Maldives tourism faces steep decline in Q2; hints at signs of recovery in Q3
The Maldives tourism sector experienced a significant downturn in the second quarter of 2023, according to the recently published Quarterly Business Survey by the Maldives Monetary Authority (MMA). The survey, which covered the period from April to June, revealed a sharp decline in key indicators, underscoring the challenges faced by tourism businesses amid an uncertain economic landscape.
Decline in revenue, bookings
The seasonally unadjusted indices for total revenue and resort bookings posted negative values, plummeting to -82 and -79, respectively, in Q2-2023. The total revenue index saw a staggering 170-point drop, with 91 percent of businesses reporting a decline in revenue. Simultaneously, the resort booking index fell by 137 points, with 88 percent of respondents reporting a decrease in resort bookings.
Labor market indicators reflect significant contraction
The labor market in the tourism sector also bore the brunt of the downturn. The number of employees index tumbled 52 points, reaching a negative index of -18 during the quarter. Furthermore, the wages and other labor costs per employee index experienced a notable decline of 63 points, with 52 percent of businesses indicating no change in labor costs per employee.
Input prices, average room rates experience downturn
In Q2-2023, input prices in the tourism sector witnessed a decline, with the index falling by 62 points to -33, indicating a relaxation of price pressures. Additionally, the average room rate index troughed by -162 points to -82, with a staggering 91 percent of tourism businesses reporting a decrease in average room rates.
Capital expenditure shows resilience
One positive note amidst the challenging landscape was the capital expenditure index, which reported a modest increase of 2 points to 34 in Q2-2023. This indicates that some tourism businesses continued to invest in their operations during this challenging period.
Looking ahead: Signs of recovery in Q3
While the survey results for Q2-2023 painted a grim picture for the tourism sector, there are glimmers of hope for the upcoming quarter. Tourism businesses appear to be less pessimistic about business activity in Q3-2023 than in the previous quarter.
The expected indices for revenue and resort bookings have improved but remain in negative territory. Similarly, the expected average room rate index has shown improvement, though 74 percent of businesses still anticipate a decrease in average room rates, while only 11 percent expect an increase.
Moreover, businesses expect input prices to rise in the next quarter, albeit at a slower pace, causing the expected input price index to rise from -29 to -6. Meanwhile, the wage and other labor costs per employee index is projected to remain stable in Q3-2023.
Mixed outlook for financial situation
The expected indices for the financial situation of individual companies and the overall business situation appear mixed for Q2-2023. The expected overall business situation is anticipated to improve, with the index increasing by 29 points to -43. However, businesses expect their financial situation to worsen in the next quarter.
The findings of the Quarterly Business Survey by the Maldives Monetary Authority (MMA) paint a challenging picture for the tourism sector in Q2-2023. The significant decline in revenue, resort bookings, and employment underscores the difficulties faced by tourism businesses amid the ongoing economic uncertainty.
Despite the gloomy outlook, there are indications of potential recovery in Q3-2023, with some key indices showing signs of improvement. The upcoming quarter will be closely monitored by corporate executives as they navigate the path to recovery and seek opportunities for growth in the Maldives’ vital tourism industry.