African tourism was severely impacted by the global recession that started around 2008. In 2013 we started seeing signs of a recovery, with the number of tourists increasing by over 5%, or three million, over 2012.
This increase created a positive anticipation that 2014 would be the year in which normality returned to the tourism industry. In fact, the World Tourism Organisation had forecast up to a 6% growth in the number of travellers and the early signs were impressive. Many tour operators and booking agents experienced record sales in the early part of 2014. Unfortunately, a recent survey of more than 500 safari operators by Safaribookings.com found that they had experienced overall reductions of 20% to 70% when compared to 2013. The primary reason given for the sharp decline was “fear of contracting Ebola”.
Tourist misconception of Africa
The problem for various African countries is: despite the fact that the countries affected by Ebola – namely Sierra Leone, Liberia and Guinea – are closer to Europe than to East and Southern Africa, there are geographical misconceptions of tourism regions by potential tourists. They view Africa as one homogenous country and not as the second-largest continent, containing 55 recognised states. This false impression will ensure that the number of tourists will remain low, even to countries not affected by Ebola, until the disease is contained or public perception changes.
East Africa has been particularly impacted by tourists’ Ebola concerns, despite being more than 5 000km from the outbreak region. During August, the World Health Organisation issued a warning regarding Kenya having a high “possibility” of experiencing an outbreak, due to it being a major travel hub. However, to date, that country has not experienced a single incident. It is praiseworthy as well as noteworthy that international airports are highly vigilant in steps taken to prevent any spread across borders.
Ebola football disappointment
Morocco had been scheduled to host the African Cup of Nations Football tournament in January 2015. Due to Ebola concerns linked to the large influx of supporters from West Africa and the difficulty in controlling such numbers, Morocco cancelled the tournament.
Although it is likely that another country will host the tournament, this decision will have an impact on the Moroccan tourism industry because many in the tourism industry have taken advance payments for bookings. They have also assumed greater levels of debt in improving the services offered by hotels and lodges.
The employment expectations of locals have also been dealt a blow. The Cup of Nations event would have expected an opportunity of employment for at least the period of the competition and possibly even permanently, as sports tourists may elect to revisit the country at a later date. But those individuals are now unlikely to earn an income from tourism, which is a further impact of Ebola on individuals as well as on the Moroccan economy as a whole.
Ebola and insurance
Insurance companies do provide an element of protection with respect to “contagious disease” being the cause of “business interruption”. However, this is generally limited to disease occurring within a specific radius to the affected business, lodge or hotel. It is highly likely that should Ebola not be contained in the West African region and spreads further, reinsurers might consider either specifically excluding Ebola, or entirely remove the contagious disease clause. Treaties are being renewed for the 2015 calendar year, and there is little doubt that this specific extension will come under scrutiny.
The impact of terrorism on African tourism
While Ebola has had an impact on the number of tourists cancelling or postponing scheduled trips to Africa as a whole, the impact of terrorism has been more localised to those countries directly affected. Nigeria, for example, has seen a decline in the number of visitors following the kidnapping of schoolgirls and that government’s perceived inability to adequately deal with that challenge.
However, the country that has been hardest hit is Kenya, following the bombings in Nairobi and terrorist attacks along the Kenyan coast. Although this has had an impact within the local economy, most tourists primarily visit Kenya for safaris. Those visitors who may have planned to visit Mombasa for the beach portion of their holiday are now switching to Zanzibar, the beautiful archipelago of islands off the coast of mainland Tanzania.
Attacks on hotels?
… new insurance risk insights needed
Fortunately, there have been no direct attacks on African hotels. However, the Taj Mahal Hotel in Mumbai, India, was severely impacted by a terrorist attack during 2008. To put matters into context, this does not mean that a single incident in India makes that country any less safe to visit than ever before. Equally, terrorism attacks in Africa merely demonstrate that there is no destination that can offer a guarantee of personal safety – and insurance needs to be carefully assessed in new and insightful ways.
Wide awake insight
Insurance does provide various products. For instance, Hollard Hospitality and Tourism provides War and Terrorism cover, as well as Kidnap and Ransom, and we have partnerships and representatives throughout the African continent. From an insurance point of view, it is extremely important to have sources for local risks as well as legislation and circumstances specific to each country.
Although our colleagues in Africa originally experienced interest in War and Terrorism, as well as Kidnap and Ransom cover, demand for this cover appears to have reduced. This seems to be due to the Somali pirates issue being largely addressed by a greater military presence in the region, including South African forces. There has also been a reduction in the number of kidnappings from oil bases in Nigeria.
For the present moment, this seems to suggest that the threat of terrorism within African countries, is not viewed as an immediate priority by either hotel owners or the African insurance industry.
However, all specialist underwriters and experts within Hollard Broker Markets who cover all categories of insurance, including Hospitality and Tourism, encourage brokers to keep alert to changes which can happen in a flash. We believe our intermediary network, particularly those who guide clients in the “movement-dependent” Tourism and Hospitality arena, are faced with the challenge of keeping totally abreast of changes that can happen overnight.
This is why at Hollard Hospitality and Tourism we make sure we have up-to-date risk information, available at all times, from our specialist underwriters and category experts. Our expertise is yours to give insightful guidance and help you to do the very best for your clients, wherever they are in the world.