Tourist arrivals rise, but profits plummet

The government is celebrating as the Maldives achieves one tourism arrivals milestone after the other. When arrivals surpassed the 1.3 million-mark at the end of last month, it was celebrated as a grand achievement. The numbers show Maldives is on track to surpassing its annual arrivals target for this year. But is this rise in numbers reflected in earnings?

The latest statistics released by the Tourism Ministry show Maldives recorded 1,347,973 tourist arrivals as of August 29. This is an increase of 127,487 visitors compared to the same period last year. China continues to dominate as the top source marked for arrivals, followed by Russia and the United Kingdom.

The statistics show that tourists spend an average of 7.7 days in the Maldives. There are currently 64,142 tourist beds in resorts, hotels and liveaboards across the country.

Is the rise in arrivals boosting revenue?

The Maldivian economy is at its most perilous in recent history. It is in desperate need of a sizable injection of foreign currency. The country’s entire economy is dependent on its tourism industry. Therefore, a change in the current economic situation depends on what happens to its tourism industry.

Its clear from conversations with multiple tourism experts that many working in the tourism industry are bearing the brunt of a drop in revenues despite the rise in tourist arrivals. There are several reasons for this.

Mohamed Riyaz, the founder and managing director of leading travel agency, Lets Go Maldives, tourism revenue depends mainly on the number of bed nights. Tourists from countries such as Russia spend an average of 7 or 10 days in the Maldives, while tourists from Asian countries spend three or four days.

Tourists from the top source market, China, spend four days at most. That is also because of the country’s strict work rules for leaves.

Another reason for the decline in tourism revenue is the strained relations between India and the new Maldivian administration, resulting dwindling arrivals from India. The Indian market is important for the Maldivian tourism industry, as tourists from the country usually visit during the low season.

“An empty bed is a loss to us. The profits increase as the beds fill up. India is a low season market. This is why the Indian market is vital,” said a sales and marketing manager at a luxury resort in near Male’.

“Some resorts depended on the India market to survive the low season. But given the decline in this market, all resorts need to chase the China market to survive. As a results, resorts are forced to slash rates and such.”

India had been the top source market for tourist arrivals to the Maldives in 2021, 2022 and 2023. Over 200,000 tourists from India visited the island nation each year. But this has changed – a change that industry analysts have warned will result in a billion-dollar loss.

Riyaz agrees with this assessment. He said that the fact that India is a low season market makes it crucial to the Maldivian tourism industry. He believes that there needs to be more growth in the China market. He believes that growth in both the China and India markets will greatly benefit the Maldives.

Another reason for the drop in revenue despite the increase in arrivals is that more and more tourists opt for cheaper guesthouses or hotels over resorts. Maldives is home to top international and local resort brands. Resorts are the big moneymakers, and it is from resorts that the Maldives gets real benefits from tourism. The high bed rates in resorts means the state generates a higher revenue from taxes and other charges.

“Even if the arrival numbers are high, if many of the tourists are going to guesthouses it means the country is generating a lower revenue. For example, when a daily average of 4,500 tourists would visit the Maldives, 80 percent of them stay in resorts. If for example 5,500 tourists visit the Maldives per day but most of them stay in guesthouses, the spending of tourists is lower. This is the reason for the lower revenue,” said the sales and marketing manager who spoke previously.

“The spending on four nights at a guesthouse is nowhere near the spending on a single night at a resort. There is a vast difference between revenue from a 16 percent tax on an USD 20 and a 16 percent tax on an USD 400. Therefore, if more tourists are staying in guesthouses, them the revenue earned by the state will continue to decline,” said the manager, who has over 20 years of experience working in the tourism industry.

Abdulla Giyas Riyaz, the chairperson of the Maldives Marketing and PR Corporation (MMPRC) and president of the Maldives Association of Travel Agents & Tour Operators (MATATO), said that while Maldives has significantly increased its bed capacity, it has failed to create enough demand to meet the supply. He said that many resorts have been forced to slash bed rates as a result.

“The average daily rate has been discounted. It is significantly cheaper compared to Bali and other such destinations. The Maldives would fill all its rooms by selling beds for USD 20. But that is wrong. This is a mistake we are making,” he said.

Abdulla said that Maldives needs to maintain its value. He believes that the country needs to drop its discounting culture, where resorts slash prices the moment there is a decline in arrivals.

He believes that Maldives must also be friendly and welcoming towards all countries. The tourism industry has suffered the consequences of tensions with foreign countries. It is reflected in dwindling arrivals from such countries and a change in perception by people of other countries they are allied with. It is important that Maldives avoid getting tangled up in geopolitical wars.

Maldives also needs to heed the counsel of tourism experts when making decisions that affect the industry. The tourism industry – the country’s main economic driver – must not become a tool for politics.

The increase in tourist arrivals is happy news. But true happiness would be if this increase in arrivals results in an increase in revenue. Industry experts warn revenue has not increased. The reasons are clear, and it needs to be worked on.

The increase in tourist arrivals is happy news. But it is meaningless unless it results in an increase in revenue. Industry experts warn that tourism revenue has not increased. The reasons are clear, and requires urgent remedy. The Maldives became the leading tourist destination it is today by working hard day and night over the course of 50 years. It is not right that the country’s tourism industry is sacrificed over a policy change by those in power.