Increasing departure tax could potentially backfire on Fiji as competing destinations lure travelers based on price, leaving Fiji with a costly reputation.
ANZ’s international Pacific economist Dr. Kishti Sen has cautioned that the stimulus provided by affluent travelers and Australians, who built savings buffers during the pandemic and sustained Fiji’s tourist demand post-COVID, is dwindling.
Australians, who make up Fiji’s biggest source market, are now returning to their preferred destinations in Southeast Asia, and the cash savings ratio in Australia has reverted to pre-pandemic levels of about 14 percent.
Fiji’s tourist numbers from New Zealand, the second largest source market, are also tapering off, although at a slightly higher level than the Australians.
“Tourism is very price sensitive,” Dr. Sen noted. “We need to compete on prices to attract travelers to choose Fiji as a holiday destination. However, households in key source markets are still dealing with cost-of-living pressures and seeking value-for-money travel. Increasing departure tax makes it a bit harder to compete on this value-for-money proposition when competition is fierce.”
Fiji will regain its status as having one of the highest airport departure taxes in the world when the tax increases to $170 next month and to $200 on August 1 of next year. The increase, announced in the Government’s 2024-2025 National Budget, is being justified as timely by the Government, which believes the tourism industry is doing well enough to afford it.
“Tourism industry has rebounded very strongly. Hoteliers and players in the tourism industry have done very well. Some of them have also made windfall profits. That has had a positive impact on the economy through spending in other sectors,” said Minister of Finance Professor Biman Prasad. “We don’t see demand as a problem. We see supply as a problem. Accommodation, more rooms…so we’re taking departure tax back to $200. It’s not something that was not there. It was a COVID measure to bring it down.”
Fiji’s airport departure tax had increased from $100 in 2012 to $200 in 2013 and remained so until it was reduced to $100 in 2020 due to COVID. The increase is projected to contribute $46.4 million in additional revenue this year.