Utilising strengths: Adapting to new trends in the market

Endowed with isolated, unspoilt nature and a nomadic Buddhist culture, Mongolia has managed to develop a small but potentially profitable tourism sector, which is expanding through support from the public sector and a growing focus on adventure and nature. Strong mining-led economic growth in the past decade is expected to dilute tourism’s overall share of GDP, however, the total volume of revenue and visitors is set to increase with the state adopting a more proactive role in the sector’s development. Setting an ambitious goal of attracting 1m leisure travellers by 2015, the authorities are adamant that they aim to drive quality tourism – and indeed revenue per tourist – rather than just quantity. Beyond mere promotion initiatives, the success of efforts among the government and the private sector is said to depend on building capacity and infrastructure, harmonising and upgrading standards, and diversifying product offers. The main challenge is to prolong the notoriously short tourist season by catering to a wider range of visitors. While many tour operators currently view mining as a threat, the sector could prove instrumental in driving higher-value-added yet environmentally sustainable tourism if properly harnessed.

HEADLINE NUMBERS: Official tourist arrival numbers have staged a strong recovery from a trough in 2008 and 2009, when arrivals fell to a low of 411,640. The numbers released by the National Statistical Office of Mongolia show a 19% annual rise in numbers in 2010 and 0.9% in 2011 to reach 460,360, respectively. A number of market participants question the real share of arrivals who enter the country for leisure as opposed to business purposes. Indeed, tourists accounted for nearly 73% of the 626,993 total foreign arrivals in 2011, a high share by most accounts. “Most travellers come to Mongolia with business interests: actual leisure tourists number only around 100,000,” said Stephen Kreppel, the director of the National Marketing Coordination Office at the Mongolian National Chamber of Commerce and Industry ( MNCCI). Other estimates vary up to 150,000 yearly. While this is a fraction of official figures, the approximate number of bona fide tourists has tripled from around 34,000 in 1999 (out of total foreign arrivals of 158,000).

BUSINESS VISITORS: The vast majority of Russian and Chinese arrivals are in fact small traders. Whereas a high share of foreign executives attracted by investment opportunities identify tourism as their purpose of visit, the private sector has been lobbying the Mongolian government for some time to exclude Chinese and Russian arrivals from official tourist statistics. Nonetheless, the figures remained aggregated as of 2012.

The director of the Governing Board of the Mongolia National Tourism Organisation (MNTO), B. Indraa, told OBG that since 2005 the World Tourism Organisation (WTO) has sought to exclude Russian and Chinese “tourists” from official tourist numbers, although they currently remain on the list. Indeed, the two neighbours produced the lion’s share of tourist arrivals in 2011, with China accounting for 43.45% (200,101 arrivals) and Russia 22.32% (102,738).

OLD & NEW: The main country source of genuine leisure tourism over the past decade have been from more affluent areas, including Japan, South Korea, North America and Western Europe, although their share of total arrivals has plateaued somewhat in the past decade. According to the Ministry of Culture, Sports and Tourism (MCST), while the number of Japanese tourists has grow steadily over the past decade, their share of arrivals slid from 27% in 2000 to around 3.3% in 2011, the same level as the US. In the meantime, South Korea’s share grew to 9.56% by 2011 (43,994 tourists), while Germany, Kazakhstan, France, the UK and Australia all feature among the top 10 origin countries with between 1% and 2% of tourist arrivals. Although European tourist numbers did not increase during 2012, largely due to the pull of holidays closer to home in times of economic downturn, arrivals from Asia have grown to compensate. As of late 2012 the MCST expected the year’s tourist arrivals to reach 467,000, up 1.44% from 2011.

DRIVING REVENUE: Mongolian tourism sector players have realised the importance of attracting high-value visitors as opposed to targeting high volumes with Bhutan, often cited as a role model. As for arrival numbers, reliable figures on tourism-related spending remained unavailable at the time of writing. According to N. Erdenebat, the vice-president of the Mongolian Tourism Association, the authorities are aiming to boost total foreign visitor numbers to 1m by 2015.

At the same time, the World Travel & Tourism Council (WTTC), a global tourism association, publishes two sets of estimates for tourism revenue, which are based on available government and industry figures calculated by Oxford Economics, a think tank based in the UK. The direct contribution of tourism to GDP includes spending such as hotels, restaurants, tickets and others and reached 3.4% of GDP in 2011, some MNT342.3bn ($239.61m). The total contribution includes indirect and induced revenue generated by tourist spending, such as the building of new hotels, which reached 8.9% of GDP, or approximately MNT893.8bn ($625.66m).

Despite the growth, these numbers remain below the world average of 5.12% in direct contribution and 13.8% in total. The ministry expects the sector’s direct revenue to rise by some 6% annually over the next decade. The WTTC is more optimistic, with growth forecasted at 7.3% in 2012, and an average of 6.2% annually in the decade thereafter. These figures may underestimate total spending, however, as tour operators note that spending remains largely in the informal sector.

An effort in the middle of last decade to establish a Satellite Account to create an accurate statistical framework for the sector with support from the US Agency for International Development (USAID), modelled on Egypt and Jordan, has yet to deliver the results. Nonetheless, tour operators have come to some consensus on general revenue figures, with estimates providing an indication of where the highest potential for those higher-yielding tourists can be nurtured.

More concerned with comfort, Japanese tourists tend to focus on smaller routes and shorter stays of between three and seven days, but spend the most, an estimated $200 per day in total average. Tourists from the US spend slightly less, between $150 and $170 per day, although the length of their stay is longer, at between two and three weeks. Meanwhile, Western Europeans spend less (roughly $100 daily), however, they do tend to venture further afield. Koreans, Taiwanese and South-east Asians generate less revenue, yet they remain more profitable than Chinese and Russian tourists, with less than $50 per day in country spend.

VERSATILITY: The nature of inbound tourism has gradually shifted over the past decade, evolving mainly from an organised tour group structure to one in which individual travellers play a growing role. Packaged tours, traditionally the dominant form of tourism, have faced rising competition from the growth in business travel, as well as independent tourists. By 2011 the WTTC estimated that business travel spend accounted for 34.1% of direct revenue ($169.26m). Meanwhile arrivals of independent travellers like backpackers have also been growing, which has spurred a drop in the average advance booking times. Tours are booked up to six months in advance, while independent travellers may only plan close to arrival. According to Erdenbat, while stopover and independent tourists are growing in numbers, they tend to book closer in advance of their arrival than tours, whom tend to book six months forward, thus reducing visibility for stakeholders in the industry.

DEREGULATED GROWTH: Mongolia attracted a steady stream of visitors during the Soviet era, with state monopoly operator Juulchin catering mainly to Soviet-bloc tourists until 1990. The publishing of guidelines for private operators in 1995 and the lifting of visa restrictions in 1998 brought about a trickle of tourists during the first decade after, although significant growth in numbers only occurred in the new millennium.

Further changes began in 1999, when the authorities defined a drive towards higher-quality tourism in smaller volumes by commissioning two sectoral plans and passing the Tourism Law of Mongolia through the parliament in 2000. Lack of institutional continuity across governments has, however, proved a challenge for the sector. The tourism department was originally established by the then-Ministry of Road, Transport & Tourism in 2004, before being transferred to the new Ministry of Nature, Environment and Tourism in 2008, and finally the newly-established MCST following elections in 2012. “Regular restructuring of government departments has made coordination on tourism policy even more difficult,” Indraa told OBG.

Despite donor support from the likes of the Asian Development Bank, Japan’s International Cooperation Agency, USAID and Germany’s GIZ to encourage a more holistic approach to the sector’s development, successive governments have focused their efforts on garnering international aid for large-scale projects. A key objective of these projects has been to build a statistics model along the line of the UN’s Tourism Satellite Account. A number of marketing campaigns were also started, including “Visit Mongolia in 2003”, “Discover Mongolia” since 2004 and the “800th anniversary of the Mongolian nation” in 2006.

According to the Mongolia Tourism Association, however, overall government spending on marketing has remained low, at under $518,000 per year. A 2011 WTO report of 176 destinations found that Mongolian promotional spending per tourist arrival totalled a mere $0.30, compared to a world average of $5.25.

Although public assistance of approximately MNT500m ($350,000) was used to support the country as the cultural partner of ITB Berlin, the world’s largest travel trade show, temporarily boosting spending to around $1 per arrival with 450 Mongolian stalls in 2011, the trend in government support has worried private operators. Allocations under the draft 2013 budget will set aside just MNT181.86bn ($131.78m) to the ministry as a whole, which plans to spend more on culture and sports than on tourism.

“We think the government should spend between $3m and $5m on international promotion of Mongolia,” Erdenebat told OBG. Hoteliers and tour operators have also argued that the focus on trade fairs is misplaced in the face of the rising number of independent travellers worldwide.

SEPARATE IDEAS: In a similar vein, criticism has been levelled at public support for the development of major projects, at the detriment of grassroots product development which NGOs see as more in line with Mongolia’s natural attributes. Despite rhetoric in favour of developing ecotourism at the community level in 2008, the former government focused on large projects such as the Chinggis Khan statue and the Sky Resort, which give more emphasis to the country’s cultural legacy and sport tourism rather than at the grassroots level.

Growth in business tourism, distorting aggregate statistics, has been a major driver of such planning. Yet, this has been criticised by NGOs, donors and private operators, which argue that efforts should focus on bringing Mongolia’s traditional assets of nature, sports, culture and nomadic lifestyle into the spotlight. “Community-based tourism is a key draw for foreign tourists, we must beware not to adopt a top-down approach to developing the sector,” D. Gantemur, the chairman of the Sustainable Tourism Development Centre, told OBG.

With little interaction between the government and private sector, new projects have often developed in isolation without an overarching plan for the sector. Since 2008, the government has offered incentives for private investment: tax rebates of up to 10% of a project’s investment are available for high-end hotels and tourist complex developments, while tour operators’ services to foreign tourists have been exempted from value-added tax (VAT). The aim of the corporate tax rebates has been to support larger, capital-intensive projects in tourism such as hotels, although in practice the award of these rebates has been ad hoc. Hotel developers contacted by OBG were unaware of the criteria used to determine the level of individual rebates. At the same time, tour operators argue that the impact of VAT waivers has been limited, given they apply only to services provided by tour operators themselves – such as driving and guided tours – but not to goods and services contracted to third parties such as restaurants and hotels. Private operators have called for the establishment of a more transparent system with systematic guidelines for the industry. The more hopeful expect the sector to eventually expand in a more integrated manner under the new government structure.

NEW VISION: Reaffirming tourism’s priority in September 2012 during the WTO secretary-general’s first ever visit to Mongolia, President Ts. Elbegdorj outlined new plans to increase arrivals to Mongolia and diversify the economy away from mining. The newly established ministry intends to focus on ecotourism and developing destinations by supporting smaller-scale initiatives, although full details of the new plan will only be published in early 2013. The ministry has also announced its intention to support rapid approvals for smaller projects, although financial backing remains unlikely.

“We will mark a clear departure from past policies, focusing on development of the sector as a top economic priority,” M. Tumenjargal, the vice-minister of culture, sports and tourism, told OBG in October 2012. “It is important to expand our brand equity overseas, at the same time as we attract private investment in tourism projects locally. An important element will be to differentiate the product offerings across the four main regions of Mongolia.”

FINDING ONE MESSAGE: The gap between government support for large projects and the fragmented sector has been exacerbated by the multitude of associations and organisations that have emerged to represent tourism (see analysis). Despite attempts by the government to engage with the private sector – at the most basic level, by outsourcing promotion efforts to an association, for instance – sufficient integration of private operators with public policy has been lacking. “There has not been enough incentive for either the public or private sector to change or engage,” USAID noted in 2012 report. By 2010 some 42 NGOs linked to tourism had emerged, yet only a handful were national in scope and representative of the sector.

The Mongolian Tourism Association (MTA), an umbrella organisation since 1992 with 245 members, has proved most successful in uniting the private sector, in part due to the MTA president’s former role as the government’s economic standing committee. Responsible for tourism promotion since 2008, the MTA has remained dependent on technical assistance from donors such as Germany, South Korea, Japan and Australia. The MNTO, meanwhile, was established in 2007 to unite public and private sectors in a more concerted marketing effort under a single brand. While it has expanded its reach to key markets like the US, the organisation remains one voice among many. The Sustainable Tourism Development Centre, the Mongolian Tourism Research Organisation, the Guides Association and the Mongolian Hotels Association (MHA) all aim to represent the interests of an otherwise small sector. Indeed, by 2012 three separate campaigns coexisted for the sector, including the ministry’s “Discover Mongolia”, the MTA’s “Majestic Mongolia” and the MNCCI’s “Inspiring Mongolia”. Indeed, Erdenebat told OBG, “with three competing slogans for Mongolia’s tourism sector, it is imperative that we unify under one message for international tourists.”

TECHNICAL ASSISTANCE: The role of technical assistance in the tourism sector offered by foreign donor organisations continues to decline. A shift in focus towards mining and challenges in implementing data systems such as the flagship “Satellite Account” has led to withdrawal by the likes of USAID, and GtZ.

The Dutch agency the Centre for the Promotion of Imports remains the only donor currently providing dedicated support for the sector. The group will cooperate with the Mongolian Sustainable Tourism and Development Centre for the period 2010 to 2013, and will aim to boost capacity, particularly at the local level, while influencing government policy on the sector to link it to overall economic development. While programmes from other donors such as the European Bank for Reconstruction and Development’s support for small and medium-sized enterprises continue to cover some tourism firms, donor attention has gradually shifted from the sector towards industries such as mining, light manufacturing and agriculture. Following successive institutional changes within the Mongolian government, donors have taken to the sidelines pending the formulation of a coherent longer-term public strategy for the sector. The increasing focus of donors on the mining industry, and its environmental effects, impacts the tourism sector only indirectly.

CROSS-BORDER INITIATIVES: While business travellers and traders dominate foreign visitor inflows from neighbouring countries, the government has sought to redress the balance. The Greater Tumen Initiative (GTI) involves the governments of Mongolia, China, Russia and South Korea, and supported by UN Development Programme, acts as a platform for integration in investment for the environment, energy, transport and tourism. The impetus for this effort since 1995 has come primarily from Russia and China: the former sees an opportunity of gaining access to North Korea’s resources and linking them to the Eastern Siberian hinterland, while the latter aims to facilitate access for traders in north-east China to ports in Russia.

Mongolia, meanwhile, has used the venue, which is a key intergovernmental economic cooperation forum for northern Asia, to develop joint-infrastructure projects that would benefit both trade in goods and in services such as tourism. An agreement in September 2012 on tourism in the GTI region emphasised a series of projects meant to catalyse cross-border tourism, including the Lake Buir Nuur and the Umnugobi ecotourism complexes along the southern border with China, the Bulgan complex in the west of the country and the Zamyn Uud complex in the east. A new paved road between Khanh and Mond in the north is aimed at facilitating transit with Russia. The objective is partly to expand the traditional focus on Buddhist tourism from China to a richer appreciation of shared cultural heritage, including the Silk Road and the Tea Road, both having passed partly through Mongolia. This initiative feeds into of the government’s ambition to have roads to every aimag by 2020, and which is enshrined through the GTI.

VISA REGIME: The government has moved only very gradually in facilitating immigration procedures for select nationalities. A letter of invitation from a hotel or institution in Mongolia is still necessary for visa applications for most nationalities. With no visa on arrival service, the government has granted 90-day visa waivers to US citizens since the early 2000s, to Malaysians and Japanese in the last few years, and signed an agreement in 2012 to expand the scheme to South Korea in coming years. Chinese and Russian tourists must still apply for visas in advance like other nationalities, although very short visa exemptions are granted to tours from the two countries. “The main challenge for the Greater Tunmen Initiative is a visa issue for Russians, Chinese and Koreans in Mongolia,” Indraa told OBG. “While there are two-day visa exemptions for Chinese groups under the ‘white slip’ scheme, this does not allow them to venture very far into the vast territory.”

While new visa exemptions are planned, for South Korean citizens, for instance, liberalisation of visa requirements for the two neighbouring countries has stalled given the lack of reciprocity from China and Russia.

PRIVATE INFRASTRUCTURE: Despite a fragmented industry, private investment has been growing in aggregate. Accounting for some 13% of total investment, or some MNT537bn ($375.9m), in 2011 according to the WTTC, projects have included a number of museums and tourism complexes alongside a host of new hotels and tourist camps (see analysis). The WTTC forecasts 6.7% annual growth in total tourism investment over the next decade, reaching an expected MNT1.18trn ($847.44m) by 2022, or 14.7% of total investment.

While figures from the former Foreign Investment and Foreign Trade Agency, which under the Ministry of Economic Development was in charge of matters pertaining FDI, but which was now disbanded following the 2012 parliamentary elections, reveal volatile foreign investment in tourism, fluctuating from $1.4m in 2005 to $371,000 in 2010, South Korean, Japanese and increasingly North American investments have been growing in the sector. Investors from north Asian markets have focused on developing tourist camps and hotels catering to their clientele, with a greater supply of foreign, star-rated hotels now on-line.

ROOMS IN THE INN: The range of accommodation has been growing apace in recent years, from an estimated 320 hotels nationwide in 2008 to 350 hotels and some 375 tourist camps by 2011, according to the MCST. Of these, 65 are estimated to be star-rated. Yet, while the MHA has sought to introduce a mandatory domestic starring system since its establishment in 1997, the ranking has never been universally applied and ratings remain self-proclaimed.

MAD Investments’ property consultancy Research Squared estimated in late 2011 that Ulaanbaatar had some 2417 rooms rated three-stars and above.

One of the leading upscale hotels in the Ulaanbaatar area is the five-star Terelj Hotel with 52 rooms developed by the Gatsuurt Group, a conglomerate operating in agriculture and mining, although the hotel does remain a resort destination roughly 70 km from the city. The Ulaanbaatar Hotel, developed during Soviet times, continues to be a well-established name but has faced growing competition in recent years. The 102-room Khan Palace Hotel, developed by Tavan Bogd in 2005 and rated four stars, has been managed by the Swiss-based Kempinski group since 2007.

The first hotel in Mongolia to be managed by an international brand, the five-star Sunjin Grand opened in 2007, managed by the South Korean Sunjin Group. Mongolian-managed competition has also intensified with the likes of the Corporate Hotel, owned by the chairman of the MNCCI, the Chinggis Khan Hotel, held by former prime minister S. Batbold, and Bayangol Hotel, part owner of Genco Tour Bureau and headed by the minister of industry and agriculture, Kh. Battulga.

Sharply rising international arrivals, particularly linked to business, have spurred inflation in star-rated hotel prices. Research Squared estimated in early 2012 that rack rates for hotels three-star and above have risen 83% since 2008, reaching $37-180 a room for three-star hotels and $104-225 in four-star establishments.

NEW PLAYERS: Property agents expect some 1200 new rooms to be added in the capital by 2015, most of which will be in the higher-end range around the capital’s central business district. The second foreign-managed hotel to open in 2011 was the four-star Ramada, which was contracted by the Max Group to manage the 128-room hotel developed as part of its Max Mall. Following unsuccessful negotiations with the Intercontinental Group, the 200-room Blue Sky Hotel, claiming five stars, opened in January 2012 managed by the developers, the Chono Group. The 24-room Tuushin Hotel, meanwhile, which has been closed for renovations since 2010, received investments worth $10.3m to be redeveloped into a high-rise hotel, and is currently holding talks with the Best Western Group.

Although Mongolian hotel developers have traditionally built their projects before seeking a management contract with a global brand, this has started to change. “We are seeing a shift in hotel developments,” U. Batbayar, the managing director of Battour Travel Agency, told OBG. “Most developers first build the hotel and then sign a management contract, but many of the new hotels, such as the Shangri-La and the Hilton, conclude a management contract first and then build the hotel to international standards.”

HOUSEHOLD NAMES: Hong Kong-based Kerry Group, owners of the Shangri-La, are developing the largest new hotel in the capital with their long-established partners (in other sectors like mining and real estate), the MCS Group. The new 273-room Shangri-La Hotel, due to open in 2013, will be part of a mixed-use complex featuring a 13,000-sq-ft convention centre and serviced apartments. The US-based Hyatt Group has planned to develop two new Hyatt Regency hotels – one in Ulaanbaatar and one in Terelj National Park (‘Turtle Rock’) – under contract from Mongolian mining firm Mongolyn Alt (MAK) Corporation. Although set to open in 2014, slow progress in late 2012 has cast doubt on whether the project can be completed on time. The 259-room hotel in the capital will also contain serviced apartments and smaller meeting facilities, while the Turtle Rock property will be smaller, at 131 rooms. The 300-room Sheraton and 175-room Radisson Blu, originally slated for completion in 2011, have been delayed to 2013 or later. Closer to completion, the 240-room Hilton should be completed in 2013. Other chains like the Park Savoy and Ritz Carlton have also set their sights on developments in Ulaanbaatar, although at the time of writing no deals had been reached.

Whilst very small with only 61 licensed units in the capital, mostly located in two luxury developments, the serviced apartments segment has attracted the attention of global brands. The scope for attracting business travellers from high-end hotels is substantial, given recent growth of this segment of the market. The new Shangri-La and Hyatt hotels will include a limited number of serviced apartments, while foreign brands such as Oakwood and Fraser have been seeking opportunities. Despite this, significant challenges remain for any large-scale serviced apartment operator, notably that without legal provision for block purchases management firms need either to purchase units individually or develop a greenfield project themselves.

Beyond the capital a number of projects have also been launched, mainly in the tourist centres of Khuvsgul, Gobi and Terelj. While smaller than projects in the capital, the focus has increasingly been on high-end accommodation. Competing with the luxury Three Camel Lodge run by Nomadic Expeditions since 2002, the five-star Khan Uul hotel with 30 rooms recently opened in Dalanzadgad in the Gobi. The Khan Ger Group, which runs the chain of Nomads restaurants in Mongolia’s main cities, has launched a collection of hotels starting with a development in the Gobi, which it aims to complete in 2013. The Max Group plans to develop two more hotels with Ramada beyond Ulaanbaatar in the coming years. With the rush to develop high-end hotels, associations in the sector are now encouraging mid-range developments as well. “Given the number of top-range hotels now under development we must actively encourage new one- to three-star hotels, especially in the capital,” Erdenebat told OBG.

MICE CAPACITY: The growing business interest in Mongolia has also spurred growth in meetings, incentives, conventions and exhibitions (MICE), particularly in the former two. The majority of larger conferences are linked to mining and investment, with the emergence of a number of larger events including Discover Mongolia, a mining conference which has been organised by Mongolia Investment Holding for 10 years. Held at the Children’s Palace, however, capacity for hosting larger events remains constrained.

Of the six main meetings facilities in Ulaanbaatar, including the Blue Sky, Hotel Mongolia and the Kempinski, among others, the largest can handle just over 200 participants. Events such as the Mongolia Economic Forum, Coal Mongolia and Metals Mongolia are held at the Grand Khural, Mongolia’s parliament, while others including the Building & Construction Mongolia are held at the Buyant Undra wrestling stadium near the airport. The new Shangri-La, Radisson Blu and Hilton will all add some capacity, yet the largest of the three, the Shangri-La, will only handle some 300 people. The Corporate Hotel has plans develop its own larger convention centre, linked to the MNCCI, although details had yet to emerge at the time of writing.

Nonetheless, hotels and tour operators see potential in smaller events. “The MICE market presents a crucial opportunity for hotels to compensate for very low occupancy rates in the low season: they must cater to all possible niches to smooth out the high fluctuations in visitor numbers,” Indraa told OBG. Tour operators have in the past two years been focusing on attracting incentive trips, such as regional board meetings and corporate retreats, from financial centres like Shanghai, Beijing, Hong Kong and Singapore. The new mayor of the capital has expressed support for MICE tourism, forging ahead with much-needed transport infrastructure upgrades and announcing a desire to develop a large convention centre for the capital in coming years.

RESOURCE STRAINS: The WTTC estimates that the travel and tourism sectors employed some 34,500 staff directly in 2011, or 2.9% of all formal employment, although the MTA notes that employment in tourism directly amounts to just 12,000. Staff requirements are, however, expected to increase over the medium term, with projected growth of 5.1% in 2012 and a total of 5500 new positions forecast to be created over the next decade. Although there are an estimated 20 training courses for the sector, with the largest run by University of Mongolia, tourism has increasingly been a training ground for bilingual Mongolians whom are poached by mining firms looking to boost their human resources, from drivers to translators, accountants and guides.

The high seasonality of tourism has proved a handicap to its appeal for human resources, but rapidly rising wages in the mining sector and government have vastly out-flanked inflation in the sector. Indeed, the average 20% wage inflation in tourism according to tour operators has been over-shadowed by the 53% rise in public sector wages in early 2012 and similar increases in the mining sector. Mining-related inflation and a strengthening of the currency in both 2010 and 2011 have led to concerns from private operators over rapidly increasing prices without related improvements in quality of service and infrastructure, which runs the risk of pricing Mongolia out of the international market.

Competition with mining has also raised criticisms over zoning regulations. Five years ago national parks and protected areas comprised some 14% of Mongolia’s territory, with this figure now at 9%, as zoning rules for mining are not strictly applied, B. Indraa told OBG.

Despite the passing of a law on protected zones in 2009 covering national parks, water reservoirs and forested areas (which only account for an estimated 7% of Mongolia’s landmass), concerns persist in light of proposals to amend the law to allow limited mining exploration in protected areas.

OUTLOOK: The expansion of tourism may have been overshadowed by fast economic growth, but it remains a tribute to the country’s vibrant private sector and the attractions of the pristine landscape. A longer-term government policy for the sector is required to protect the industry from any negative effects from the mining industry. The ministry’s narrow focus on ad-hoc international promotion must also be broadened to develop the full potential of Mongolia’s different tourism products. Sports and cultural heritage in particular play on some of the country’s unique traits, which other destinations will have difficulty emulating.

While the development and expansion of new hotel and MICE infrastructure in Ulaanbaatar is necessary to cater to growing business travel, the government will certainly need to pay close attention to supporting smaller ecotourism projects and initiatives in the countryside in order to preserve options for leisure tourists.