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The Mauritius' global financial crisis

Paper Type: Free Essay Subject: Tourism
Wordcount: 2253 words Published: 10th Apr 2017

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3.0 Global Financial Crisis in Mauritius: Evidence from Macroeconomic Indicators

The analysis below is based on some macroeconomic indicators namely GDP growth rate, some tourism components (arrival, receipts, number of hotels and room, employment rate, FDI inflows, BOP) of the Mauritian economy and Air Mauritius in the event of the crisis.

3.1 GDP growth rate

Mauritius relies on three traditional pillars specifically agriculture, E.P.Z manufacturing sector and tourism but the market structure changes over time. From 2006 to 2008, the growth of GDP was constant but unexpected decline of 2.4%, from 5.5% in 2008 to 3.1% in 2009 as shown in figure 1 below. The main reason behind the decline was the impact of the financial crisis on Mauritian sectors. The GDP improved to 4.2% in 2010 compare to 2009 projecting a gradual recovery from the global crisis but this was not the case in 2011 as there was a drop of 0.7%. This means that global crisis has a continuous effect on the economy as it cannot be solved overnight. However, there was a slight increase by 3.5% in 2013.

Figure 1: Real GDP Growth Rate 1994-2013

Source: CSO, National Accounts of Mauritius, 2012

3.2 Global financial Crisis and Mauritian Tourism Industry

3.2.1 Tourism Arrivals and tourism receipts

In pre-crisis era, the tourism and travel industry has been the largest flourishing sector. Since the late 90s the tourism sector has experienced a boom. Since 1994, there was a rapid growth in the number of tourist arrivals in Mauritius that led to an increase in the tourism receipts as shown below in figure 2.

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The amount of tourist arrivals has increased from 400,526 in 1994 to 993,106 in 2013. The amount of tourism has boosted from Rs 6,415 million in 1994 to Rs 40,557 million in 2013 indicating an increase of Rs 34142 million over the past years. There has been around 532.2% increase in the tourism receipts the past 20 years. There was a very little increase in 2000 to 2001 in number of arrivals and the amount of receipts was quite the same in 2001 and 2002 due to the 9/11 terrorist attack in New York on the World Trade Center in 2001.

Figure 2: Tourism Arrivals and tourism receipts for last 20 years

Source: Central Statistical Office Mauritius

For the past few years, Mauritius has experienced hostile impacts on the tourism sector due to the global financial crisis. The 930456 arrivals in 2008 indicated a growth of 2.6% but the rate decreased by 13% compare to the growth of 15.06% in 2007. However, the difficult times and global crisis started afflicting our shores by slowing down the growth. Eventually in 2009, the tourism industry was hardly hit as it showed a negative growth of 6.4% decreasing by 59,100 of arrivals between 2008 and 2009. There was also a heavy decline in tourism receipts around 13.4% between 2008 and 2009. During 2010, Mauritius maintained the highest arrivals growth of 7.3% due to the incentive taken by the government. The tourism arrivals rebounded by a growth rate of 3.2% in 2011 and 0.08% in 2012. The tourism receipts boosted up in 2010, 2011 and 2012 but there was a decline by 8.6% in 2013 although the number of arrivals increased by 2.9%. The disparity in 2013 would be explained as there was a decrease in hotel price in order to attract European clients and the markets has been opened to Asian countries.The figures used are attached in Appendix A.

3.2.2 Number of Hotels and hotel rooms

In Mauritius, the number of hotels and rooms has expanded along with the growth of tourist arrivals. In 2013, there were a total of 107 registered hotels and 12,376 rooms. There was a closure of 3 hotels in 2011 and 10 hotels in 2013 which led to a decrease in the number of rooms. The graph below shows the trend of hotels and room available in Mauritius over the past 10 years.

Figure 3: Number of Hotels and hotel rooms for the past 20 years

Source: Central Statistical Office Mauritius

3.2.3 Employment in Tourism Sector

Figure 4: Employment in Tourism Sector, Mauritius

Source: Central Statistical Office Mauritius

The tourism sector has been creating plenty of jobs over the past years. From the figure above, GFC has shown its huge impact mainly on travel and tourism as there is a continuous decrease from 2006 to 2007 and only 2011 there was a slight increase. The restaurants have only been affected in 2011 with a slight decrease around 2.2%. Tourism sector was mainly touched in 2009 so the employment in hotels demonstrated it by a decrease of 1836 jobs and in 2012; there was only a small decrease. Overall, the total employment in tourism sector had a negative impact around 6.1% in 2009 and 0.38% in 2012.

3.2.4 Balance of payment (BOP)

There are various components of the economy in Mauritius that contributes to the BOP namely tourism earnings, Foreign Direct Investment (FDI) and invisible exports. Since the plague of GFC, “the phenomenon of global imbalances ‐‐ that is, the coexistence of large current account deficits and surpluses in the global” (Servén and Nguyen 2010). The continuous deficit in the current account indicates a slowdown in the Mauritian economic activity and growth. Meanwhile, the surplus in the services account showed a decline of around 17.6% in 2008-09 due to a depression in our principal export markets in the EU and UK meant that services fell by 17.6% in 2009 (see Table 1 below). The service showed sustained growth to Rs 27,485 in 2011-12. However, this was not reflected on the financial statement of listed hotel groups which showed a declining profit.








Current Account
















Table 1: Balance of payment

Source: Bank of Mauritius

In relation to FDI inflows, present to the changeable economic environment, many companies have postponed their investment schemes. While some projects in the tourism sector have been deferred and there was also delays in the construction of airport project. Tourism industries have responded to the crisis by reducing costs, cutting the accommodation price in hotels, changing work methods and prolonging investments and recruitments. Figure 6 below, shows the deterioration in FDI in tourism sector from 2007 to 2012 and only 2009 there was an increase of USD 10.5 million.

Figure: 5: Foreign Direct Investment by tourism Sector

Source: photos.state.gov

*Figure for 2012 is for the period Jan-Sept only

3.3 Air Mauritius

Air Mauritius is the national airline of Mauritius. Ujooha, the CEO of Air Mauritius (annual report, 2008/09) mentioned that GFC would be remembered as the ‘worst in its history’ of airline industry. Air Mauritius was badly affected by the GFC as it faced huge losses on fuel hedging where they hedged on fuel for USD 104 a barrel for 2 years until August 2010 but fell to USD 33 a barrel in 2008. With the worldwide recession, the number of passengers carried has declined around 9% in 2008/09 and 4.9% in 2009/10 as shown figure 6. In 2012, due to the reduction in seats on European markets so there was a termination of flights to Rome, Munich and Vienna and it had an impact on 2012/13. Hence, the GFC really had a negative impact on Mauritian tourism sector and airline industry as Air Mauritius is still trying to overcome that crisis.

Figure 6: Passengers carried & Revenue

Source: Air Mauritius

New Mauritius Hotels (NMH)

NMH is also known as Beachcomber Hotels, is one among the largest and oldest of hotel in Mauritius. It consists of eight hotels operating in Mauritius under its brand name:

  1. Royal Palm
  2. Dinarobin Hotel Golf & Spa
  3. Paradis Hotel & Golf Club
  4. Trou Aux Biches Resort & Spa
  5. Shandrani Resort & Spa
  6. Le Victoria
  7. Le Canonnier
  8. Le Mauricia

NMH had an amazing year in 2007 which has reported a profit reaching around Rs 1,969m. This profit fostered NMH to invest immensely in the development of the companies. Consequently the financial chaos put a cessation to the ascendancy of the business in 2008. Nevertheless the incomes of company for nine months boosted by 8% ending on June 2008, the company’s profits for the similar period compared to last year fell dramatically. Since the arrivals in tourism dropped by 7.6 % at national level, receipt for the group declined by 16.2% for the following year and revenues plummeted by 8.6% in the year 2009. There was no exception in 2010 as the group showed another decline in revenue of 7.7%. The company also reported this fall because of the shifting and fluctuation in demand towards low-priced accommodation and huge discounts by some hotel operators. The main reason behind it was due to fragile and weak conditions that overcame Europe. The year 2012 had a harsh trading condition as there was a drop in the average of guest night spending because the exchange rates were unfavorable but the total revenue improved by 6.4%. In 2013, there was a negative drop of -3.5% in total revenue due to the heavy discounting rate provided by their competitors.

Sun Resorts

Sun Resorts is a luxury and deluxe hotel group that owns five hotels in Mauritius namely:

  1. Le Touessrok (5-star resort)
  2. Long Beach (5-star resort)
  3. Sugar Beach (5-star resort)
  4. La Pirogue (4-star resort)
  5. Ambre (4-star resort)

Sun Resorts began to get worse in terms of both rates and volume by the end of year 2008, as the current turmoil in the world financial markets had affected our core source markets. While the decrease in occupancy rate persisted, the group’s profits kept on decreasing severely also and in the end of 2009, Sun Resort showed a deficit of Rs105m. The company reported Rs133m loss in 2010 as the market disorder that is staying uncertain and difficult and to predict. In 2011, there was a decrease of 2 % in the group’s revenue so in order to lessen these risks; the company has diversified its approach towards some emerging markets of Asia and Russia.

Naade Resorts

The luxury hotel group, Naade Resorts owns one-villa in Blue Bay at Ile des Deux Cocos and 6 hotels in Mauritius namely:

  • Beau Rivage
  • Legends
  • Les Pavillons
  • Tamassa
  • Merville Beach
  • Le Tropical

It started to experience a decrease in terms of both revenue and volume in 2008, as the decline in the rate of occupancy continued and Naade Resorts’ profits kept on falling sharply. The group reported a negative increase of 4% in the revenue in 2009. The average revenue per room decreased by 41.5% in 2008 and decreased by 0.8% in 2009. As the group itself reflected the impact of the GFC in their annual report, it ended with a deficit of Rs367m in 2009. The overall hotel group’s performance was extremely affected by the destructive effect of the GFC on the arrival of tourists for both the Maldives and local operations and together with an elevated gearing influenced harmfully on the performance of the hotel. Naade Resorts ended its 2012 with an increase of 19% in the average revenue per room compare to 49.9% in 2006.

3.4 Conclusion

The chapter 3 shows that GFC has afflicted the GDP and tourism sector in Mauritius. Moreover measures have been taken by government to overcome it and to increase the amount of tourist arrivals. The next chapter will analyse the impact of GFC on tourism sector and different steps of analyzing.


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