Tourism in the South Pacific is changing in step with global economic trends. While the traditional source of visitors – from Australia and New Zealand – remains strong, a growing Chinese middle class with money to spend has not gone unnoticed by the islands’ marketing departments.

The challenge faced by the islands in serving all-comers, however, is not to overdevelop while ensuring that destinations are well served by both brand-name hotels and flights.

Faiyaz Siddiq Koya, Fiji’s minister for industry, trade and tourism, says: “We do things in terms of it being sustainable for our infrastructure and inventory. We could open the skies and turn it into a bigger industry but we have to think of our national airline, Fiji Airways. If, say, we brought in 1.5 million tourists in 2017, we don’t want to be in a situation where everything collapses because the infrastructure is not there. The two growth areas for us are China and India. They are the highest spending tourists in the world.”

Charter flights

One of the pioneers for bringing Chinese visitors to Fiji is Tony Whitton, managing director of local company Rosie Holidays and Ahura Resorts. His was the first company to organise tourist charter flights out of Beijing and Shanghai, and it more recently scored another first with the arrival of 1200 high sales achievers from China on an incentive trip.

Chinese investment is also moving parallel to the flow of tourists. In the case of Fiji, one of the most significant and largest Chinese investments is being done under the One Belt One Road programme (despite Fiji being nowhere near the Silk Road, which inspired the initiative) and brings together developer Guangdong Silkroad Ark Investment and US hotel operator Wyndham. The F$500m ($243m) resort, backed by the Guangdong provincial government, will have 370 rooms on a 67-hectare site, as well as a 1000-seat convention centre.

China’s influence on the South Pacific is huge and growing. As well as a source of tourists, Chinese investors are active in the property markets. They are running businesses from hotels to banks, and official flows in soft loans and grants are behind a wave of new government buildings, infrastructure and convention centres. The Chinese role can be controversial, however, and there have been some complaints that aid packages are less generous than Western ones and building standards not as high.

Tonga’s minister for lands and natural resources, Lord Ma’afu, says: “We are taking Chinese investment because the big Western powers, especially the US and the UK, have become less active in the region. We don’t have any choice even though we still drive on the left [in common with the UK, Australia and New Zealand].”

Mr Whitton says of Fiji: “Currently Chinese visitors are 10% of the total but it’s a huge potential market and one that can keep growing. Fiji is the superpower of the region [in terms of tourism] and all the big hotel brands are here.” These include Sheraton, InterContinental, Hilton and Westin.

Catch 22 situation

Fiji's attractiveness stands in stark contrast to other islands that can face a Catch-22 type situation: the big hotel operators will not come until there are sufficient airline routes and the airlines refuse to put on routes until they see the hotels. Top hotel brands are considered vital for doing well in the all-important US market.

The Cook Islands has partly solved the airline problem by underwriting Air New Zealand’s losses on direct routes from Los Angeles and Sydney. Finance minister Mark Brown says that while NZ$12m ($8.7m) was allocated in the budget, better-than-expected performance and lower oil prices have brought this down to just over $NZ6m. The agreement expires in 2018 and the government is asking for expressions of interest to see if there is a more favourable deal to be had.

The Cook Islands has a derelict and abandoned Sheraton hotel from a failed 1990s project but no major brand-name hotel, a situation it wants to change. “We need 250 to 300 more rooms and a branded hotel for the US market,” says Karla Eggleton, sales and marketing director at the Cook Islands Tourism Corporation.

In Samoa – where the Sheraton does have a presence – prime minister Tuilaepa Lupesoliai Neioti Aiono Sailele Malielegaoi is concerned about the lack of flights and is considering relaunching the national airline on international routes under the name Samoa National Airline. “What we want to do is get more flights and more visitors coming to Samoa,” he says.

Tonga's tourism drive

Meanwhile in Tonga, a big hotel investment has been made by Fiji’s Tanoa Hotel Group, chaired by one of the country’s leading businessmen, YP Reddy. This shows that there are opportunities for intra-Pacific investment flows especially from the larger economies, such as Fiji and Papua New Guinea, to the smaller ones. One of the region’s largest banks, Bank of the South Pacific, is headquartered in Papua New Guinea's capital, Port Moresby, and is chaired by Sir Kostas Constantinou, whose business interests include hotel projects such as the refurbishment of Fiji’s heritage Grand Pacific hotel and Samoa’s newly opened Taumeasina Island resort.

An agreement by Tanoa to refurbish Tonga’s Dateline hotel in a prime seafront position in the capital Nuku'alofa was concluded with the government in August 2015 and opened late in 2016. Tongan finance minister ‘Aisake Value Eke says the hotel was previously rundown and needed a $10m refurbishment.

“The government has provided a 99-year lease and duty and tax exemptions on the imported capital equipment. After four years of operation, the government will receive 2% of gross revenues after agreed deductions for the management fee. The hotel used to be run by the government but it was not successful and then a Chinese investor ran it for a few years but the government terminated the agreement,” he says.

Fiji film incentives

When it comes to attracting tourists, Fiji has another trick up its sleeve: an incentive scheme that pays 47% of the costs of making a film. This has attracted filmmakers from Hollywood, Bollywood and China. US reality TV shows such as CBS’s Survivor and Fox’s Kicking & Screaming have been filmed in Fiji, helping to promote the country as a tourist destination.

But nothing has succeeded as spectacularly as when the Chinese reality TV show Where Are We Going Dad? was shot in Fiji and broadcast to 75 million viewers – about three times the audience a US reality TV show usually attracts. This led to a 40% uplift in Chinese tourists after it was broadcast in February 2015.

“The benefit for Fiji is money spent here, which gives a multiplier of 2.8 times, and [it promotes] Fiji as a tourist destination,” says Dallas Foon, CEO of Film Fiji, whose previous job was the rather less glamorous one of running a poultry farm. Now he spends much of his time reading film scripts to ensure they pass Film Fiji’s suitability test.

The strategy appears to be working, with total film spending in 2016 set to top F$100m, more than double the amounts spent in 2015 and 2014. 

Regional variation

When it comes to investment incentives, conditions vary widely across the different locations in the Pacific Islands, as does the FDI promotional machinery set up to encourage investors. In Fiji this is moving towards a world-class sophisticated model but elsewhere it is fairly rudimentary or non-existent.

Investment Fiji CEO Godo Muller-Teut says that investment promotion in the country used to be about who knocked on the door but the aim now is to be proactive rather than reactive. He sees big opportunities in tourism, including that related to sports, incentives trips and conventions.

Mr Muller-Teut has pushed hard to reduce the time for investors to get a licence. “As little as a year ago it used to take six months. Now with the one-stop shop launched last July you can get a licence in a week,” he says.