The government of Vanuatu has convened three major tourism and travel stakeholders this week to announce a major shakeup in the sector.

Dubbed Shared Vision 2030, the plan commits Air Vanuatu, the Vanuatu Tourism Office, and Airports Vanuatu Ltd to an ambitious expansion strategy.

The Vanuatu Daily Post reported yesterday that Air Vanuatu intends to build an actual international fleet of up to eight jet aircraft. Airports Vanuatu Ltd has almost completed the essential Bauerfield runway upgrade. It is also lining up support for an ambitious new facility plan that can accommodate and service Air Vanuatu’s fleet.

READ MORE: Vanuatu and New Caledonia hold historic talks on tourism

For its part, the Tourism Office is being asked to transform itself into a more dynamic organisation, in touch with modern travellers and modern tech.

The government is being asked to stump up no less than VT500 million (NZ$6.6 million) in new money every year for the next five years to back this play.

The plan unveiled on Monday raises countless questions.

Where will Air Vanuatu find the pilots? How will it finance the planes? A new Airbus A320 lists for US$101 million, and a Boeing 737-800 costs about a million dollars more.

Leasing isn’t cheap
Leasing even one isn’t cheap. How will Air Vanuatu afford 6 of them?

A new terminal isn’t just a building. It’s the air traffic control centre, hangars, fuel depot, service bays, fire-fighting and emergency response facilities, food preparation, administration… the list is long and exacting.

All things considered, a price tag of more than  VT10 billion (NZ$130 million) won’t be hard to reach.

The argument in support of the plan is simple. We can either grow now, or run the risk of our economy withering away.

Vanuatu’s economy suffered badly in 2018. Few businesses thrived, and many struggled. VAT revenues are one of the most reliable measures of overall commercial activity. They don’t look good.

Although monthly revenues have surged a few times over the same period in 2017, 2018 revenues overall were only about 10.2 percent higher than last year.

That’s a problem, because revenues should have risen at least 15 percent overall, given the 20 percent rise in the tax rate (2.5 is 20 percent of 12.5, so the rate rise is 2.5 percent, but revenues should increase by 20 percent). The trendline is pointing downward, when it should be sharply upward.

Tourism slump
Much of the commercial slowdown comes from slumping tourism revenues among traditional players. Larger resorts and hotels are struggling, to put it politely. The lucky ones are seeing 50 percent occupancy rates. The unlucky ones are far worse off.

Reduced tourism activity has effects throughout the economy, dragging industry, services and agriculture down with it.

Tourism officials are quick to crow about ‘record’ air arrival numbers. The numbers are real, but they hide a number of problems. First, these numbers have only just managed to rebound from 2014 levels, before the twin catastrophes of cyclone Pam and the Bauerfield runway debacle decimated air arrival numbers.

Second, everyone’s strategic plan expected continuous growth through that period. But we’re barely ahead of where we were in 2014. That puts us almost five years behind schedule.

Lastly, travellers are planning differently. They’re not following the beaten path as much. The advent of social media changed the way people decide where to go, how they book their reservations, and what they do when they’re away.

Referrals matter more than ever. More people ask for input about possible destinations on social media than ever before, and a large number of people decide where to go based on what they hear.

AirBnB is affecting traditional booking patterns enough to make it hurt, especially for larger resorts. Unless arrival numbers rise significantly, it will be impossible to convince new investors to come, and some existing investors could well begin planning an exit.

No middle ground
The plan’s proponents argue that Vanuatu can either rise in popularity, or expect to be ignored by the next generation of travellers.

And based on which path we choose our economy will either grow, or shrink. There’s no middle ground, they say.

But we have to walk before we run. Tourism and travel industry experts tell the Daily Post that the first priority is getting maximum value from existing markets. Expect to see service to Melbourne announced soon, and increased flights to all existing destinations.

One insider told the Daily Post that there is a shortage of aircraft worldwide. Forbes reports that in the USA, for example, “More than three-quarters of the fleet for sale is more than a decade old, [with a] decreasing quantity and quality of less-than-decade-old aircraft.”

Vanuatu will have to acquire ‘new iron’ for its own routes, rather than trying to seduce outside airlines to come here.

One major challenge that has yet to be addressed is the 140 new pilots who will be needed to fly the fleet.

The greatest shortage in the aviation industry right now is pilots. This means more competitive salaries and better working conditions will be needed to convince commercial plots to come, and our own pilots to stay.

Air Vanuatu is holding a press conference today to discuss these and other issues. The Daily Post will be following the story as it develops.

Dan McGarry is media director of the Vanuatu Daily Post group.

• Vanuatu airport crisis

In a late-night teleconference with senior government officials, World Bank representatives finally acquiesced to Vanuatu’s choice of bidder for the long-awaited Bauerfield runway upgrade.

Confronted with a determined government, the World Bank ended what one participant called a months-long “standoff” by indicating it had no objection to the decision to use China Civil Engineering and Construction Company, or CCECC, as the contractor for the projects.

CCECC’s bid for the Bauerfield component of the contract came in at just over US$47 million—approximately VT5.16 billion—according to members of the bid review committee. The repairs and upgrades on Tanna’s White Grass and Santo’s Pekoa airports will cost slightly more than US$11.3 million, or approximately VT1.24 billion.

A decision had been expected late January this year. But after a series of delays, the resolution arrived only hours before a senior cabinet briefing designed to bring the issue to a head.

In a late-night discussion with World Bank representatives on Thursday, senior government officials made it clear they were prepared to end the impasse by making their choice public, even if that preference was not shared by the funding body.

Journalists invited to the Friday morning event at the Holiday Inn had been briefed to expect a statement to that effect from the Prime Minister. Some were surprised when Charlot Salwai instead announced that the logjam had at last been broken.

The government clearly intends not to waste another moment. Contacted for comment, both the World Bank and CCECC were playing catch-up to the Friday morning announcement. Shortly after the press statement was issued, a spokesperson for CCECC indicated that the company had yet to receive formal notification of their selection, but promised a response as soon as the word arrived.

‘Critical importance’
For its part, a World Bank spokesperson replied by email, stating, “We fully appreciate the sense of frustration felt by many regarding delays in finalising the tender evaluation, however due to the critical importance of this runway to Vanuatu, getting things right through following proper procurement processes and due diligence was essential.”

They expressed relief at the positive result and were eager to move on: “The good news now is that all bidders have been formally notified of the completion of the evaluation process, with contract negotiations to be scheduled by the government in the coming days.”

Details are sparse concerning the cause of the delays. Speaking on background, all parties have admitted to differences of opinion concerning bid price, and confidence in the ability of some bidders to complete the required works within the proposed budget.

But no one was willing to discuss the process on the record, for fear of prejudicing the process.

An evaluation committee member told the Daily Post that their recommendation was returned three times with requests from the World Bank for additional information. These requests for information had to be forwarded to all bidders, and responses compiled and circulated.

Each of these took weeks to complete, giving rise to concerns among onlookers that the process was in danger of getting stuck in a loop.

Asked if this series of interactions affected the outcome, one person close to the process said: “It did affect the outcome. I can’t say any more than that.”

Fair contest
Numerous commentators and participants expressed understanding and respect for the integrity of the World Bank process, and understood the need to ensure a thorough and above all fair contest. Weeks ago, after a meeting with the World Bank’s vice-president for Asia Pacific, MIPU Minister Jotham Napat underlined the need to ensure that the process wouldn’t be subject to appeal or litigation following the award.

“That’s the last thing we need,” he said at the time.

The economic consequences of delay have been a source of deep concern people on the ground here in Vanuatu.

There has long been a widespread sense that undue delays to the Bauerfield project would only prolong the country’s economic struggles. In the wake of cyclone Pam, which ravaged half the country, tourism has struggled.

The shock announcement at the beginning of 2016 that Air New Zealand was suspending commercial service to Port Vila due to runway conditions was followed in quick succession by the suspension of a codeshare between Qantas and Air Vanuatu.

The resulting drop in tourists arriving by air put intense pressure on local tourism operators, who rely on air arrivals for the bulk of their revenues. Overall revenues from tourists arriving by air are just now returning to 2014 levels, but occupancy rates are lower.

This is primarily because tourists have been staying in Vanuatu marginally longer in recent months.

‘Round the clock’
When bids were unsealed in late December last year, a procurement specialist contracted by the World Bank assured bidders that committee members would work through Christmas and the New Year and do their best to get a result “within a month”.

A bid review committee member confirmed to the Daily Post that they had worked “round the clock” to assess the bids and make their selection.

According to one technical specialist, the upgrade to Bauerfield airport’s runway will consist of milling out the top 10mm of the runway surface, then re-mixing it and adding new bitumen. Then another 10mm of new runway surface will be added, effectively doubling the depth of the surface.

The contractor will work during airport downtime, mostly at night. The work will proceed in small slices, as it were, and a temporary ramp section will be added every morning to allow a smooth transition between new surface and old.

Asked about the state of the foundational materials that underlie the tarmac itself, the specialist replied that it was found to be in perfectly good condition.

Perhaps the primary concern for tourism business owners is the status of the codeshare between Qantas and Air Vanuatu.

The code share was cancelled shortly after Air New Zealand’s January 2016 announcement that they were suspending scheduled commercial service due to concerns about the condition of the runway.

The Daily Post asked Jotham Napat if he was going to contact Air New Zealand now, but he indicated he didn’t want to politicise the situation.

“This is purely a commercial deal. We’re doing our part. The airport has been certified. It’s just a matter for them to come.”

“The ball is in their court now,” he concluded.

Dan McGarry is media director of the Vanuatu Daily Post group and has written extensively on the Port Vila airport issue.

With more flights to return in coming weeks, key industry developments and an exciting, integrated marketing campaign to be rolled out by Vanuatu Tourism Office, the coming months are set to be a turning point for Vanuatu.

Runway repair work was completed in April by New Zealand contractors Fulton Hogan and the Minister for Infrastructure and Public Utilities, Jotham Napat, has appointed an Airport Taskforce to finalise negotiations with the World Bank loan for the second phase of repairs.

Vanuatu Tourism Office’s general manager, Linda Kalpoi, is thrilled that the first phase is complete and says it is a boost for Vanuatu’s tourism industry.

“This is such an important moment for the tourism industry and we are looking at the completion of this first phase as a launching point for the next exciting stage of tourism for our country,” Kalpoi says.

“The Minister for Tourism, Joe Natuman, has announced an all-important recovery campaign, which will roll out in Australia and New Zealand over the next few months.

“The integrated ‘Discover What Matters’ marketing campaign will include travel trade education, public relations and digital marketing, all developed to inspire and motivate people to book their holidays to Vanuatu and to reconnect with themselves and loved ones.”

Aligning with the campaign launch, the tourism industry is busy finalising new developments and improvements that will once again position Vanuatu as a leading holiday destination.

Some of these developments include:

• Iririki Island Resort and Spa reopening its door this week after impressive renovations
• Global brand, the Holiday Inn, reopening in coming weeks, following repairs
• A brand new Ramada property, Akiriki Resort, is well underway
• The iconic restaurant Tamanu on the Beach is undergoing a major upgrade, including additional accommodation options and is set to open October 1.
• Air Vanuatu announcing increased weekly flights from Brisbane, Sydney and Auckland commencing June 1.

The next phase of the rehabilitation will see the airport meet Code E specifications which will allow it to cater for long-haul flights from wide bodied aircraft – opening the door to more travellers from around the globe.

This news item is republished with thanks to Vanuatu Daily Digest.

• Trade updates on Vanuatu: www.vanuatuspecialists.com.au

Prime Minister Charlot Salwai has his eyes set on urgent repairs for Vanuatu’s international airport at Bauerfield and wants to see the runway fixed by April, as mandated by the incoming cabinet in an emergency meeting yesterday.

The new coalition government only took office this week after the snap general election last month.

New Zealand contractor Fulton Hogan has been awarded the Bauerfield contract for emergency airport repairs.

The contractor’s letter for award of contract was issued yesterday afternoon by the Director-General of the Ministry of Infrastructure and Public Utilities following the Vanuatu Project Management Unit steering committee’s consideration of evaluation reports.

Fulton Hogan are now expected to have the contract signed in the coming days for immediate mobilisation of machinery and experts.

56-day job
It is envisaged that the duration of works contract will be completed within 56 days after the signing of the contract.

This means mobilisation of equipment and materials will be done by March 15, when works are expected to start.

According to the project timeline, the government expects the emergency repairs to be completed by the April 6.

In addition, under the same timeline, the shipment of materials, including asphalt to repair the runway is expected in the coming weeks.

NZ waits for fix-up plans for Vanuatu airport

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