Interview with Moustafa Khataw, Managing Director and CEO of Skylink Group

Tanzania received a record 1,1 million international visitor arrivals in 2015, mostly from Europe, the U.S. and Africa, versus around 580 000 in 2004. That is increasing at a rate of about 10% per annum. To what extent is this stellar growth a result of the Tanzanian governments’ strategies and policies that have been implemented in the last 20 years in order to help improve development in the Tanzanian tourism sector?

I think the 4th phase government that was in power for about 10 years focused well on tourism and the policies that the government put in place in the tourism sector was always done in a consultative process with the stakeholders. I think this gave an impetus to the growth although the government did not spend much on marketing or providing funds to Tanzania Tourist Board (TTB) which is a government body to ensure the promotion of Tanzania as a tourist destination. However, even with the budget constraints, the Tanzania Tourist Board (TTB) managed to participate in some major travel show and travel markets such as ITB Berlin, WTM and the Indaba in South Africa. As that took effect it brought in a lot of tourists. The Tanzania Tourist Board also did road shows. There were also other private tour operators who did road shows in very remote countries such as South America, Brazil, Argentina, Ecuador and Paraguay as well as road shows in China and Russia, which were initiatives from the private sector. Coupled with other monies, the government spent it on advertising Tanzania on CNN and the British Premier League, which is Tanzania’s’ target market. I think that led to the increase in the number of tourists as well. Having said that, there was a rebranding in October last year of Tanzania as the Soul of Africa. That rebranding has not really hit the market as much as we hoped. This was done right at the end of the 4th phase governments’ term. One of the good things to come out of the 4th phase government was their consultative approach. The stakeholders were always involved in tax matters to provide guidance on how to grow this business. It is not the government that runs those businesses but it is the private sector that drives the growth of any business and tourism is no exception. I’m sure you saw the announcement of VAT being introduced throughout tourism in Tanzania. It came into effect at the beginning of this month, 1st of July. That has sent a bit of a shockwave through the business community and through the tour operators worldwide. For example; in Europe the tour operators sell tours in advance, collect the money upfront and send it to the tour operator here and with the tough EU laws the travel agent or tour operator cannot go back to the customer and ask for another 18% to pay for the VAT. This is a big challenge and what is happening now is that the Tourism Confederation of Tanzania (TCT) and the Tanzania Association of Tour Operators (TATO) are engaging the government at the administrative level to find solutions. One of the solutions is to defer the implementation for three months so that tour operators can firstly give notice to their agents and secondly to take a look at Kenya as an example. Kenya introduced VAT a while back and this year they pulled it out because they felt this did not augur well for the inflow of tourists. We have unique wildlife and we have unique attractions but we have many similarities to Kenya. Having introduced this 18% VAT, a tourist may now opt to go to Kenya, book a safari at cheaper rates and then travel to Tanzania for a shorter visit. As tour operators and stakeholders in the tourism business we are at a cross roads. It seems that the government doesn’t want to empathise with the tour operators. The biggest chunk of our GDP comes from tourism, an inflow of 2 billion dollars. That is a huge amount of money. But we have seen that the government institutions and officials are shooting themselves in the foot.

By 2025 Tanzania’s tourism sector is estimated to grow at a rate of about 6.2% per annum against an expected world average of about 3.7%. Those are figures drawn from the WWTTC. Do you feel that the country's capacity is keeping pace with this projected growth?

It’s very challenging in view of the recent developments. However, there is of course potential for growth and the new government has put a lot of emphasis on infrastructure such as industries and road infrastructure which is very important for the tourism sector. I am optimistic that the growth will be on par with the projection or just slightly lower. If the government manages to find an amicable solution for a win-win situation with the private tour operators I think the potential will be great.

Despite this abundance of natural beauty that Tanzania has, it still holds big challenges in terms of the infrastructure development as well as delivery of service and I think it lags behind in capacity in these two key areas at the moment. In your view as a tour operator, does the quality of the experience here match the prices that the top tourists have to pay in comparison to competing markets?

Skylink handles air travel, safaris for which we have our own safari workers and we do car rental. We provide a whole package to our clients.

In Tanzania’s service and hospitality industry, human interaction is key and very important. We have a challenge in Tanzania and we need to admit it. As far as customer service delivery from tour operators and from hoteliers is concerned, it is below standard. This means that we need to do continuous training of our human resources and we are far behind. That is why in Tanzania we have to employ expatriates and what it boils down to is that a lot of expatriate hoteliers or tour operators come and they’re supposed to impart the knowledge to their second in command as practice but it has been very difficult basically because of attitude challenges we have in Tanzania. It’s a reality. I have been in this business for over 25 years and it is really lethargic. We have to do continuous training but the problem remains and the people in the hospitality industry have to take charge of investing in their staff. If they don’t they will have challenges and that impacts the customer service delivery and guests feel it. If you cannot resolve a complaint in 60 seconds you are in the wrong business. When you used to check out of a hotel and they totalled up the bill they would ask if you had used anything out of the mini-bar. If you had said no, the desk clerk would call the room attendants and ask them to check the room to verify this. Now at least, there have been some improvements made. When the client now checks out and says they have not consumed anything out of the mini-bar the desk clerk will just ask the customer to sign and that has made the checkout process smoother. If there are any challenges during a client’s stay, such as the room not being adequate or the airport transfer car was unpleasant, then the customer service recovery is lacking a bit. Secondly, the infrastructure, the roads and the traffic jams all build up the frustrations and it also builds up the cost of doing business. If somebody wants to build a hotel in the Serengeti the infrastructure is very limited. It’s very costly to build those hotels and investors most definitely want to see a return on their investments in a timely manner and that is why prices become higher. As a child I never thought that a hotel in Tanzania would be able to charge 1000 dollars for a room but we now have hotels in Grumeti, Singita and in the Serengeti as well as Mnemba Island in Zanzibar. There are hotels in Selous that have rooms that command a rate of up to 600 dollars in high season. There are waiting lists to get rooms there. It is a very holistic approach: change the attitudes and train the staff in the hospitality industry intensively.

Do you feel the government is doing enough to promote and attract investment into the sector and are they working to develop and enhance the available human capacity in human resources?

The national college of tourism concentrates more on hotels. It doesn’t have a curriculum to provide training to tour operators or for travel agents who have evolved into multiple areas. For example; Skylink handles air travel, safaris for which we have our own safari workers and we do car rental. We provide a whole package to our clients. There is no other institution that provides training from the government for tour operators or travel agents. There is however some tour guide courses out there but they are done on a very ad hoc basis.

So essentially your business has to subsidise and fill that gap to ensure that your staff are of a sufficient calibre.

Absolutely. We do continuous in-house training although from our payroll, we contribute a 4.5% levy called a skills and development levy to the government but I cannot draw money from that pool nor is there any school or college that provides the training I need in my business. For us it is a sunk cost and it is just one of the levies and taxes that you pay to the government but there is no real benefit returned to the sector.

Is this a bone of contention for you? Having to pay what is basically a tithe for something that is useless to you?

It used to be 5% and in the new budget it was reduced by half a percent but then the government came up with another levy called the workman’s compensation fund. So in reality we have ended up paying an additional half percent. On top of that there are a lot of minute taxes, we call them nuisance taxes for tour operators and the list goes on. Now with the burden of VAT that was introduced overnight the argument from the minister is that we have a unique heritage so the tourists come whether they like the tax or not.

So for them it is just a cash cow.

Exactly.

There are a limited number of airlines linking Tanzania to the key European and U.S markets with no direct flights to the main source market of travellers. What more do you think the industry lobby groups such as the Tanzania tourist board (TTB), the Tanzania Airports Authority and the Tanzania Civil Aviation authority, could do to try and tackle this and encourage more international airlines to fly directly into Tanzania?

Firstly, the government has taken a step in the right direction with the construction of a third terminal in the airport. As I understand it, the airport will be operational in January 2018 and that will make room for additional capacity going through the airport. However. The government has clamped down on spending. Any foreign travel has to be cleared through the state house, through the offices of the treasury registrar across the entire semi-government sector. That becomes a stumbling block. When I give a quotation to a corporate government entity but the time they get approval from the relevant authorities the fare is no longer available. Airline fares are dynamic. When you have to tell a client; sorry, that fare is no longer available, it becomes a challenge. We understand the steps being taken by the government of controlling costs but it should not be an outright clamping down. There has to be a process. This has now filtered down to semi government institutions that they also need to go to government to get approval. On top of that there are certain government officials who also sit on the boards of certain institutions that are not funded by the government and yet even if that institution sponsors that official to attend any business related function that person has to obtain permission. That creates a lot of frustration and bureaucracy. I believe that the new government has created fear in the business community and everybody has started keeping their money close. They don’t want to spend and you will find everyone complaining that there is no money in town. The government needs to remove that fear. How is this to be done? People with the right skills need to be encouraged to travel and get exposure. The embassies or high commissions that represent Tanzania overseas cannot do business deals with government offices based here. They are not equipped for that. The point they are missing is that if a pension fund decides to do a joint venture with a financier you can’t expect that the embassy or high commission office of Tanzania to have people with the relevant expertise to sign agreements on behalf of that institution. This is a snag we have hit and I don’t know how this will be resolved.

The new Dar es Salaam international airport or the DIA will be officially opened in 2018 to attract and serve bigger airlines and obviously Zanzibar’s airport too which is also being upgraded and there are also new airports, as I understand it, in Mwanza in the north of the country and in Songwe and Pande in the south, as well as Mafia Island. How well served is the country overall with aviation infrastructure?

I believe we have good airports though some of them cannot accommodate bigger aircraft. Mwanza is an international airport and can accommodate big aircraft and Mbeya; the Songwe airport can take up to an Airbus 320 or 330. They have that capacity. Zanzibar airport is being upgraded and a new terminal is being built but it is not finished yet. The current terminal two of Dar es Salaam was built in 1983 by a French company and it is over 30 years old. It is old and cannot cope with current arrivals. The first impression for a tourist when they arrive is of landing and then having to stand around for two hours waiting for immigration to get your visa and then going to the immigration officer and then only clearing customs. There is also a problem of airlines arriving too close together. You would have the South African Airways at 2pm, then Emirates at 3pm and then Etihad and Qatar arriving nearly simultaneously at 4pm and it just becomes a bottleneck. The Tanzania Airport Authority will most likely, when negotiating with international airline, have to give appropriate time slots to them but when you have an international airline wanting to do business in your country you grab that opportunity because it will provide income to the airport handling authority and landing fees for the Tanzanian civil aviation authority and sometimes beggars can’t be choosers. We just welcome them and try to accommodate them as best we can.

The overall Tanzanian tourism strategy is consciously one of low volume and high yield. To what extent do you think the TTB, the Tanzanian Tourism Board, is now looking at other emerging markets such as Brazil, Russia and China, the red countries and India, the UAE and South Africa as well as the wider African region?

I respect your opinion that we want high yield and low volume but I disagree. We still cater for backpackers. We have plenty of campsites. Many tourists that want to come visit our wildlife and stay in campsites. There are many hotels that take backpackers. If we only wanted to attract high yield and low volume customers we would lose out because people have choices. They can go to Namibia or South Africa and see the Big 5 in South Africa. They could go to Kenya and see the Big 5. The only unique attraction that we have is the Serengeti and Ngorongoro but people can see the wildebeest across the Maasai Mara instead of the Serengeti if they wanted to. The infrastructure in Kenya is much more developed than in Tanzania and there are more hotel beds available in Kenya. The notion of us wanting high yield is right to help improve the infrastructure, but slapping them with more VAT because we are the best can’t work. People are conscious of their options and their hard earned money. Most people who come to Tanzania will not come every year unless they were very rich. A tourist that comes from America will plan their trip a year in advance to visit Tanzania within their budget. And yes, the tourism board has explored markets in India and China and that is still coming up. We see a lot of Chinese tourists coming to Tanzania but what Chinese tourists want is not the same as a European tourist. They want to come to Tanzania, go on a quick game drive and then spend more time in the casino than the game parks. There are cultural differences.

Irrespective of where they are from, do you think tourist that are visiting are hungry for new destinations in Tanzania itself such as relatively unexplored places in different parts of the country. I’m referring to the likes of Selous, Ruaha and along the coast, Lake Tanganyika and Lake Nyasa.

I think there has been a lot of increased traffic to Katavi and Mahale and Gombe on the Lake Tanganyika where people go to see the chimpanzees. Investors have built luxurious lodges there and they have their own plans but these are expensive because they are very rural accessed mainly by cars and if you want to go to Ruaha or Selous it will take you a good eight hour drive that will be very bumpy unless you fly in which costs money. It becomes expensive but Katavi, Mahale, Gombe and Lake Tanganyika are gaining momentum and it is more appealing to people that have visited Tanzania before and now want to experience more of Tanzania off the beaten track.

Do you see Tanzania as a destination that is difficult to beat in Africa in terms of variety, diversity and fusion of everything it has to offer, the warmth and hospitality of the people and its accessibility?

I strongly believe that Tanzania is a unique destination. I am Tanzanian. I was born and bred in this country. It is unique. The infrastructure has improved over the last 15 to 20 years. It has opened up to more luxurious brands of hotels, lodgings and campsites that have come into the country. We offer many choices to tourists and I would say that we easily cater to middle class tourists up to the high end tourist market. I strongly believe that there is room for all tourists to come to Tanzania irrespective of their budget. If you want to go on a camping safari we can provide that. I strongly believe that the current saga could have been avoided if the current stakeholders had been consulted.