By Anil Adam Managing Partner at Peacock Consulting
Maldives tourism has been referred to as the “chicken that lays the golden egg”. It is the lifeblood of our economy. Over the years, it has gone through several evolutions that positioned it as one of the niche destinations in the world. In the global media, the Maldives is referred to as a paradise on earth. It is one of the top bucket-list destinations for soon-to-be-wed honeymooners.
The success of Maldives tourism is coupled with many factors, including its one-island-one-resort concept, attractive tax regime and lack of supply that translated to favorable investment returns. Even today, the average resort investment recovery in the Maldives is 8 years and Return on Investment (ROI) is between 12 to 15 percent. However, one question that looms on my mind is how long can this Maldives sustain this advantage?
The world we inherited today is witnessing various changes. Countries, even the ones that were plagued with developmental challenges, are prospering. As per the United Nations, the world’s Human Development Index (HDI) has risen from 5.98 in 1990 to 0.731 in 2018 (of which index above 0.700 is considered high). This sparks countries to compete in international trade.
Today, countries are striving to become more internationally competitive with added investment and better planning. Other than the Maldives, more paradises are popping up across the world. The world has learned the success of island tourism concepts and are in an endeavor to imitate it. Although travelers once did an exclusive trip to the Maldives, there is a growing trend that shifts Maldives as a combined holiday destination. It is expected that this trend will become more pervasive in the future with more competitive travel offers. Thus, Maldives cannot afford to put its mind at rest in the changing market reality. Our share of wallet from these travelers may further be subjected to cannibalization without a winning strategy. Maldives needs to enhance its strategic excellence that can create a competitive advantage in the rising destination rivalry.
Current Maldives Tourism Context
Tourism in the Maldives is operating in a disparate context compared to its earlier days. Over the past years, Maldives has seen two notable changes that led to how tourism is regulated in the country. Like any other economic system, our regulatory and political factors play a pivotal role in the whole industry and how the competitive dynamics form its shape. This includes how investment decisions are made in the industry and the flow of demand and supply. These are all determining factors that relate to how the attractive Maldives would be in today’s global competition.
The current Maldivian political context is playing a crucial role in shaping our tourism’s future. Over the years, political development had resulted in the introduction of various taxes. Maldives now has a number of tourism taxes to support the growing developmental needs. Like any other industry, the level of taxation is a crucial factor that determines the competitiveness of Maldives tourism. Maldives need to ensure that these taxes are implemented in unison with its value creation model.
The second dimension is the social reforms that are sparking in the Maldives, which are catalyzed due to political reforms. This is driven by interest groups including resort workers, guesthouse associations, travel agents’ associations and such similar groups who are becoming more vocal and active. This has led to laxing of some of the laws including revoking of regulations that confined tourism to uninhabited islands. The official statistics from the Ministry of Tourism shows that this led to the proliferation of guesthouses, which sparked an upward trend in the number of beds over the last couple of years. From 2013 to 2017, the guesthouses have sustained an average bed growth of over 40 percent while, during the same period, the resorts segment was able to retain a growth of just over 6 percent. A starker reality is emerging in the occupancy aspects of these two segments. From 2013 to 2017, resorts have an average occupancy decline of 2.95 percent whilst guest houses were able to secure a growth 14.39 percent occupancy during the same period.
From the investment perspective, the resorts are subjected to higher investments and risks whilst the guesthouses have a minimal investment. Although resorts were able to withstand the competition from guest houses by positioning as a secluded one-island-one-resort concept incorporating further value propositions, this unique proposition is becoming more challenging to capitalize. Guesthouses offer almost similar offering and many of these guest houses even offer private beaches and almost the same level of service offerings with much more cheaper rates.
Way Forward
The future of the Maldives lies on its clever moves. It needs a clear and well-considered strategy under the current market dynamics. A well-executed strategy will act as a panacea for the rising challenges. For Maldives tourism, planning without a sound strategy is no different than sailing off without a rudder. Our tourism’s eventualities, in such a case, will be an industry that gets buffeted in the rough seas of competition. Our tourism needs a calm and Blue Ocean as we had in its heyday.
On developing a sound strategy, Maldives need to focus on some of the pillars that uphold our tourism uniqueness. The rising number of beds are not proportionately translating to occupancy growth. At first, Maldives needs to implement a cohesive long-term plan on how it would manage the supply and demand into the industry and secondly, it requires a winning destination strategy to leap ahead of the competition.
Such a strategy should constitute a unique destination marketing effort linked to more relevant measurement indicators. The total number of tourists arriving in the Maldives is less relevant when the demand is sluggish and the supply is overflowing. A picture with such a developmental statistic alone is so untrue. Rather, more relevant indicators would be the average occupancy in the Maldives, the average length of stay, the growth rates of product segments and Average Room Rate (ARR) to name some.
From the competitive strategy perspective, Maldives need to develop its comparative advantage, which its rivals could hardly imitate, at least, not in a very short run. It requires a novel marketing strategy to stimulate brand differentiation. A novel marketing strategy, when executed triumphantly, would help to attain a strong brand leadership status for Maldives in the global competition. Attaining such a position necessitates Maldives cater for diversified travelers and their evolving needs and our destination brand “Maldives” to leapfrog in its marketing.
Developing brand leadership
A destination brand like any other brand requires viewing from a different lens. A brand constitutes more than the functional attributes. A successful brand is wrapped in a bundle of various functional and emotional attributes, which together forms a complete brand. In addition to the functional elements, including the accommodation offerings, food and beverage options, transportations, entertainment offerings, the emotional appeal of our destination needs to be augmented.
In developing the functional attributes, Maldives need to invest in enhancing its product portfolio. It requires novel product concepts in its march towards a diversified product portfolio. Having a diversified product portfolio would not only help Maldives to cast a wider net on all our potential and existing customer base, it would also help a traveler maturing from one product or service to move to another product or service, thus, helping Maldives to prolong the travelers’ life cycle in the Maldives.
To establish a diversified product portfolio, Maldives needs timeshares, condos, events of all sorts, entertainment brands, enhanced cultural and arts experiences, food and beverage innovations, creative travel arrangements and so on. It needs a top-ranked hotel management institute to supply talented human resources. Many of these concepts may take a while to gain momentum. It may, in fact, not succeed. However, such product testing needs to be initiated to stimulate innovations and turn Maldives tourism even as an incubation platform as is the case of Silicon Valley. For such innovative initiatives to thrive, economic incentives are vital and can be possible with a strong funding mechanism. Maldives need a promising investment ecosystem and our capital market holds great prospects for it. An internationally integrated capital market will help our tourism investors to be less reliant on foreign banks, which are not at disposal for many Maldivian companies and share the wealth of our tourism more equitably.
More holds true in the emotional aspects of Maldives’ tourism brand on how it translates to competitive advantage. Investing in our brand from an emotional track would help Maldives to develop a deep intrinsic bond with travelers, promotes organic growth, make Maldives as a destination more unique and becoming less price-sensitive over rival destinations. Tapping into customers’ core motivations and delivering to their deep-rooted, unspoken emotional needs would be the next big thing Maldives could do to sustain a calm Blue Ocean for the near future. The current “Sunny Side of Life” and its sub slogans are compelling and overarching themes. However, they require subsequent creative stories and further campaigns to richly inculcate the brand “Maldives” in our visitors’ minds and reap its real competitive returns.
Maldives tourism truly holds greater potential. Realizing it requires a long-term integrated planning approach. It requires taking a strategic perspective by creating an advantage in its rich history, grows a diversified portfolio and developing a unique emotional rhythm that will create resounding value.
