In response to newly introduced regulations by the Maldives Monetary Authority (MMA) mandating a compulsory USD 500 fee per tourist at resorts, the Maldives Association of Tourism Industry (MATI) has raised significant concerns about the impact on the sector. Over 50 resorts have already voiced their opposition, arguing that the new rules are out of sync with industry realities and will stifle growth.
According to a study commissioned by MATI, the average daily rate (ADR) for most Maldivian resorts stands around USD 500 per night. However, this figure primarily reflects high-end properties, leaving many mid-tier resorts struggling to meet the compulsory fee. The study suggests that most smaller resorts are unlikely to generate USD 500 per tourist during a typical stay, making it difficult for them to comply without resorting to the black market for dollars.
While the MMA maintains that the new regulations will help stabilise foreign reserves and improve public access to dollars, industry experts and MATI have expressed doubts. Despite these objections, the MMA has chosen to implement the stringent regulations, ignoring proposals from MATI for more sustainable solutions.
MATI’s Call for a More Measured Approach
MATI has stressed its willingness to find a middle ground, submitting proposals to both the MMA and the President’s Office. These included a more moderate requirement for resorts to mark just 10% of their foreign exchange earnings or introduce a per-head charge of only USD 1, with guesthouses and city hotels facing a lower fee of USD 15. Additionally, MATI proposed the introduction of fixed deposit schemes with favourable interest rates to incentivise resorts to deposit foreign currency into local banks. However, these suggestions have reportedly gone unacknowledged.
A MATI official, speaking on condition of anonymity, criticised the lack of engagement from authorities, stating, “We offered practical alternatives that would have helped secure foreign exchange without burdening the sector. Unfortunately, these were dismissed without any serious consideration.”
Increased Operational Costs and Investor Deterrence
The MATI report highlights that compliance with the new MMA regulations will require resorts to invest heavily in administrative staff and financial management systems, adding to operational costs. This, in turn, could extend the return on investment for properties, potentially driving away investors. MATI predicts a potential 36% decline in investor interest in the Maldivian tourism sector as a result.
Further complicating matters, the sector is already grappling with increased taxes introduced by the previous administration, including hikes in the Tourism Goods and Services Tax (TGST) and green taxes. Despite an uptick in resort revenues, much of this income is absorbed by foreign debt repayments, leaving fewer dollars circulating within the local banking system.
Industry’s Fear of Long-Term Damage
Tourism stakeholders are concerned that the new rules could lead to further dollar shortages in banks, exacerbating reliance on the black market. Although the MMA projects that these measures will boost official reserves to MVR 6.82 billion in the first year, MATI warns that this short-term gain could come at the expense of long-term stability. The report forecasts that the black market exchange rate could climb to MVR 21.7, driving inflation to 6.45% by the second year and increasing the cost of living for the general public.
One senior industry official noted, “The tourism sector is a major contributor to the economy, and these regulations risk undermining its stability. Instead of focusing on rigid measures, the government should explore collaborative solutions that encourage growth.”
An Urgent Need for Dialogue
MATI’s report concludes that without a shift towards more flexible policies, the Maldives risks losing its competitive edge as a prime travel destination. As neighbouring countries ramp up efforts to attract tourists, increasing operational costs and taxes could deter both investors and visitors.
While the MMA’s goal of stabilising foreign reserves is understandable, stakeholders argue that these regulations, in their current form, could inflict lasting damage on the nation’s most crucial industry. MATI continues to urge the government to revisit its approach and consider more sustainable solutions that align with the realities of the tourism sector.
With the high season approaching, tourism leaders are calling for urgent dialogue with authorities to address these concerns and avoid a potential downturn in one of the Maldives’ most vital economic pillars.
