São Tomé and Príncipe economy - the Tourism Sector

The Tourism Sector in São Tomé and Príncipe

São Tomé and Príncipe, a small island nation in the Gulf of Guinea off the west coast of Africa, is known for its pristine rainforests, volcanic mountains, and beautiful beaches. The tourism sector has emerged as a significant contributor to the economy, particularly given the country's unique natural and cultural attractions. With a focus on nature-based and cultural tourism, the sector is seen as a key driver for economic diversification and growth, offering substantial opportunities for investment.

Current State of the Tourism Sector

Research suggests that the tourism sector in São Tomé and Príncipe is a major economic driver, contributing approximately 27.4% to the Gross Domestic Product (GDP) in 2019, based on data from the World Travel and Tourism Council (WTTC). This figure highlights its importance within the services sector, which dominates the economy at 73.4% of GDP. The number of international tourists has been increasing, with around 34,900 visitors in 2019, according to World Bank data, indicating a growing interest in this off-the-beaten-path destination. The sector experienced a setback during the COVID-19 pandemic, with a reported 70% drop in tourist arrivals in 2020, but has shown signs of recovery, with the government aiming for a 10% annual increase in visitor numbers, as noted by CNN Travel.

Economic Contribution

The tourism sector's contribution of 27.4% to GDP in 2019 underscores its economic significance, particularly in a country where services dominate at 73.4% of GDP. Between 2010 and 2019, tourist arrivals rose from 8,000 to 34,900, with a notable recovery post-COVID-19, as reported by the U.S. Department of Commerce. This growth is driven by the country's niche positioning as a destination for wealthy, adventure-seeking tourists, with natural attractions playing a key role.

Potential for Growth

The potential for growth in the tourism sector is significant, given the country's untapped natural wealth and unique biodiversity. The government aims to increase visitor numbers by 10% annually, supported by international donors like the World Bank, which focuses on improving infrastructure in its Country Partnership Framework for FY2024-2029. The sector can expand by attracting more international tourists, particularly from Europe and Africa, and by developing new tourism products, such as cultural tours and adventure sports.

Investment Opportunities

The government has identified tourism as a priority sector and offers various incentives for investors, such as tax breaks and simplified procedures for setting up businesses, as outlined by the National Investment Agency (ANIP) (Investment Promotion Agency São Tomé and Príncipe). Potential investment areas include:

1. Hotel and Resort Development: There is a need for a range of lodging options, from luxury resorts to budget accommodations, especially in areas like Tofo Beach and Príncipe Island. Recent developments, such as the Príncipe Trust, indicate demand for high-end facilities, while budget options can cater to a broader market.
2. Ecotourism Projects: Developing sustainable tourism activities in natural areas, such as guided tours in Obo National Park, can attract eco-conscious travelers. Investments in community-based ecotourism, like homestays and local guides, can also enhance visitor experiences and support local economies.
3. Tour Operator Services: Creating and managing tour packages that highlight the country's unique attractions, such as diving trips to Tofo Beach, hiking in the rainforests, and cultural tours in São Tomé city, can tap into the growing adventure tourism market.
4. Adventure Sports and Activities: Investing in activities like diving, hiking, and birdwatching can attract adventure tourists, with the potential to develop facilities for these activities, such as dive centers and adventure gear rentals.
5. Cultural Heritage Preservation and Promotion: Supporting projects that preserve and promote the country's cultural heritage, such as restoring colonial buildings or hosting cultural festivals, can enhance the cultural tourism offering.
6. Transportation and Infrastructure: Improving airports, ports, roads, and other infrastructure to facilitate tourist travel is crucial. Investments in São Tomé International Airport and Príncipe Airport can enhance connectivity, while road improvements can make remote attractions more accessible.

Recent tourism projects, such as luxury resort developments by the Príncipe Trust and small-scale ecotourism initiatives, demonstrate a mix of high-end and low-impact investments, suggesting room for diverse strategies catering to various market segments.

Challenges for Investors

Potential investors must navigate several challenges:

1. Limited Infrastructure: Inadequate roads, water, and electricity supply can pose challenges for large-scale projects, particularly in remote areas like Príncipe Island. The World Bank's CPF for FY2024-2029 aims to address this by improving road and digital connectivity, but progress may be slow.
2. Small Domestic Market: With a population of about 225,000, the country relies heavily on international tourists, increasing dependence on global travel trends and economic conditions.
3. Regulatory Complexities: Bureaucratic processes and regulatory uncertainties may slow down project implementation, requiring investors to engage with local authorities and conduct thorough due diligence.
4. High Transportation Costs: The remote location increases the cost of travel to and from the country, which can affect tourist numbers and operational costs, particularly for air and sea transport.
5. Skilled Labor Shortage: There may be a lack of trained personnel in the tourism industry, such as hotel managers, tour guides, and dive instructors, requiring investment in training or hiring from abroad, which can increase costs.