IMPOSITION of VAT on tourism is projected to be felt this year as hotel room revenue expected to decline further, PwC cautioned in a report.
In the report, ‘PwC Hotels outlook: 20172021: South Africa–Nigeria–Mauritius–Kenya–Tanzania, PwC predicts a dip of negative 3.6 per cent to 546,42bn/- in this year against 566.71bn/- in 2016.
“We expect that the full impact of the new VAT on tourism services will lead to a decline in revenue 2017, followed by large increases during the subsequent three years,” the PwC said.
The report, however, had projected a decline in stay unit nights due to the imposition of an 18 per cent VAT on tourism services beginning 2016 for foreign tourists. “…but an increase in bookings in advance of the new tax led to an increase in foreign tourism and guest nights held steady in 2016.
Slower average daily rate (ADR) growth, however, led to slower growth in room revenue,” it said. Tourism is a leading foreign exchange earner for Tanzania. It contributed 2.0 billion US dollars last year up from 1.9 billion in 2015.
It accounted for 17.5 per cent to the total economy, according to official statistics. According to the report, from early this year the market appeared to have weakened leading to expectation of a drop in stay unit nights this year.
Despite registering an increase last year of hotel room revenue in Tanzania, the amount was lower compared to 2015. The revenue for the last year increased at the rate of 7.7 per cent compared to a growth of 15 per cent registered in 2015.
The 7th edition report include two emerging hotel market—Ghana and Ethiopia. The sector was projected to rebound next year and register a leap growth of 11.1 per cent before slightly climbing down to 10.4 per cent in 2019 and up again by 12.1 per cent in 2020.
“We project a 6.9 per cent increase in room revenue in Tanzania,” based on compounded annual growth rate to 2021, the report said.
The rebound was predicted to be caused by infrastructure investments, improved air access in Tanzania with improvements at Air Tanzania and a strong economy that will support growth in domestic tourism.