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Rising Cost Of Oil

Tanzania tour operators to impose fuel surcharges

Adam Ihucha, eTN  Mar 20, 2011

ARUSHA, Tanzania (eTN) – Tour operators in Tanzania are considering imposing surcharges on their safari package in response to the rising price of oil triggered by the uprising in North Africa.

The average prices of refined fuel in Tanzania have risen by an average 33 percent per liter since the end of last year and are likely to soar further as the unrest in Libya, a major oil exporter, spreads.

Tanzania-bound tourists will be hit by price increases on packages probably from 2012 seasons.

Tourism key players say that Tanzania’s safari package surcharges will range between 15 to 20 percent, depending on the length of the trip and come into effect on all forthcoming bookings.

Mathew Mollel, Chief Executive Officer (CEO) of a giant Rainbow shuttle firm plying tourists between Tanzania and Kenya, says that the fuel price increase consumes his entire profit margin of 15 percent.

“I normally spend US$5,270.092, or Tshs 8million, per month to fuel my shuttles, but last month the bill has shot up to US$10,540.184 or 16 million,” Mr. Mathew told eTurboNews.

"We've tried hard to minimize the impact of the rising fuel costs on our dear tourists, but the fuel tax is a certain result of the soaring price of oil," Mr. Mollel explained, adding, “By any standard, the safari package will go up between 15 to 20 percent come October this year.”

Managing Director for Hoopoe Adventure Tours, Peter Lindstrom, said that fuel price increases have a very significant impact on the tourism industry.

“This is not just the impact of the pump price. Any sustained hike in fuel prices works its way into the economy driving up prices of food and supplies for lodges and camps and puts pressure on wages as household budgets come under strain,” he said.

Mr. Lindstrom, who is also a Vice Chairman of Tanzania Association of Tour Operators (TATO), said employees will ultimately demand more in wages and so all these factors drive an inflationary spiral.

The biggest challenge for the industry is that most tour operators, camps, and lodges publish their rates at least nine months in advance and have to live with their rates as the overseas tour operators, mostly in Europe, are legally obliged to stick to their published rates in brochures.

Industry analysts say it is not good business practice to change the rates once they have been published.

“This means that [the] Tanzanian tourism industry is at the mercy of external economic factors beyond the control of the local government and has little power to mitigate the impact of increased fuel prices,” Mr. Lindstrom noted.

Industry watchers also say that history is showing that even when the world economy is not firing on all cylinders, the Tanzanian government does not come to the assistance of the tourism industry.

For instance, in 2008, during the global financial crisis, Tanzania didn’t reduce tourist visa costs or park entry fees like neighboring countries of Kenya and Uganda did.

“Their tourism [has] bounced back faster than ours, and maybe that is no accident,” TATO Executive Officer Mr. Sirili Akko told eTurboNews.

In 2009, nearly 1,160 breadwinners in Tanzania’s tourism had to loose jobs, as the rising heat of the global recession scorched the fragile tourism industry - an innocent victim of the crisis.

A lion's share of the jobs that disappeared were held by men who worked as tour guides, pushing thousands of women in Tanzania’s northern tourism circuit to become the primary breadwinners.

Tour operators had opted to pay out millions in redundancy payments to thousands of workers rather than retain them as the recession worsened.
“God forbid this should not occur again this time around,” Mr. Akko stressed.

For his part, Mataro Mwita, Managing Director for Introducing Africa Co. Ltd, said he is now counting losses for this year’s bookings.

“I’ve charged 30 holidaymaker groups, and with the current fuel price, I’m standing to loose US$1,200 in profits. Mind you, this does not includes hotel charges, which also swelled from US$185 double full board to US$250 at the moment,” Mr. Mwita said.

A Tanzanian-renowned economist, Prof. Ibrahim Lipumba, said the government should scrap off VAT and fuel duty in a bid to relieve its people from pains of life's hardships triggered by price hikes of basic commodities like fuel.

Minister of State in the President's Office, in charge of Social Relations and Coordination of Government Planning, Stephen Wassira, said the fuel price hike is beyond the state's control.

With a growth rate of 12 percent for the last four years, tourism is one of the fastest-growing industries, contributing 17.2 percent of the GDP and 41.7 percent of the country's foreign exchange inflows in the last five years.

Available records show that Tanzania earned US$4,987.5 million from the tourism sector in the last four years. The industry employs nearly 200,000 Tanzanians directly.

Renowned for its relative calm in the region, the nation of about 40 million people aims to earn US$1.5 billion annually by attracting 1 million tourists per annum from 2011.

There are still great prospects for expansion and growth in this sector. There is a huge demand for more hotels, more trucks, more restaurants, more local and international flights, and more tour operators.

Tourists come to Tanzania to enjoy the beaches on its eastern coastline and the Zanzibar archipelago, its national parks such as the Selous in the southeast and the Serengeti in the north, and to climb Mount Kilimanjaro.

Tanzania tour operators to impose fuel surcharges
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