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TOURISM IN THE SEYCHELLES

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					                      TOURISM IN THE SEYCHELLES
                              Rony Gabbay and Robin Ghosh
                         Centre for Migration & Development Studies
                                  Department of Economics
                             The University of Western Australia


Abstract

In this study the authors discuss, first of all, the growth of tourism in the Seychelles since the
opening of the international airport at Anse Dejenner, Mahé in July 1971. From a relatively
small number of 3,175 tourists in 1971, the figure exceeded the 100,000 mark for the first time
in 1990. The Government of Seychelles is now planning to achieve a target of 200,000 visitors
by the year 2000. The authors have carefully examined policies and measures adopted in the
Seychelles to bring about the remarkable growth of tourism, and then they focus attention on
the potential of the Seychelles to achieve its target for tourists by the turn of the century. In
general, the conclusions in the paper are positive and optimistic.
        A second part of the paper discusses the impact of tourism on the economy of the
Seychelles. Following Brian Archer’s (1982) pioneering study, the authors have estimated
that the additional income generated by the tourism sector in the Seychelles was SR946
million in 1995. When the total contribution of the tourism sector, including hotels and
restaurants, tour operators, air transport and related services is taken into account, its
contribution to the GDP of the Seychelles (1993) was estimated at a higher level than the
combined added values of agriculture, forestry and fishing.
        The authors also analyse the employment effects of tourism in the Seychelles.




Introduction

A widespread and isolated group of small islands [113 in total - ranging from a mere 0.1
hectare in area to 15,000 hectares - in the case of Mahé Island] in the Indian Ocean, the
Seychelles gained independence in June 1976, almost 206 years to a day after the first group
of inhabitants settled there. Since then the population has increased to over 75,000 (in mid-
1995) and it is expected to reach 80,000 by the year 2000. Eighty per cent of the population
lives in Mahé, the principal island where the density is 380 inhabitants per square kilometre
(in Mauritius the density of population is 530 per square kilometre). The greater part of Mahé
is mountainous and boulder strewn forest creating a considerable shortage of land to
accommodate the increasing population. The Seychelles has no known mineral resources
except for a small deposit of guano while its undifferentiated climatic conditions and infertile
soil offer poor prospect for agricultural development. Consequently, the country depends on
                                                                                  1
imports for its basic foodstuffs. The Seychelles’ per capita income of SR30,800 (December
1995) is bolstered by the exceptionally high earnings of expatriates. The significance of a

1
       In December 1995, the exchange rate stood at SR5.00 = US$1.00 approximately.
relatively high per capita income is reduced by high taxation (over 30 per cent of GNP)
necessitated by the costs of administering a state with a small population base. The
government’s efforts to broaden the country’s economic base through industrialisation is
being constrained by a combination of factors: the small size of the domestic market,
difficulties in penetrating foreign markets because of high costs of production and transport,
absence of a favourable industrial environment, lack of an indigenous technological base,
inadequate supplies of raw materials and last but not the least, until recently, the lack of a
                                                                            2
well-defined and generous incentive package to attract foreign investments. Consequently, a
major characteristic of the Seychelles economy is its reliance upon tourism. It is the major
source of the country’s foreign exchange earnings, and contributes handsomely to gross
domestic product (GDP), government revenues, and employment.
        Finally, the country’s economic vulnerability is further compounded by its remoteness.
The Seychelles is not only ‘unique by a thousand miles’ as the tourism slogan puts it, but it is
also ‘a thousand miles from anywhere’. Whilst this remoteness is rightly exploited by the
tourism industry, it poses certain real problems for the country, such as the difficulty of
establishing viable transport and communication links, and the difficulty in containing the
landed unit cost of its imports.

Tourism in the Seychelles

The development of tourism into a major industry for the Seychelles resulted from a
conscious decision taken in the light of the need to diversify the economy from its near
complete dependence on agriculture and fisheries. That decision taken in 1964, involved the
construction of an international airport at Anse Dejeuner, Mahé, which opened for its first
scheduled service by jet aircraft on 4th July 1971. Over the following twenty five years, there
has been a period of rapid development of the tourism industry and the infrastructure
necessary to support that industry. The natural beauty of the Seychelles, its year round
sunshine, its coral sand beaches fringed with tropical vegetation and backed by attractive
mountain ranges and its heterogeneous culture and racial compositions have facilitated, if not
encouraged the development of tourism. When the country received its independence in 1976,
tourism remained central to its government’s plans for rapid economic development.

Section One: The Tourism Industry

1. Number of Tourists

The opening of the new international airport in 1971 meant that the Seychelles’ immense
tourism potential could begin to be realised. Between then and 1979 the number of visitors
multiplied 25 times, from 3,175 to 78,852. The annual average growth rate was over 49 per
cent in this period. However, the year 1980 witnessed the beginning of a downward slide in
tourism which continued until 1983 when only 47,280 tourists - a 40 per cent decline
compared with 1979 - visited the country. Many factors combined to create and lengthen the
duration of the slump; these included: economic recession in the European major source
markets, rising airfares, poor marketing, falling hotel standards, competition from rival
tropical island holiday resorts and a 15 per cent revaluation of the rupee in March 1981 - all of
which made holidays in the Seychelles more expensive compared with Mauritius and Kenya
2
       In December 1994 an Investment Promotion Act (IPA) was approved to promote and
       facilitate investment in the country.



                                               2
(both of which, incidentally, devalued their currencies in that period). There was also the
adverse publicity following a failed mercenary attack in November 1981 which created the
rumours of ‘lack of safety’ in the country. Moreover, the imposition in January 1981 of a
departure tax of SR100 which was substantially higher than a similar tax in Mauritius, did not
help the industry. The situation worsened when both British Airways and Lufthansa, decided
to withdraw their scheduled air services from the Seychelles.
        The government’s response was a two-pronged strategy to upgrade tourist facilities: (i)
to go for upmarket tourism, and attract a wealthier clientele and (ii) to publicise opportunities
for tourism in the Seychelles. To this later end, a Seychelles Tourist Board was set up to
present an attractive image through the travel media and a major European advertising
campaign was launched. Also, a gaming bill was approved by the People’s Assembly in May
1982, allowing hotels to open Casinos for the first time. By 1983 the government’s
determined drive began to pay off and the number of tourists started to rise to 55,867 in 1983,
63,417 in 1984 and 72,542 in 1985 (still 8.7 per cent below the peak of 1979). The average
length of stay in 1985 was 11.0 days, well up on 9.1 days in 1979. As a consequence, the
number of visitor-nights, the most accurate indicator of activity in the tourism sector was a
record high of 798,000 in 1985, some 11.4 per cent above the level of 717,553 in 1979. The
revival may be largely attributed to work by the parastatal tourist offices, such as the National
Travel Agency (NTA) and the Seychelles International Safari Air (SISA), which joined
together in promoting an all-in package with flights direct from Germany by Air Seychelles
and British Caledonian Airline.
        In 1990 the number of tourists exceeded the 100,000 mark for the first time; it was the
fourth consecutive year that the Seychelles had realised healthy growth in the tourism sector
after some poor years during the early 1980s. Visitor arrivals rose by 20.6 per cent in 1990
compared with an 11.2 per cent increase in 1989. This increase had been achieved against
fairly unfavourable conditions prevailing in the international travel and tourism market, and
must be attributed to two main factors: the acquisition by Air Seychelles of its new Boeing
767 in July 1989, and the conclusion of an agreement with Air Mauritius in November 1989
which provided a weekly service linking the Seychelles with London, Paris and Mauritius. A
vigorous tourism promotion campaign was carried out in France in 1989, and this resulted in a
53.3 per cent increase in arrivals of French tourists.
        The Gulf War of 1991 had an adverse impact on tourism. The rise in the price of
aviation fuel led to an increase of about 8 per cent in both domestic and international airfares.
This, together with fears of terrorism induced holidaymakers to stay at home. As a result, total
arrivals during the first half of 1991 were more than 19 per cent below the corresponding level
of the previous year. Much of the decline was caused by three major European markets:
France, Italy and the UK, registering falls of 46.2 per cent, 63.3 per cent and 23.6 per cent
respectively. The total visitor arrival figures could have been worse had it not been for a
record level of arrivals from Africa, which rose by over 75 per cent. The Gulf crisis taught the
authorities in the Seychelles two lessons. First, the heavy dependence on tourism exposed the
islands’ vulnerability to international fluctuations. Second, the geographical concentration of
the tourists from Europe underlined the need to diversify the markets away from Europe.
        A substantial jump in tourist arrivals took place in 1993 due mainly to Air Seychelles
extending its air network. In March 1993 Air Seychelles took delivery of its second Boeing
757 aeroplane and immediately began operation of its weekly non-stop flights to Paris,
Frankfurt, Zürich, Rome, Bahrain, Singapore, Nairobi, and Johannesburg. It also ran two
flights a week to London and a new route to Madrid via Nairobi. The result was a spectacular
rise of 18 per cent in the number of tourists from 98,547 in 1992 to 116,180 in 1993. Much of
the growth was from France, Germany and the UK.



                                               3
        Alarmed by the drop in tourist arrivals during 1994, the government decided to set up
a tourism marketing fund with an allocation of SR10 million under the 1995 budget. The
Ministry of Tourism prepared a new marketing strategy emphasising the islands’ scenic
beauty and the uniqueness of their flora and fauna. European television companies were
encouraged to make nature programmes on the islands; documentaries by a French television
channel were heavily subsidised; last but not the least, the Ministry of Tourism was host to 90
journalists from Germany, who were flown in by Condor (a subsidiary of Lufthansa) to
publicise the tourists attractions of the Seychelles and help to push up tourist arrivals from
Germany. These efforts paid off handsomely, and in 1995 a total of just over 120,000 tourists
(excluding visitors with docking cruise ships), entered the Seychelles. This total represents an
all time record number, being 9 per cent higher than the 1994 figure and well in excess of the
3.8 per cent global rise in tourism in 1995.
        Table 1 provides an analysis of visitor arrivals, visitor-nights and cruise ship passenger
arrivals over the period 1970-1995. Figures just released show arrivals during the first five
months of 1996 (57,850 tourists) were 11.6 per cent higher on 1995 figures for the same
period. All in all, the forecast for 200,000 visitors by the year 2000 may look rather optimistic
at this point in time, but this rate of growth is certainly possible although its achievement
would require massive investments in tourist accommodations and intensive promotion
overseas.

Table 1: Visitors and Cruise Ship passengers 1970-1995
                                                                                      1
Year          Visitors arrivals      Average length of stay           Visitors nights             Cruise ship
                                                                                                   2
                     (number)                       (nights)                  (1,000)    passengers (number)
1970                     1,622                          42.3                       69                  1,340
1971                     3,175                          28.5                       90                  4,250
1972                    15,197                          13.1                      199                  4,623
1973                    19,464                          10.5                      204                  5,965
1974                    25,932                          10.2                      265                  3,321
1975                    37,321                          11.1                      414                  5,189
1976                    49,498                          11.5                      569                  3,178
1977                    54,490                          11.0                      599                  2,598
1978                    64,995                           9.6                      624                  3,324
1979                    78,852                           9.1                      718                  3,454
1980                    71,762                           9.0                      646                  4,264
1981                    60,425                           9.6                      580                  2,693
1982                    47,280                           9.7                      459                  4,505
1983                    55,867                          10.7                      598                  4,197
1984                    63,417                          10.8                      685                  6,310
1985                    72,542                          11.0                      798                  4,027
1986                    66,782                          11.7                      781                  2,855
1987                    71,626                          11.4                      817                  4,573
1988                    77,401                          11.0                      851                  2,876
1989                    86,093                          10.7                      921                  1,549
1990                  103,770                           10.1                    1,048                  7,564
1991                    90,050                          10.5                      946                  7,618
1992                    98,547                          10.2                    1,005                  8,688
1993                  116,180                            9.6                    1,115                  9,594
1994                  109,901                           10.1                    1,110                  9,897
1995                  120,716                            9.5                    1,147                  8,422
Source: Statistics Division, Migration & Tourism Statistics, and Management Information Systems
        Division: Migration & Tourism Statistics 1995, Mahé, February 1996.
Notes: 1. Visitor-nights are calculated as Visitor-arrivals multiplied by average length of stay.
        2. Cruise passengers are not included as “visitors”. [Source: Ministry of Tourism & Transport.




                                                       4
2. Arrivals by Country of Residence

As can be seen from Table 2, the leading tourist market is in Europe. Between 1979 and 1984,
tourists from Western Europe constituted no less than 62.6 per cent of all tourists and reached
75.5 per cent in 1985. For the following decade the percentage fluctuated between 71.7 per
cent during the 1991 Gulf War to the record of 83.2 per cent in 1987. In absolute numbers
1995 registered almost 93,000 tourists from Europe, which represented a jump of 70 per cent
over 1985 - a compound rate of annual growth of 5.6 per cent. Within Europe the highest
preference goes usually to French holidaymakers 20.6 per cent in 1995, followed by West
Germans (15.9 per cent of all tourists), British (14.6 per cent), Italians (9.5 per cent) and the
Swiss (4.2 per cent). In 1988 and again in 1989 the British tourists contributed the highest
percentages (25.8 and 22.5 respectively) but their numbers showed a steady decline to 14.6
per cent (17,617) in 1995 due mainly to economic factors in Britain. The inauguration of the
Madrid-Mahé air route by Air Seychelles in mid-1994 brought a noticeable jump in the
number of Spanish tourists, who by 1995 ranked the sixth largest group of tourists after the
French, German, British, Italian and the South African tourists. Visitors from Africa, mainly
South Africans, used to represent 23-25 per cent of all visitors in the mid-seventies, but the
banning in September 1980 of all South African Airways flights to and from the Seychelles
resulted in a considerable drop in arrivals from 3601 in 1980 to 949 in 1987. The trend
reversed itself from 1990 onwards. Indeed 1991, the Gulf War year saw a record number of
tourists from South Africa visiting the islands. In that year, a total of 11,774 visitors from
South Africa visited the Seychelles, and to a great extent offset the drop of tourists from
Europe as a result of the War.
        Another important recent development is tourism from Japan. As a result of a
promotional campaign in the city of Tokyo, over 18,000 Japanese tourists visited the
Seychelles between 1981 and 1985. However, the decision by British Airways to abandon its
Japan to Johannesburg route (which had a stop-over in the Seychelles) from mid-January 1986
resulted in a sharp drop in the number of visitors from Japan. In 1994, Air Seychelles started a
second weekly flight to Singapore and with Singapore Airlines introduced a special package
to attract tourists from Japan, Singapore and the Far East. The process proved rather slow. In
1995, over 4,000 tourists from the Far East came to the Seychelles. In this respect tourism
from Oceania has also been on the decline from 1,505 in 1979 to 869 in 1995. Again, the
Seychelles is hardly known to the Americans and if it was not for the stationing of American
personnel at the satellite tracking station in Mahé, the number of Americans visiting the island
would have been much less than the 1300-1900 who came each year between 1985-1992.
However, since 1993, a rise in American tourists was noticeable. The numbers were 3,123 in
1993, 2,732 in 1994 and 5,235 in 1995. Now, that the US Government has decided to close
down the tracking station and downgrade its diplomatic mission, the authorities in the
Seychelles are expecting a substantial fall in the number of American visitors in the coming
years.
        The fluctuations in the number of tourists arriving in the Seychelles over the years
have gone hand in hand with promotion campaigns and the opening up of new routes. As a
rule, whenever the Seychelles Tourism authorities and/or Air Seychelles conducted
promotional campaigns, offered special packages, hosted foreign travel agents, or opened new
routes, the efforts were successful and the following seasons saw an impressive increase in
tourist arrivals. In 1995 Air Seychelles introduced the Islands to Israeli tourists, the campaign
brought about 3,000 Israeli tourists during the first five months of 1996. Whether this market
will continue to grow once the special package is withdrawn is not easy to know at this stage.




                                               5
Table 2: Visitors Arrived by Country of Residence: 1979-1995
                    1979     1980   1981   1982   1983        1984     1985 1986 1987 1988 1989       1990    1991             1992     1993     1994    1995
TOTAL               78,852   71,762 60,425 47,280 55,867      63,417   72,542    71,626 77401 86,093 103,770 90.,500           98,547   116,180 109,901 120,716
EUROPE              50,805   45,894 37,831 29,910 37,763      44,533   54,753    59,621 64184 68,613 81,236 64,555             79,329    93,898 89,530 92,868
France              14,577    9,903 9,352 7,846 8,820         11,054   12,174    13,906 14304 16,278 21,900 15,193             21,360    26,615 22,293 24,903
UK & EIRE           12,925   10,414 7,900 4,826 4,065          7,803    9,837    16,856 19935 19,346 19,207 14,877             14,322    18,910 19,271 17,617
W. Germany           5,194    8,837 6,417 5,079 9,759          8,555   10,085     5,276 5501 7,371 9,018 9,321                 12,950    18,476 20,560 19,258
Italy                8,479    9,097 8,599 6,470     5667       7,101   11,444    14,358 14604 15,175 19,281 15,238             20,878    14,355 12,118 11,477
Switzerland          3,540    2,318 1,621 2,473     6192       5,845    5,637     3,346 3126 2,882 2,771 2,520                  2,641     3,788   3,881   5,104
Austria              1,449    1,356 1,096     810    966       1,075    1,024       855 601      632     685     879              844       939   1,187   1,311
Belgium &
Luxembourg           1,247    823       556     548     856      788      879            701    862    801    986 1,014 1254              1,580    1,320  1,287
Netherlands            438    385       243     178     178      382      752            233    357    322    272    341    424             432      485    756
Scandinavia          1,337 1,345      1,081     752     587      715    1,580          2,308   2358 2,047 2,103 1,369 1551                1,901    2,132  2,310
Spain & Portugal     1,335 1,008        683     660     361      712      736          1,150   1318 1,638 2,754 2,119 2,224               5,490    4,008  5,213
Other Europe           284    408       283     268     312      503      605            632   1218 2,121 2,259 1,684       881           1,412    2,275  3,632
AFRICA              13,632 12,068     9,420   7,114    8049    9,986    7,985          5,640   7957 11,173 15,871 18,825 12,167          13,541   11,011 14,263
Reunion              1,919 1,364        899     937    1179    2,209    1,744          1,670   1348 2,091 2,131 3,543 2,140               3,308    2,456  3,540
Mauritius              870    908       668     653     499      515      569            388    606    885 1,072     968 1,209            2,354    1,618  2,027
East Africa (1)      3,749 3,463      2,371   2,061    2155    1,753    1,885          1,311   1432 1,309 1,287 1,135 1,375               1,150    1,077    948
South Africa         3,646 3,601      3,402   2,020    2676    3,516    2,001            949   2947 5,056 9,897 11,774 6,065              5,039    4,718  6,531
Other Southern
Africa (2)           1,153   1,059      847     429     389      437      460            358    700     873      574     550     516        430       399      313
Other Africa         2,295   1,673    1,233   1,014    1151    1,556    1,325            964    924     959      910     855     862      1,260       743      904
ASIA                 9,258   8,822    8,122   7,255    7574    6,583    7,418          2,890   2733   3,273    3,545   3,760   4,094      4,038     5,293    6,442
MIDDLE EAST          2,361   2,390    2,354   1,805    1792    1,459    1,425          1,916   1779   1,870    1,873   1,806   1,911      1,758     2,092    2,013
INDIAN Sub Co        2,494   2,101    1,260     992     874      704      568            202    262     419      339     479     665        517       585      885
Hong Kong            1,277     805      380     508     265      324      574             47     36      71      250     237     219        188       120      182
Japan                2,031   2,254    3,390   3,380    3931    3,284    4,065            344    268     371      481     463     504        939     1,182    1,423
Other Far East       1,095   1,272      738     570     712      812      786            381    388     542      602     775     444        403       377      984
Singapore                -       -        -       -       -        -        -              -      -       -        -       -     351        233       937      955
OCEANIA              1,505   1,272    1,106     697     483      439      502          1,002    330     443      504     504     460        924       700      869
Australia               na      na      845     537     347      311      382             na     na      na       na      na      na         na        na
AMERICA              3,652   3,706    3,946   2,304    1998    1,876    1,884          2,473   2197   2,591    2,614   2,406   2,497      3,779     3,367    6,274
USA                  2,665   2,877    2,848   1,725    1694    1,442    1,329          1,721   1624   1,913    1,938   1,836   1,843      3,123     2,732    5,235
Other America          987     829    1,098     579     304      434      555            752    573     678      676     570     654        656       635    1,039

Source: Statistics Section from Disembarkation Cards. Notes: (1) East Africa includes: Kenya, Tanzania, Uganda. (2) Botswana, Lesotho, Swaziland, Namibia, Zambia,
Malawi and Zimbabwe.




                                                                                         6
Visitors Arrived by Country of Residence: 1979-1995 (In Percentage)
                     1979    1980     1981    1982    1983     1984 1985 1986 1987 1988 1989 1990 1991              1992    1993    1994 1995
TOTAL                100.0   100.0    100.0   100.0   100.0    100.0 100.0    100.0 100.0 100.0 100..0 100.0        100.0   100.0   100.0 100.0
EUROPE                64.4    64.0     62.6    63.3    67.6     70.2 75.5      83.2 82.9 79.7 78.3 71.7              80.5    80.8    81.5 76.9
France                18.5    13.8     15.5    16.6    15.8     17.4 16.8      19.4 18.5 18.9 21.1 16.9              21.7    22.9    20.3 20.6
UK & EIRE             16.4    14.5     13.1    10.2     7.3     12.3 13.6      23.5 25.8 22.5 18.5 16.5              14.5    16.3    17.5 14.6
W. Germany             6.6    12.3     10.6    10.7    17.5     13.5 13.9       7.4 7.1 8.6        8.7 10.4          13.1    15.9    18.7 15.9
Italy                 10.8    12.7     14.2    13.7    10.1     11.2 15.8      20.0 18.9 17.6 18.6 16.9              21.2    12.4    11.0   9.5
Switzerland            4.5     3.2      2.7     5.2    11.1      9.2   7.8      4.7 4.0 3.3       2.7    2.8          2.7     3.3     3.5   4.2
Austria                1.8     1.9      1.8     1.7     1.7      1.7   1.4      1.2 0.8 0.7       0.7    1.0          0.9     0.8     1.1   1.1
Belgium &
Luxembourg                1.6     1.1    0.9      1.2     1.5       1.2    1.2           0.9 1.1 0.9        0.9   1.1    1.3 1.4     1.2  1.1
Netherlands               0.6     0.5    0.4      0.4     0.3       0.6    1.0           0.3 0.5 0.4        0.3   0.4    0.4 0.4     0.4  0.6
Scandinavia               1.7     1.9    1.8      1.6     1.1       1.1    2.2           3.2 3.0 2.4        2.0   1.5    1.6 1.6     1.9  1.9
Spain & Portugal          1.7     1.4    1.1      1.4     0.6       1.1    1.0           1.6 1.7 1.9        2.6   2.4    2.3 4.7     3.6  4.3
Other Europe              0.4     0.6    0.5      0.6     0.6       0.8    0.8           0.8 1.6 2.5        2.2   1.9    0.9 1.2     2.1  3.0
AFRICA                   17.3    16.8   15.6    15.0     14.4     15.7 11.0              7.9 10.3 13.0 15.3 20.9 12.3 11.7 10.0 11.8
Reunion                   2.4     1.9    1.5      2.0     2.1       3.5    2.4           2.3 1.7 2.4        2.1   3.9    2.2 2.8     2.2  2.9
Mauritius                 1.1     1.3    1.1      1.4     0.9       0.8    0.8           0.5 0.8 0.1        1.0   1.1    1.2 2.0     1.5  1.7
East Africa (1)           4.8     4.8    3.9      4.4     3.9       2.8    2.6           1.8 1.9 1.5        1.2   1.3    1.4 1.0     0.9  0.8
South Africa              4.6     5.0    5.6      4.3     4.8       5.5    2.8           1.3 3.8 5.9        9.5 13.1     6.2 4.3     4.3  5.4
Other Southern
Africa (2)                1.5     1.5    1.4      0.9     0.7       0.7    0.6           0.5 0.9 1.0        0.5   0.6    0.5 0.4     0.4  0.3
Other Africa              2.9     2.3    2.0      2.1     2.1       2.5    1.8           1.3 1.2 1.1        0.9   0.9    0.9 1.1     0.7  0.7
ASIA                     11.7    12.3   13.4    15.3     13.6     10.4 10.2              4.0 3.5 3.8        3.4   4.2    4.2 3.5     4.8  5.3
MIDDLE EAST               3.0     3.3    3.9      3.8     3.2       2.3    2.0           2.7 2.3 2.2        1.8   2.0    1.9 1.5     1.9  1.7
INDIAN Sub Co             3.2     2.9    2.1      2.1     1.6       1.1    0.8           0.3 0.3 0.5        0.3   0.5    0.7 0.4     0.5  0.7
Hong Kong                 1.6     1.1    0.6      1.1     0.5       0.5    0.8           0.0 0.0 0.0        0.2   0.3    0.2 0.1     0.1  0.1
Japan                     2.6     3.1    5.6      7.1     7.0       5.2    5.6           0.5 0.3 0.4        0.5   0.5    0.5 0.8     1.1  1.2
Other Far East            1.4     1.8    1.2      1.2     1.3       1.3    1.1           0.5 0.5 0.6        0.6   0.9    0.4 0.3     0.3  0.8
Singapore                   -       -       -       -        -        -       -            -     -      -     -      -   0.3 2.0     0.8  0.8
OCEANIA                   1.9     1.8    1.8      1.5     0.9       0.7    0.7           1.4 0.4 0.5        0.5   0.6    0.4 0.8     0.6  0.7
Australia                  na      na    1.0      1.0     0.6       0.5    0.5            na    na    na     na    na     na    na     na  na
AMERICA                   4.6     5.2    6.5      4.9     3.6       3.0    2.6           3.4 2.8 3.0        2.5   2.7    2.5 3.3     3.1  5.2
USA                       3.4     4.0    4.7      3.6     3.0       2.3    1.8           2.4 2.1 2.2        1.9   2.0    1.9 2.7     2.5  4.3
Other America             1.3     1.2    1.8      1.2     0.5       0.7    0.8           1.0 0.7 0.8        0.6   0.7    0.6 0.6     0.6  0.9
Source: Statistics Section from Disembarkation Cards. Notes: (1) East Africa includes: Kenya, Tanzania, Uganda. (2) Botswana, Lesotho,
Swaziland, Namibia, Zambia, Malawi and Zimbabwe.




                                                                                         7
Air Access

Until 1990 Air Seychelles, the national airline, leased two Boeing 707s for its international
routes. The acquisition in 1990 of a new Boeing 767 gave the airline a reliable service to the
major European cities and to Singapore. In March 1993, Air Seychelles acquired a second
aircraft - a Boeing 757 - under a lease-purchase scheme from International Lease Finance
Corporation of Beverly Hills, California. The deal was worth US$65 million to be paid over
seven years. The new aircraft took over the services to Singapore and Johannesburg (until
then provided by the larger Boeing 767) and also flies to Rome and Madrid. The larger
Boeing 767 concentrated on north European destinations: London, Paris, Frankfurt and
Zürich.
        In March 1995 air links between South Africa and the Seychelles improved with a new
weekly service, provided by a subsidiary of the South African Airways, Inter Air. The route
                                                                                3
chosen by the airline provided a link to the neighbouring island of Madagascar.


Air Lines          Destination                  Mid-June 1985      Mid-June 1996
                                               (Frequency/week)   (Frequency/week)
Air Seychelles     Bombay - Dubai                     -                  1
                   Frankfurt                          1                  1
                   Jeddah                             2                   -
                   Johannesburg                        -                 1
                   London                             2                   -
                   Nairobi - Madrid                    -                 1
                   Paris - London                     -                  1
                   Rome - London                       -                 1
                   Rome - Zürich                      1                  -
                   Singapore                          -                  2
                   Tel-Aviv                            -                 1
                   Zürich - Manchester                 -                 1
Air France         Mauritius                          1                  3
                   Djibuti - Paris                    2                  -
                   Jeddah - Paris                     1                   -
                   Paris                               -                 3
British Airways    Mauritius                          1                  2
                   Bahrain - London                   1                   -
                   London                              -                 2
Aeroflot           Djibuti - Cairpo - Moscow          1                   -
                   Tannarive                          -                  1
                   Bubai - Moscow                      -                 1
Kenya Airways      Nairobi                            1                   -
Safari Airways     Cairo - Basel                       -                 1
                   Frankfurt                          1                  -
Air Mauritius      Mauritius                          1                   -
Air Austral        Mayotte - Reunion                   -                 1
Inter Air          Tanarive - Johannesburg            -                  1

       In October 1995, Air Austral, a French-owned airline started a weekly link with
Mayotte and Reunion. This link proved to be extremely important to Air Seychelles. With this
new flight, passengers from the Comoros islands got an easy access (using Air Seychelles
services) to Paris, Bombay, Dubai and Singapore. Indeed, the benefit to Air Seychelles was

3
           Interviews: July 1996.



                                                    8
enormous, as the Comorian passengers have enabled the Mahé-Singapore route to become
very profitable.
         Also in December 1995, Air Seychelles announced two new long-haul services to Tel-
Aviv (became operational in April 1996) and to Manchester.4
         Over the years there has been mounting pressure on the government to allow the
landing of charter flights to cater for low income tourists to the islands. The government has
always resisted this pressure for two main reasons: first, to maintain the Seychelles as an up-
market destination for the well-to-do tourists and secondly, the recognition that mass tourism
could undermine the fragile environment of the islands. And yet when in mid-1991 the
negotiation with Alitalia for regular flights to the islands proved difficult, the government
                                                                                              5
agreed to the proposal from Alitalia to operate 17 charter flights starting in December 1991.
         In early 1990 Air Seychelles computerised its booking, reservation and ticketing
service which brought about an increase in the national airline’s share of the passenger
market.6
         In December 1989 the Seychelles and Malaysia signed an agreement permitting their
national airlines to resume regular flights between the two countries. The agreement also
provided for the two airlines to fly on to other destinations via Malaysia and the Seychelles.
At the time, there was high expectation in the Seychelles for a new lucrative route tapping the
rich Malaysian market, but the expectation faded away very quickly when the promotional
campaign depicting the Seychelles as islands of leisure and pleasure clashed head-on with
Malaysian Islamic traditions and values, as a result the aviation agreement was never
               7
implemented.
         In 1990 and again in 1993 the Seychelles conducted intensive negotiations with Japan
hoping to reach a bilateral agreement to establish an air link with Tokyo without success.
Indeed, Air Seychelles has kept its landing rights in Singapore active in spite of the route
being under-utilised, in the hope of attracting Japanese visitors via Singapore. Also, many
promotional campaigns were conducted in Japan, but the results were disappointing. The
Japanese have on average 15 days’ annual holiday and the journey from Japan to the
Seychelles takes almost two days each way, thereby making it difficult for the Japanese to
visit the Seychelles on a tight time-schedule. The Japanese can possibly find equally attractive
and idyllic environment in the Pacific islands and in Australia.
         As early as 1990 the Seychelles turned to East Europe to tap the tourist market there.
In April 1990 the Seychelles and Yugoslavia signed an agreement providing landing rights to
each other’s airlines in their respective countries.8
         In April 1991 the Seychelles lifted the 11 year ban on South African Airways (SAA),
and announced its intention to allow Air Seychelles to operate flights to Johannesburg. Since
April 1992 South African tourists have been coming to the Seychelles in large numbers using
two weekly flights by Air Seychelles and Madagascar Air. It is expected that South African


4
       Nation, 10 December 1995.
5
       Nation, 13 December 1991.
6
       Interview with Air Seychelles manager - July 1996.
7
       Interview with Seychelles Civil Aviation Director - July 1996.
8
       EIV Country Report, No. 3, 1990.



                                               9
Airways would soon inaugurate its operation to the Seychelles.9
        In February 1992 Air Seychelles expanded its fleet by taking delivery of its fourth De
Havilland Twin offer: these 2- seater aeroplanes are being used on domestic routes linking up
the major islands.10 Again, in February 1992, an agreement was signed with Kenya allowing
Kenya Airways traffic rights between Nairobi, the Seychelles and Mauritius on a twice
weekly basis. In exchange, Air Seychelles was granted traffic rights between Nairobi and
Madrid.11
        When Air Seychelles took delivery of its second Boeing aircraft - a Boeing 757 - in
March 1993 it immediately formalised the operations with Iberia - the Spanish national
airlines and initiated the Mahé-Madrid route via Nairobi.

3. Seasonality

The Seychelles is fortunate in not having marked seasonal variations in tourist arrivals, which
partly reflects the islands’ favourable year round climate (average temperature 280C) - a major
attraction to winter-bound Europeans. The West Germans tend to arrive in larger numbers in
January, March and August; the Italians favour December, February and October; the British
tourists are keen on the period from June to September; and the French tourists arrive in
greater numbers in July, August, November and December. In fact, total arrival figures by the
month of arrival show that December is the most popular month, followed by March and
August, with June being the least busy - but the peaks and troughs are very flat (see Table 3).
        Nevertheless, special holiday packages for the low season (April, May, June,
September) could increase capacity utilisation within the industry.

Table 3: Visitors Arrivals: Seasonal Index 1979-1995
Month          1979    1980     1985     1990    1995
January           97      99      92       106    110
February         109     123     104       103    108
March             95     126     124        94    107
April           110       93      97        95     89
May               88      73      88        92     73
June              78      78      82        74     66
July            121       95      99       108    108
August          122      125     114       113    107
September         95      82      92        78     81
October           98      97      88       103    112
November          87      96      96       101    105
December         100     114     124       131    134
Range             44      53      70        57     68
Note: In each column 100 measures average monthly arrivals for the
year concerned.
Purpose of Visit


9
        Interview July 1996.
10
        Nation, 3 March 1992.
11
        Nation, 13 March 1992.



                                                    10
The majority of all visitors (over 80 per cent) mention ‘holiday’ as the purpose of their visit to
the Seychelles (see Table 4). However, the numbers of business visitors started to rise since
1990 and in 1995 almost 8 per cent of all visitors were business persons. Also on the increase
were those visitors, mainly from Mauritius and the African continent who made a 1-3 days
stop-over in the islands and declared themselves as in ‘transit’. In addition, the former
Seychelles residents have been coming back in increasing numbers in recent years, to visit
relatives and friends. They are not tourists nor are they on business.12

Table 4: Visitor arrivals by purpose of visit: 1988-1995
           Total           Holiday       Business    Holiday/Business    Transit     Others/Not stated
Year               (%)            (%)            (%)              (%)            (%)               (%)
1988     77,401    100    71,381 92.2    4,843 6.3       240       0.3    727 0.9       210         0.3
1989     86,093    100    79,348 92.2    4,231 4.9       254       0.3 1,251 1.5 1,009              1.1
1990    103,770    100    92,985 89.6    4,219 4.1       390       0.4 4,869 4.7 1,307              1.2
1991     90,050    100    82,890 92.0    4,131 4.6       319       0.4 1,080 1.2 1,630              1.8
1992     98,547    100    85,651 86.9    7,226 7.3       394       0.4 2,734 2.8 2,542              2.6
1993    116,180    100    93,034 80.1    9,156 7.9       389       0.3 8,843 7.6 4,758              4.1
1994    109,901    100    92,831 84.5    8,556 7.8       445       0.4 3,541 3.2 4,528              4.1
1995    120,716    100    94,455 78.2    9,642 8.0       524       0.4 10,614 8.8 5,481             4.6
Total   802,658    100   692,575 86.3   52,004 6.5     2,955       0.4 33,659 4.2 21,465            2.6

Table 5: Visitor Departures: Distribution of Length of Stay: 1977-1995
Year                           Lengths of stay (nights)                       Average length of
                                                                                   stay (nights)
          0 1-2      3-6 7-8 9-13 14-15 16-20 21-28 29+ Total
1977    6.4    4.2 16.2 27.9       9.0     23.4     2.6 10.3       na 100.0                11.0
1978    7.4    7.4 17.1 29.3       8.5     18.6     2.2    6.9    2.7 100.0                 9.6
1979    7.6 11.8 17.4 25.9         9.0     15.9     3.0    7.5    1.9 100.0                 9.1
1980    7.6 14.6 15.2 24.8         8.3     17.2     2.8    8.0    1.5 100.0                 9.0
1981    6.1 11.3 14.4 29.8         7.6     18.1     2.8    8.3    1.6 100.0                 9.6
1982    7.9    9.1 14.0 31.3       8.5     16.5     2.2    8.3    2.2 100.0                 9.7
1983    7.6    7.4 10.2 26.5 10.9          21.4     4.1 10.0      1.8 100.0                10.7
1984    8.8    5.8 10.5 25.0       9.0     24.5     2.7 12.0      1.7 100.0                10.8
1985    7.2    5.5   8.1 27.3      7.8     29.6     1.7 10.9      1.8 100.0                11.0
1986    1.4    4.1 11.0 30.4 10.3          24.8     2.8 11.0      2.5 100.0                11.7
1987    0.7    3.1 14.1 31.0 10.9          24.4     2.8 10.8      2.1 100.0                11.4
1988    0.9    3.4 14.7 31.0 13.8          21.5     3.4    8.8    2.2 100.0                11.0
1989    1.0    3.7 15.2 32.7 14.3          20.0     3.4    7.7    1.9 100.0                10.7
1990    4.1    4.7 12.4 34.6 12.8          19.7     2.8    7.0    1.8 100.0                10.1
1991    0.9    3.7 16.3 34.6 13.7          18.2     3.6    6.9    2.1 100.0                10.5
1992    1.2    7.7 14.9 32.2 12.6          19.4     3.1    6.9    1.9 100.0                10.2
1993    3.4    9.3 21.6 20.8 21.4          12.3     4.6    4.9    1.7 100.0                 9.6
1994    1.9    6.4 22.6 22.0 23.9          11.5     5.8    4.2    1.7 100.0                10.1
1995    2.7    9.2 24.9 19.6 23.3          10.0     5.3    3.3    1.7 100.0                 9.5
Source: Migration and Tourism Statistics: 1995, Victoria, February 1996.

4. Length of Stay
On average the length of stay has been fluctuating between 9 and 11 nights. The tendency in
recent years is for an average stay of 10 nights. This average is usually uniformly distributed
throughout the year with August consistently showing a longer stay period. As a matter of
fact, almost seventy per cent of all visitors left the islands after 11 days. In 1995 that

12
         Interview with the Director General of Department of Tourism, July 1996.



                                                          11
percentage was 80 per cent of all tourists.
        The distribution of length of stay varies according to country of residence. In 1995,
visitors from Switzerland recorded the longest average length of stay (13.1), followed by UK
(13.0) and West Germany (11.0). Indians and Sri Lankans stayed 7.2 nights - the shortest
period on average. All in all 20 per cent of all tourists stayed 14 or more nights while the
majority stayed from 1 to 13 days. Ten years earlier, in 1985, the average stay was 11 nights;
but 31 per cent of all tourists stayed 14 nights and 21 per cent left after 7 nights. The change
from 1985 to 1995 must be attributed to two factors: first, the cost of holidaying in the
Seychelles has risen over the years, with an overvalued rupee adding to the cost, and
secondly, the availability of more flights per week to major source countries meant that
tourists have some flexibility in organising their flights.

Multi-Centre Visits

Visitors surveys conducted in both 1984 and 1985 showed that between 25 and 30 per cent of
all tourists came to the Seychelles after spending some time in other places: East Africa or
other India Ocean islands. This findings promoted the idea for a joint Kenya-Seychelles
holiday package. Consequently, an agreement was reached with Kenya in 1990 to develop a
two centre holiday package combining Kenyan Safari and the Seychelles beach. A proposal
was submitted to the European Common Market in 1991 but nothing came to fruition. It was
soon found that two Centre holidays would be extremely expensive. The idea of ‘two-centre
holidays’ between the Seychelles and Kenya became the core theme of an agreement signed
between the two countries in late 1993. Again no major progress has taken place since then.
         In early 1991, another venture was attempted. A passenger liner service linking
Durban with the Seychelles via Mozambique, the Comoros and Madagascar was initiated. A
liner able to take up to 900 tons of cargo and having space for 68 passengers started operation
by the South African company Sea Safaris. The liner was equipped with glass bottomed boats,
snorkelling gears and other adventures type attractions and the service was expected to be
popular with rich tourists who would be able to combine a holiday in the Seychelles with open
ocean fishing and snorkelling. However, the service was cancelled after one season because of
lack of patronage.
         In November 1994, Air Seychelles launched its second weekly flights to Singapore.
The new flight, which also stops off in Nairobi, makes the concept of a two-centre holiday all
the more feasible. Tourists from the Far East will be able to combine a beach holiday with a
safari, an increasingly popular concept in the holiday market.

The Seychelles as International Conference Centre

In order to make the Seychelles a centre for international conferences and conventions -
combining professional advancement with some leisure and relaxation, the government
initiated the construction of an international conference hall adjoining the Maison Du Peuple
at the centre of Victoria. The 400-seat building was inaugurated in late 1991 and has since
                                                                                           13
been used to attract international conventions, indirectly bolstering the tourism industry.


6. The Accommodation Sector


13
       Nation, 3 February 1992, 14 march 1994, 16 June 1995.



                                              12
Most of the Seychelles hotels are of modern standard with air-conditioning, private
bathrooms, swimming pools and sports facilities. They blend harmoniously with their natural
surroundings and by government decree none are allowed to be higher than the palm trees.
        In addition to traditional hotels accommodation the Seychelles offers the tight-budget
visitor accommodation in guestrooms, some of which were once plantation houses but have
been totally modernised for today’s tourists. Also there are some thatched properties right on
the beach for cheap accommodation.
        Until the opening of the international airport at Anse Dejeuner, Mahé on 4th July
1971, hotel accommodation did not exist for any significant number of visitors. Table 6
demonstrates the remarkable change that took place between 1971 and the present time in
number of beds, bed nights and bed occupancy.

Table 6: Number of beds, bed-nights and bed-occupancy
rates 1971-1995
Year       Average no.          Bed-nights    Bed-occupancy
                 of beds occupied (`000)             rate (%)
1972                 630               148                 64
1973                 830               160                 53
1974               1,060               200                 52
1975               1,390               316                 62
1976               1,870               450                 66
1977               1,970               487                 68
1978               2,170               485                 61
1979               2,430               563                 64
1980               2,560               526                 56
1981               2,680               467                 48
1982               2,630               359                 37
1983               2,770               491                 48
1984               2,840               568                 55
1985               2,960               671                 62
1986               2,900               672                 65
1987               2,800               675                 66
1988               3,050               706                 63
1989               3,430               763                 61
1990               3,590               872                 67
1991               3,680               750                 56
1992               3,880               784                 55
1993               3,960               830                 58
1994               4,240               840                 54
1995               4,340               835                 53
Source: Statistics Section (Hotel Returns) and Migration and
Tourism Statistics, 1995 Edition.


         The annual increase in the number of visitors from 1976 to 1979 and from 1985 to
1990 was sufficient to preserve occupancy rates over 60 per cent, but the fall in visitor arrivals
in 1980 to 1983 depressed these rates to an unprofitable level. However, from 1987 onwards
the accommodation sector witnessed a suitable expansion from 2800 beds in 1987 to 4340
beds in 1995. This growth, although matched by rising tourist arrivals impacted the average
rate of occupancy to 53 per cent in 1995. To place these figures in perspective, Worldwide
Lodging Industry 1996 reports that an international break-even room occupancy rate would be
53.2 per cent. People who seem to know well the tourist sector in the Seychelles estimate, on
the other hand, that a rate of occupancy of 50 per cent is enough to make most establishments
in the islands profitable in the Seychelles.14

14
         Interviews, July 1996.


                                                          13
        Most of the hotels and guesthouses are situated near the beaches, as is consistent with
the tourist product, and the majority are dispersed around the main island of Mahé. However,
with the expansion of tourism, hotels and guesthouses were built on other islands including
Praslin, La Digue, Bird, Denis, Poivre and Fregate Island. The rate of bed occupancy on these
islands (excluding Mahé) has generally been higher than on Mahé Island.
        The introduction of multi-party democracy in 1992-93, brought with it an air of
political stability which encouraged investment in the tourism industry. Already in 1992 we
witnessed increasing activities in building small hotels, guesthouses and self-catering
bungalows. As a result, total number of beds rose by over 31 per cent during the period 1990-
93. Visitors numbers grew about 12 per cent during the same period. Consequently, the
Seychelles has been facing an excess capacity in tourism accommodation and occupancy rates
are unlikely to improve unless visitors’ numbers are to increase substantially. This could only
happen if charter flights were encouraged, mass tourism was allowed, and a reduction in
tourism packages were undertaken.
        Hotels and self-catering accommodation account for over 80 per cent of all visitors-
nights, the remainder are in guesthouses, private houses and the homes of friends and
relatives. Also, it can be seen from Table 7 that over 70 per cent of all hotel and guest house
bed-nights are spent in Mahé, which is followed in terms of relative importance by Praslin, La
Digue, Denis and Bird. As accommodation facilities increased on these islands and with it, the
promotional campaign intensified, more and more tourists came to these islands in preference
to Mahé. This trend will intensify in future years as more islands are opened up to receive
tourists. The authorities when contemplating 200,000 tourists a year by 2000, are anticipating
that a large proportion of this influx of tourists will bypass Mahé and spend most if not all of
their holiday in other islands. To that end, a two-year project to improve the harbour facilities
on La Digue, which is possibly the most beautiful island in the Seychelles and the third largest
in terms of population, was completed in 1992. The project received Australian aid of some
SR500,000. As a result, La Digue now has a deeper and larger harbour allowing bigger
vessels to service the island from Mahé and Praslin. The harbour is the only gateway to La
Digue and is the island’s economic lifeline. Also, an SR8 million [financed by US Economic
Support Funds and the Fond D’Aide de Corporation of France] water project aimed at
improving the quality and distribution of water supplies on the island was completed in mid-
1992.
        Again, in 1994 the government spent SR7.2 million [a Grant - World Bank package]
to improve unsurfaced primary roads on the island of Praslin, the Seychelles’ second largest
resort. The project involved the surfacing of 13 km of road and contributed to the upgrading
of Praslin’s road network which was quite poor and made some beautiful parts of the island
inaccessible. Nevertheless, appropriate measures also need to be taken to improve occupancy
rates in guesthouses, which are often as low as 30 per cent.
        Table 8 shows the place of stay preferred by European and other visitors for the years
1994-95. These figures are calculated from the annual visitor surveys.




                                               14
Table 7: Number of Beds Available by Type of Accommodation and Location
                                    1985                          1990                                                      1995
                               No. of      Bed-nights Bed occupancy    No. of      Bed-nights Bed occupancy    No. of      Bed-nights Bed occupancy
                                beds occupancy (`000)       rate (%)    beds occupancy (`000)       rate (%)    beds occupancy (`000)       rate (%)
Mahé
Hotels & Self-catering         1,990            494              68    2,380            592              68    2,480            482              53
Guest & Private houses           320             34              30      350             52              41      550             68              34
Total                          2,310            528               -    2,730            644               -    3,030            550               -
% of grand total                  78             79               -       76             74               -       70             66               -

Other Islands
Hotels & Self-catering           580            132              65     690             190              75    1,010            230              63
Guest & Private houses            70             11              42     170              38              62      300             55              50
Total                            650            143               -     860             228               -    1,310            285               -
% of grand total                  22             21               -      24              26               -       30             34               -

Total
Hotels & Self-catering  2,570             626                    67    3,070            782              69    3,490            712              56
Guest & Private houses    390              45                    32      520             90              47      850            123              40
Total                   2,960             671                    62    3,590            872              67    4,340            835              53
Source: Migration & Tourist Statistics, Annual.

Table 8: Place of Stay 1994-95 (in percentages)
  Place of Stay        United        France        West     Italy   Switzerland Other  Africa Elsewhere  Overall
                     Kingdom                    Germany                         Europe
                    1994 1995 1994 1995 1994 1995 1994 1995 1994 1995 1994 1995 1994 1995 1994 1995 1994 1995
Hotel/guest house 84        94     87     96    95     97 94 97      99     97 96 93 92 84 96 92        92    94
Family/friends       14      6      5      4    5       2 4       2   1      3  4    3 8    12 4    5   5      4
Other                 2      1      8      1     -      1 2       1   -      1  -    3 -     4 -    5   5      2
Source: Visitors Surveys 1995, 1996.




                                                                                  15
Hotel Ownership

The boom in tourist demand during the late eighties and the early nineties was met by
extensive private investment and construction. Accommodation capacity rose from 2960 beds
in 1985 to 3590 in 1990 and to 4340 by 1995 - the peak year, with occupancy rate averaging
just under 60 per cent during the decade. In the boom conditions prevailing, there was
growing pressure on prices and wages, and reportedly a deterioration in the quality of
facilities and services towards the end of the 1980s. During the recession in tourism (1980-
85), bed occupancy rate fell to a bottom of 37 per cent in 1982, far below break-even levels.
The situation was exacerbated when the government decided to introduce control on hotels
and guesthouses in 1979 followed by a total price freeze in 1980. In virtually no time,
standards slipped everywhere, thus forcing the government to acquire management of hotels
and other services that were experiencing maintenance and financial problems. The
Compagnie Seychelloise de Promotion Hoteliere (COSPROH) - a parastatal established in
1980, assumed control of three hotels during 1981-82 including one of the larger ones on
        15
Mahé, the national Air Seychelles subsequently (during 1984) acquired two other large Mahé
hotels and three other units, and manages another for private owners;16 and finally Skychef - a
parastatal formed in 1979 for airline catering, purchased the major share in another large
Mahé hotel, the Reef Hotel in 1983. During 1985, a new parastatal company, Seychelles
Hotels Ltd. was established to manage the 10 hotels owned by the government (via other
              17
parastatals). Table 9 compares ownership break-down of hotels between mid-June 1986 and
mid-June 1996.
          During the eighties, Seychelles Hotels Ltd decided to entrust the management of some
big hotels to international hotel chains in line with the government’s then emerging policy of
attracting rich and wealthy tourists by offering them top quality product. Consequently,
Societe des Hotels Meridien of France (a subsidiary of Air France) agreed to operate the
Fisherman’s Cove at Beau Vallon and Barbarons Beach Hotel on Mahé’s west coast;18 the
Sheraton Management Corporation managed the Mahé Beach Hotel (renamed the Seychelles
Sheraton) at Port Glaud from June 1986, and Intercontinental Hotels managed 206 room hotel
at Baie Lazare which became known as the Plantation Club Resort. This last hotel is privately
owned by Ailee Development Corporation. It was opened in December 1986 offering luxury
suites, conference, banquet and sports facilities, a variety of restaurants, bars and lounges, a
health centre, discotheque, boutiques, nature trail and tropical gardens - the lot. It is the most
glamorous 5-star hotel of the Seychelles.19
          The nineties heralded a new era. Slowly, the government adopted the idea of

15
       The Flying Dutchman of Praslin Island (1981); The Northolme (1982) and
       Fisherman’s Cove (1982).
16
       The Barbarons Beach Hotel; The Beau Vallon Bay Hotel and Vacoa Village (renamed
       Auberge Club des Seychelles) a self-contained apartment complex - and Cote d’Or
       Lodge & Praslin Beach Hotel both on Praslin.
17
       The nine mentioned in Table 9 plus La Digue Island Lodge on the Island of La Digue.
       Consequently, Air Seychelles Hotels ceased to operate.
18
       Central Bank, Quarterly Review, Oct.-Dec. 1985, p. xii.
19
       Seychelles Today, No. 3, 1986; Nation, 13 June 1996.



                                               16
privatisation and looked around for potential buyers of its hotels and tourist resorts. In
November 1993 COSPROH sold two of its hotels - Beau Vallon Bay Hotel and Mahé Beach
Hotel, and a 20 per cent stake in Praslin Beach Hotel to the Malaysian hotel company -
Berjaya Leisure. The deal was worth US$31 million, and the Malaysian company was
selected on both financial and strategic grounds.20 Berjaya Leisure which owns over 20 resort
hotels world-wide promised to upgrade the hotels, expand them and provide both managerial
and promotional skills to raise occupancy. The idea of selling government owned hotels was
raised already in 1991-92 but potential buyers were reluctant to pay the price asked until
Berjaya Leisure came on the scene and did not conclude the deal until COSPROH agreed to
                                                 21
spend US$3.5 million renovating the hotels. To fulfil its undertakings Berjaya Leisure
announced in June 1994 a further investment of SR20 million (US$4 million) to upgrade the
three hotels and in September 1994 started marketing the Seychelles hotels under its own
brand name, taking advantage of its affiliation with Best Western International, the world’s
single largest brand of independently owned hotels.22 With the dispersal of these two hotels,
the parastatal, known as Seychelles Hotels was dissolved. Most of the remaining COSPROH
hotels are either managed by, or leased out to foreign firms.

Table 9: Ownership of Hotels & Guesthouses (mid-June 1986 and mid-June 1996)
                         Government ownership                    Privately owned
                                                                                         1
                       No. of        No. of Rooms        No. of             No. of Rooms
                   Establishments                    Establishments
                   1986     1996    1986      1996   1986      1996       1986        1996
Mahé Island
  Hotel                6       4     586      299      3        5        184          540
  Guest Houses         -       -      -        -      20       34        182          286
Praslin Island         3       3     107      107      7       13         75          201
La Digue Island       1        1      9        9       2        2         17           31
Bird Island            -       -      -        -       1        1         25           25
Desroches Island       -       -      -        -       -        1          -           20
Denis Island           -       -      -        -       1        1         24           25
Falicite Island        -       -      -        -       -       1           -            3
Poivre Island          -       -      -        -      1        1          4            6
Silhoutte Island       -       -      -        -       -       1           -           12
Fregate Island         -       -      -        -      1        1          4            10
TOTAL                 10       8     702      415     36       61        505         1,159
Source: Department of Tourism.
1
  Many with 3 or 4 beds.

        Also, during the nineties the government encouraged existing owners of guesthouses
to expand their facilities and appealed to local and non-resident Seychellois to invest in
tourism. The net result of these endeavours was the substantial expansion of privately own
guesthouses, pensions and tourist bungalows, especially in islands outside Mahé. These
private establishments which vary in size from 2 to 30 rooms sprouted all over the place, so
much so that by mid-June 1996 there were 61 privately owned establishments with 1159
rooms representing 48 per cent of all tourist rooms in the Seychelles. As a result of this

20
        Nation, 10 November 1992.
21
        Interview: July 1996.
22
        Interview with management: July 1986.



                                                17
intensive expansion the government’s ownership of hotels and tourist accommodation has
been reduced from a majority control of 58 per cent of all accommodation in 1986 to less than
27 per cent by mid-1996. In Mahé itself expanding existing facilities got underway from
1995. In May 1995 a US$6 million renovation budget was raised by private investors to
upgrade the Coral Strand Hotel - a privately owned hotel adding 26 new rooms and suites, to
be completed by September 1996. In early 1996 intensive negotiation was afoot with several
potential foreign investors to build a new five-star hotel at Beau Vallon district which, if
                                                                                       23
successful, would bring hotel capacity in the Beau Vallon district to 1300 rooms. The trend
for privatisation will continue and the government is determined to liquidate its ownership of
hotels once suitable foreign owner-investors arrive at the scene. The preference is for foreign
investors who would pay the right price and bring managerial skills and hopefully further
investment for upgrading these establishments.24
        Indeed, the privatisation of several hotels has led to an injection of new investment.
This is likely to lead to an improvement in accommodation facilities and services in the
industry. During 1995-96 several potential investors visited the islands and the tourism
authorities expect a few proposals to take off soon. One such example is an Indian-owned
chain, Oberoi Hotels, which is planning to invest in the construction of a luxury hotel in the
Seychelles. The vice-president of Oberoi, Gautam Khanna, visited the Seychelles in July
1996, apparently to look at potential sites for the new hotel.25
        Also a SR40 million (US$8 million) project to upgrade tourist accommodation on
Fregate Island, the site of one of the Seychelles’ rare-bird sanctuaries, was recently submitted
to the tourism ministry. The project consists mainly of construction of a 14-villa holiday
complex with all the service facilities to turn the island into an eco-tourism centre. In line with
the Seychelles tourism development policy, an environmental impact assessment has to be
carried out before the project gets the green light.26
        Last but not the least, it was announced in September 1995 that the African
Development Bank (ADB) is to lend about US$1.5 million to finance the development of the
Dolphin Bay Hotel at Anse Boudin on Praslin Island. The hotel is to be made up of a 26-room
complex in landscaped gardens, arranged in 13 bungalows of two rooms each. Marketing of
the completed hotel will initially focus on Europe, and later on Australia and the Middle
East.27
        In December 1995, it was announced that a land-use plan was being prepared for St
Anne Island, close to Victoria, which is the site of two now-abandoned National Youth
Service Villages built in the 1980s. The government is seeking a very high-class hotel
development for the island, with a strong ecotourism element.28

Incentive for Investors

23
       Nation, 10 May 1995.
24
       Interview with government officials: July 1996.
25
       Nation, 10 July 1996.
26
       Nation, 6 June 1996, 12 July 1996.
27
       Nation, 14 October 1995.
28
       Nation, 3 January 1996.



                                                18
The government welcomes private investment providing it mainly takes the form of equity
participation, especially in the case of foreign investment. Profits may be repatriated from the
Seychelles and various other terms include the following:
        (a) government’s guarantee against nationalisation, but in the “event of nationalisation,
the government promises to negotiate compensation.”
        (b) exemption from import duties for machinery, equipment and raw materials needed
in the building stage.
        (c) skilled expatriates (where no suitable qualified Seychellois are available) may work
in the country. However, a work permit fee for each expatriate personnel employed is
SR10,000 per annum.
        (d) hotels are entitled to benefit from accelerated depreciation allowances: 20 per cent
first year: 10 per cent next four years.
        (e) profits are taxed at 35 per cent. However, dividends paid out of taxed profits are
not taxable in the hands of local shareholders, but are subject to 15 per cent withholding tax if
paid to non-residents other than a financial institution.
        (f) soft term loans are available from the Seychelles Development Bank to the
Seychelles shareholding. Foreign investors may obtain short term loans from commercial
banks up to the amount of capital transferred from abroad at a normal interest rate.
        The above terms are hardly called “attractive”. What is more we were told that there
was no “precise set of terms” and each application was evaluated on an ad-hoc basis.

Section two: The Impact of Tourism on the Economy

1. Tourism Expenditure

In part reflecting the Air Seychelles’ aggressive marketing but also buoyed by the economic
upturn in Europe, tourism receipts kept on rising from 1983 until 1990. In 1990 it reached its
highest ever SR646 million, almost double its level in 1985. In US dollars term, the $126
million represented a jump of 32.2 per cent over 1989. After 1990, receipts started a
downward trend and by 1995 it stood at SR466, a drop of 28 per cent from the peak of 1990.
In 1995 tourists spent an average of SR3,860 or SR406 (US$82) per day compared with
expenditure of SR616 (US$120) per day. Table 10 summaries earnings from tourism for the
period 1979-1995.
        Table 10 shows clearly that despite the huge increase in arrivals in 1993, gross
earnings from tourism increased by a mere 0.3 per cent to SR607 million while average tourist
expenditure per head fell by 14.2 per cent compared with the previous year. These figures
should, however, be interpreted with care. About half of the increase in tourism arrivals
during 1993 was made up of transit passengers, who normally spend a very short time in the
Seychelles. Thus their average expenditure levels are likely to be low. If transit visitors are
excluded from the total arrivals figure, however, average spending per tourist still registered a
decline from previous years. This demonstrates the problem that the Seychelles faces in trying
to maximise benefit from its tourism industry. The government’s policy of maintaining an
overvalued rupee makes the Seychelles one of the most expensive holiday destinations in the
Indian Ocean region. Tourists also tend to opt for all-inclusive holiday packages, thus
reducing levels of local expenditure.
        The picture repeated itself in 1994 - when gross tourism earnings plummeted to SR510
million (US$101 million), considerably below the average level achieved during the previous
years. The figures for 1994 and 1995 have forced the authorities to compare the performance
of the Seychelles tourism industry with that of its closest competitor, Mauritius, which



                                               19
achieved growth of over 7 per cent in 1994. Emphasis was being placed on the quality of
service and value for money in the Seychelles, but the president of the Federation of
Employers Associations in Seychelles, Basil Soundry, said the Seychelles had “a three-star
tourism industry marketed at a five-star price”, while Mauritius had “five-star tourism sold at
a three-star tag”. This overprice, combined with an overvalued rupee, has contributed to a
decline in tourist spending over the past few years.

Table 10: Earnings from Tourism 1979-1995
Year        Tourism Expenditure         Visitors     Visitors Expenditure per Expenditure per tourist per day
                                        arrivals     nights        tourist
                                                                                                     1
        Mill. Growth Mill. Growth                    (`000)     Rs. Growth Rs. Growth US$ Growth
                               1
         Rs.     %       US$        %                                      %             %               %
1979 291        19.7      46.0     27.9   78,852       718     3,690       -     405      -     64.13     -
1980 326        12.0      50.0      8.7    71,762      646     4,543     23.1    505    24.7    77.52    21
1981 285 -12.5            45.7     -8.6    60,425      580     4,716      3.8    491    -2.8    78.90    1.8
1982 220 -22.8            33.6    -26.6 47,280         459     4,453     -1.3    479    -2.4    73.15   -7.3
1983 233         5.9      33.7      0.2    55,867      598     4,171 -10.4 390 -18.6 56.30 -23.0
1984 283        21.5      38.5     14.2   63,417       685     4,462     7.0     413     5.9    56.13    0.0
1985 336        18.7      50.9     32.4   72,542       798     4,632     3.8     421     1.9    63.80   13.7
1986 347         3.3      58.5     15.0   66,782       781     5,196     11.2    444     0.1    74.90   17.4
1987 379         9.2      73.7     26.0   71,626       817     5,291      0.2    463     0.4    73.70   -0.2
1988 439        15.8      81.3     10.3   77,401       851     5,672     0.7     516    11.4    95.50   29.6
1989 522        18.9      95.4     17.4   86,093       921     6,063     6.9     567     9.9    95.40    0.0
1990 646        23.7     126.2     32.2 103,770 1,048          6,225     2.7     616     8.7   120.40 26.2
1991 526 -18.6 103.9 -17.7 90,050                      946     5,841     -6.2    556    -9.7 109.80 -8.8
1992 600        14.0     116.8     12.4   98,547      1,005    6,088      4.2    597     7.4   116.22    5.8
1993 607         1.2     117.2      0.3   116,180 1,115        5,224 -14.2 544          -8.8 105.11 -9.6
1994 510 -16.0 100.9 -13.9 109,901 1,110                       4,641 -11.2 459 -15.5 90.90 -13.5
1995 466        -8.6      97.6     -3.2 120,716 1,147          3,860 -16.8 406 -11.5 85.10              -6.4
Source: Migration & Tourism Statistics, annual. Figures published by the Central Bank. Differ slightly, See
Central Bank of Seychelles, Quarterly Review, various issues.
Note: (1). Converted at the rate of exchange as recorded by the Central Bank at the end of December each year.
Basically the SR has remained fixed at SDR=SR7.2345 since 16 March 1981.

        Early in 1996, the government, with an eye to develop the Seychelles as a low-duty or
duty-free destination, decided to reduce duty on cameras, watches, binoculars, jewellery and
perfumes to just 5 per cent. This came as scant relief to visitors who found the Seychelles a
very costly destination. In 1990, the average visitor spent SR616 per day; in 1995 that figure
had fallen by more than one-third to SR406. It is abundantly clear that the islands are now
attracting less affluent visitors and that these visitors do not often use official channels for
currency conversion. It seems that a devaluation of the overvalued rupee (up to 30 per cent)
would more correctly reflect its purchasing power parity and would also be a boon to the
tourism industry, the country’s main foreign exchange earner.
        A survey of tourism expenditure in the Seychelles in 1995 indicated that 69 per cent of
tourist expenditures was on hotel bills, compared with 64 per cent in 1995, while local cash
expenditure’s share of the total fell to 31 per cent. Despite attempts made by the authorities to
encourage more spending on local products, the surveys revealed that the expenditure of
tourists was mostly concentrated on food with a very high import content. Also, expenditure
on local handicrafts, though rising by 79 per cent between 1985 and 1995, its percentage share
of total expenditure actually declined from 4.2 per cent to 3.2 per cent. It was discovered that
the majority of tourists seldom venture to the outer islands which remained largely
underdeveloped and unspoiled. The authorities should seriously consider expanding and
improving inter-island ferry services to attract day trippers to the inner islands. One of the


                                                     20
islands’ richest resources, fish, remains largely untapped and more holiday packages
combining sun, sea, and fishing could widen the appeal of the Seychelles to the European
tourists and raise their local expenditure.
Table 11: Tourist Expenditure Survey (SR million)
                   1985    % of total   1990     % of total     1995      % of total
                               1985                  1990                     1995
Hotel receipts      248         74.0      466         72.0       345           74.0
Restaurants          22           7.0      44           7.0       30             6.5
Car hire             15           4.0      33           5.0       22            5.0
Taxis & busses        7           2.0      10           1.5       15             3.0
Excursions           20           9.0      68         10.5        39            8.0
Handicrafts          15           4.0      25           4.0       15             3.0
Total               335        100.0      646       100.0        466         100.0
Total expenditure
per tourists (SR) 4,632                 6,225                   3,860

Table 12: The Multiplier Effect of Tourism (in SR million)
         Tourism          Additional income generated by Total income
         Expenditure      the multiplier                   from tourism
1979          291                        300                      591
1980          326                        336                      662
1981          285                        294                      579
1982          220                        227                      447
1983          233                        240                      473
1984          283                        292                      575
1985          336                        346                      682
1986          347                        357                      704
1987          379                        390                      769
1988          439                        452                      891
1989          522                        538                     1,060
1990          646                        665                     1,311
1991          526                        542                     1,068
1992          600                        618                     1,218
1993          607                        625                     1,232
1994          510                        525                     1,035
1995          466                        480                      946

The Multiplier Effect

The tourism income multiplier was estimated at 1.0304 in 1981,29 that is, every rupee spent by
tourists generated directly and indirectly SR1.03 of income. If the value of this multiplier is
still unchanged, then total revenues, both direct and secondary, generated by tourism
expenditure during 1979-1995 may be estimated. These estimates are given in the following
sections of the paper.

2. Impact on the Balance of Payments

In addition to the balance of payments tables, the Central Bank of Seychelles publishes in its
Quarterly Review an Exchange Record Table where external receipts and payments by the

29
        Archer, B (1982), “The Economic Impact of Tourism in Seychelles”, April, p. 29.
        Professor Archer also estimated a tourism GNP (factor cost) multiplier of 1.13 - 1.14
        by reworking data from an earlier Irish Tourist Board study of tourism in Seychelles.



                                                   21
banking system (including the Central Bank) and the Treasury are recorded. By combining
information provided by these two sets of tables, it was possible to structure Table 13 where
the relative importance of tourism and related activities can be demonstrated.
Table 13: The Relative Importance of Tourism to the Balance of
Payments, 1990, 1994 ( in million Rupees)
                                                1990       1994
Total Exports                                  302.2      249.2
of which
 Copra                                            1.6        0.2
 Cinnamon                                         0.4        2.3
 Canned tuna                                     55.3       89.2
 Others                                        252.8      157.5
Total Imports                                  884.6      951.8
of which
 Food & live animals                           132.4      162.1
 Beverages & tobacco                             22.3       16.4
 Fuels                                         162.9      138.0
 Manufactured foods                            140.7      174.3
 Machinery & transport equipments              223.4      205.2
 Others                                        202.9      255.8
Receipts
 Tourism earnings                              645.5      637.3
 Ticket sales to non-residents                   87.1     218.1
 USAF tracking station                           35.1       36.4
 Foreign embassies                               16.4       12.0

        In his study of tourism in the Seychelles30 Professor Brian Archer referred to the fact
that tourism creates a need for additional imports:
        (a) Direct: being goods and services imported directly by the establishments which
receive tourist spending;
        (b) Indirect: the additional imports to service the firms which supply goods and
services to the tourists and those other establishments whose turnover rises as a secondary
result of tourist spending; and
        (c) Induced imports: needed to supply households in the Seychelles, whose incomes
have risen because of the direct or indirect effects of tourism and to service those
establishments whose turnovers have risen as a direct or secondary consequence of this
enhanced household expenditure.
Table 14: The Impact of Tourism on Balance of Payments (in million Rs.)
                                              1990                   1994
Total Tourism Expenditure                      646                     510
Less Promotion abroad                           22                      28
Less Direct imports (11.6%)                     75                      59
Less Indirect imports (18.3%)                  118                      93
Net effect on Balance of Payments              431                     330
Value of Induced Imports (58.6%)               518                     558

       For the year 1981, Professor Archer estimated direct imports at 11.6 per cent of total
tourism expenditure; indirect imports at 18.3 per cent and induced imports at 58.6 per cent. If

30
        Archer, B (1982), “The Economic Impact of Tourism in Seychelles”, April. A Report
        prepared for the Commonwealth Secretariat CFTC/SEY/51.



                                                  22
these percentages hold true today, the following net effects of tourism on the balance of
payments for the years 1990 and 1994 are calculated.

3. Tourism’s Contribution to Gross Domestic Product (GDP)

Value added by the tourism industry was equivalent to 21 per cent of GDP at market prices in
1979, 15.0 per cent in 1980 and 11.8 per cent in 1993. Some 54 per cent of value added has
been generated in hotels and restaurants in the 1980s and rose to 73 per cent in the 1990s.
Even so, the tourism sector’s contribution to GDP is much higher than the combined added
values of agriculture, forestry and fishing. Table 15 shows the contribution of tourism to GDP
at current prices.

Table 15: Value Added by the Tourism Industries at Current Market Prices
1980-1993 (in million Rupees)
                                      1980     %    1985     %    1990     %    1993       %
Hotels & restaurants                   80.2   8.5 103.8     9.0 215.2 11.0 207.8          8.6
Handicrafts                            10.4   1.1     9.7   0.8    19.6   1.0    20.8     0.9
Air transport & related services       33.7   3.6    48.1   4.2    16.3   0.8    21.4     0.9
Tour operators                         11.7   1.2     9.9   0.9    43.5   2.2    27.2     1.1
Recreation                              1.3   8.1     1.7   0.1     5.9   0.3     7.0     0.3
Total Tourism                         137.3 15.0 173.2 15.0 300.5 15.3 284.2             11.8
Total GDP at current market prices    941.9 100.0 1,158.7 100.0 1,967.1 100.0 2,419.2   100.0

Table 16: Receipts from Tourism and GDP 1979-1993 (in million
Rupees)
  Year Total receipts from GDP at market prices Tourism as % of
              tourism                                GDP
 1979           291                806.3              36.1
 1980           326                941.9              34.6
 1981           285                971.8              29.3
 1982           220                968.2              22.7
 1983           233                989.4              23.6
 1984           283               1,074.2             26.4
 1985           336               1,158.7             29.0

  1990           646                 1,967.1            33.0
  1991           526                 1,980.1            26.6
  1992           600                 2,221.1            27.0
  1993           607                 2,419.2            25.1

4. Tourism and Development

In 1994 tourism supported 4726 direct jobs or over 18 per cent of total formal employment
(i.e., excluding domestic workers, self-employed and family workers). Historically, direct
employment in the tourism sector expanded considerably during the period 1973-1993
averaging 4.6 per cent annual growth. During this period female participation in the work
force, encouraged mainly by opportunities in tourism, reached its highest percentage of 56 per
cent. Table 17 gives average formal direct employment for selected years.
         Sectional distribution of employment is given in Table 18. The private sector provided
86 per cent (78 per cent in 1993) of all direct jobs in tourism in 1994, while public entities
were responsible for 14 per cent only. Compared with 1985, a radical change has taken place,
with the parastatals abandoning their role in owning and running the tourism industry.



                                                   23
Table 17: Average Formal Direct Employment in Tourism
                               1985     %      1993     %                                1994               %
Restaurants                     312    1.7      479    1.9                                488              1.9
Hotels                        1,756    9.6    2,970   11.8                              3,145             12.4
Transport (Tourism related)     611    3.4    1,121    4.4                              1,093              4.3
Total Tourism                 2,679   14.7    4,570   18.1                              4,726             18.6
Total Formal Employment      18,230 100.0 25,235 100.0                                 25,376            100.0
Source: Statistics Division, Employment Statistics.

Table 18: Sectoral Distribution of Employment in Tourism 1984, 1985, 1993 & 1994
                 1984                1985                1993               1994
            Private Parastatal Total    Private   Parastatal Total  Private Parastatal Total Private Parastatal Total
             Sector    Sector            Sector      Sector          Sector    Sector         Sector    Sector
Restaurants    209         77    286       222           90     312    427         52 479       467         21 488
               (73)      (27) (100)        (71)        (29)   (100)    (89)      (11) (100)     (96)        (4) (100)
Hotels         981        754 1,737        931          825 1,756 2,518           452 2,970 2,949          196 3,145
               (56)      (43) (100)        (53)        (47)   (100)    (85)      (15) (100)     (94)        (6) (100)
Transport       325       222    547       351          260     611    628        493 1,121     632        461 1,093
               (59)      (41) (100)        (57)        (43)   (100)    (56)      (44) (100)     (58)      (42) (100)
Total        1,515      1,053 2,570      1,504        1,175 2,679 3,573           997 4,570 4,048          678 4,726
Tourism        (59)      (41) (100)        (56)        (44)   (100)    (78)      (22) (100)     (86)      (14) (100)
Total        5,523      5,469 17,892     5,708        5,235 18,230 9,622        6,011 25,235 10,509      5,220 25,376
Employment     (31)      (31) (100)        (31)        (29)   (100)    (38)      (24) (100)     (41)      (20) (100)
Tourism as
% of Total
Employment (27.4)      (19.3) (14.4)     (26.4)       (22.4)   (14.7)   (37.0)   (16.6) (18.1)     (38.5)    (13.0) (18.6)
Source: Statistics Division.
Note: (numbers in brackets are percentages)

Table 19: Average Monthly Earnings in Formal Employment by Principal
Sectors 1980, 1983-85 and 1993-94 (in million Rupees)
                                                   1980    1983     1984      1985    1993        1994
Agriculture, forestry and fishing                   887 1,224 1,274          1,416   2,290       2,304
Manufacturing                                     1,353 1,783 1,856          1,956   2,454       2,422
Mining and construction                           1,353 1,590 1,551          1,712   2,357       2,412
Wholesale and retail trade                        1,129 1,834 1,896          2,003   2,180       2,214
Restaurants                                       1,013 1,282 1,363          1,360   2,163       2,306
Hotels                                            1,178 1,542 1,573          1,534   2,330       2,345
Transport, storage and Communication
(tourism related)                                 2,059 2,411 2,508          2,515   3,651       3,738
Services, Public administration                   1,947 2,173 2,216          2,200   2,957       3,010
Finance and Business                              1,923 2,553 2,586          2,620   3,225       3,229
Other                                             1,337 1,691 1,687          1,718   2,149       2,235
 All Sectors                                      1,530 1,931 1,977          2,063   2,720       2,738
Private                                           1,442 1,787 1,849          1,901   2,449       2,513
Government                                        1,837 2,173 2,204          2,259   2,837       2,885
Parastatal                                           na 1,767 1,819          1,967   2,966       2,961
Source: Statistics Division (Statistical Abstracts and update thereto).

Earnings

Salaries and wages paid out in hotels and restaurants are generally below the average wages in
the country, but earnings in tourism related jobs in transport and communications are
substantially higher than the national average. This can be seen from Table 19. The pay


                                                        24
structure in the parastatal owned hotels is higher than in the private sector (see Table 20).

Table 20: Average Earning by Sector and Industry 1994 (in Rupees)
Direct and Indirect Employment
                                      Private Parastatal All Sectors
Restaurants                           2,303   2,373        2,306
Hotels                                2,298   3,060        2,345
Transport etc. (tourism related jobs) 3,639   3,874        3,738
Finance & Business                    3,219   3,252        3,229
All Industries                        2,513   2,961        2,738

Direct and Indirect Employment

In addition to the direct employment generated in the industry, tourism expenditure creates
and maintains additional employment through the flow of tourist spending through the
economy. In 1981, Professor Archer estimated the ratio of total employment (both direct and
indirect or secondary) to direct employment at 2.38, i.e., each direct job supported an
additional 1.38 secondary jobs.31 Assuming this employment multiplier still holds, the impact
of tourism on employment for both direct and indirect jobs would be as calculated in Table
21.

Table 21: Direct and Indirect Formal Employment in Tourism (1981, 1985, 1993 and 1994)
                                                               1981   1985   1993      1994
Direct Employment                                             2,865  2,679  4,570     4,726
                       1
Indirect Employment                                           3,954  3,697  6,306     6,522
Total Direct & Indirect Employment                            6,819  6,376 10,876    11,248
Overall Employment                                           17,583 18,230 25,235    25,376
Total Tourism as % of overall employment                       39%    35%    43%       44%
1
  Indirect or secondary jobs represent 138% of direct formal jobs.

Table 22: Tourism Expenditure and Employment 1985, 1993 and 1994
                                                     1985        1993           1994
Direct jobs                                         2,679        4,570         4,726
Indirect jobs                                       3,697        6,306         6,522
Total jobs                                          6,376      10,876         11,248
No. of tourists                                    72,542     116,180        109,901
No. of direct jobs per 100 tourists                    3.7         3.9            4.3
No. of total jobs per 100 tourists                     8.8          9.4          10.2
Receipts from tourism (mil. rupees)                    336         607            510
No of direct jobs per Rs. 100,000 spent                8.0        13.0          11.0
No. of direct jobs in hotels per registered bed.      0.59        0.75           0.74

       It should not be assumed, as Professor Archer rightly remarked, that in the absence of
tourism all the secondary jobs would be lost. In reality some would be maintained, especially
those which cater primarily for household demand but at a very much reduced level of real
remuneration.
       Finally, it is to be noted (see Table 22) that every 100 tourists who arrived in the island
in 1994, supported 4.3 direct workers in the industry. By using Brian Archer’s multiplier, it is
possible to work out the number of indirect jobs created by tourism. Also the last row in Table

31
       Archer, B (1982), op. cit., p. 46. See also National Development Plan 1985-89, p. 95.



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22 shows that the efficiency of the work force in hotels declined between 1985 and
1993/1994. Thus whereas in 1985 the bed-staff ratio was 1:0.59, in 1994 a bed was served by
0.74 of a staff.

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