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Vertical Integration: Clipping the wings of the Seychelles Tourism Industry

Vertical Integration: Clipping the wings of the Seychelles Tourism Industry

Seychelles Minister Didier Dogley, the island’s Minister responsible for Tourism, was in the National Assembly last week to answer questions on his “Amendments to the Vertical Integration policy” that is set to touch the Tourism Industry of Seychelles, and only the tourism industry players. Other very big economic players settled and commanding other sections of the island’s economy, can diversify into the tourism industry, as they continue to control their section of expertise and other lines of business, they are already well established in.

An extract of the Government daily Newspaper, Nation, revels the “Clipping of the Wings”  of the tourism industry move:-

“The Baie Ste Anne Praslin elected Member, the Hon. Churchill Gill MNA quizzed Minister Dogley on the amendments made earlier in June to the Vertical Integration policy and what these changes entail.

Vertical Integration is the term used to describe a strategy wherein the supply chain of a company is owned by that same company, this means that the company operates various services or provides different products which are normally operated by separate firms.

Since this method can impact negatively on small businesses, the ministry for tourism established the Vertical Integration policy in 2008 in order to address the pleas made by small businesses in the tourism industry and to provide some form of control to avoid that large tourism service providers dominate the local market.

Minister Dogley stated that the policy was revised in June 2018 and assured the members that the revision process had included consultative sessions with all stakeholders in the tourism industry.

A total of eight major amendments were made, Minister Dogley explained.

Firstly, tour operators are only able to invest in or manage not more than 150 hotel rooms compared to previous conditions in the policy that allowed an investment of 15% of the total operational hotel rooms in the country.

“For instance there were 6171 rooms in July 2018, which would have made it possible for a tour operator to acquire 925 hotel rooms. This shows that with the increasing number of rooms, there were potentials for the tour operators to monopolise the market and this is why we opted for a fixed number,” Minister Dogley further explained.

Other amendments include motorised watersports limitations as well as limitation on hotels that can gain access to the bicycle rental business on La Digue.

The amendments also make provisions for tour operators to be able to own specialised restaurants and compete in the ferry business.

Additionally, hotels are allowed to own and manage only one excursion boat of a maximum capacity of 12 passengers under the revised policy.  This is to encourage hotels to outsource this service to other small excursion firms.

In the same line, tour and hire craft operators will have to adhere to a new condition dictating that they only operate with five boats instead of 10 to allow small, independent boat operators to gain a greater foothold to the excursion market.

Operators who currently have more than five boats have been given a grace period of one year starting June 1, 2018 to do away with the excess boats.

On this point, several MNAs expressed their concerns that this would not necessarily help smaller businesses since the ministry does not cap the capacity limit for these excursion boats.

“It is difficult for us to put a limit on the size of the boats operated by tour operators because we are developing the cruise ship business in Seychelles and we need these big boats that have a large capacity in order to cater for the large number of tourists during the cruise ship seasons,” Minister Dogley replied.

Minister Dogley also stated that Seychelles is a free market and they cannot enforce policies that are too strict and that could potentially scare away investors from the tourism industry.”

This proposition, seen as “Clipping the Wings” of the Seychelles Tourism Industry, is set to see a lot of further discussions and amendments. Investors or leaders from other Trade and Industries are not touched, and they can enter the Tourism Industry and indirectly now control the industry, because of the limits set on the existing players, but not on any other trade or business lines.

Are these “Amendments to the Vertical Integration policy” barring, for instance, “Club Med” from setting up their proposed establishment at Sainte Anne because they are a Tour Operator and are already looking also into the airline industry? Or is the rule only applicable to Seychellois? A local DMC (Tour Operator) is already also involved in the island’s largest tourism establishments, will that amendment mean they have to relinquish, on paper at least, all their interests in the said establishments?

Unfortunately, there are more questions than answers for now, and is their a need to grow to tourism cake to ensure every one gets their share of the tourism industry that should be the preoccupation of the Government? Time will tell.