbish (27%) and infrastructure (16%). Conversely, despite safety and security being high on the list of concerns, 43% of respondents chose the people of PNG as the most appealing aspect of their visit, suggesting that the experiences of travellers are much more positive than pre-conceived perceptions.

OUTLOOK: Following the results of the PNG IVS, the IFC forecasts that with greater attention paid to infrastructure, capacity building, marketing and regulatory issues, PNG could receive an additional $117m per year in niche market tourism revenues (see analysis). To reach its potential, PNG would benefit from constructing international airports, ports and terminal facilities, as well as a quality road network to facilitate domestic travel. Beyond just Australian tourists, attracting visitors from high-spending markets in Europe, North America and East Asia, as well as MICE travellers will be key to its long-term success. The APEC summit in November 2018 looks set to provide a boost in this area, particularly due to the construction of infrastructure, including new hotels, highways and the ICC, as well as the promotion of the country as a major destination on a global stage.