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Whale watching in the Kingdom of Tonga continues to contribute strongly to the country’s economy, with whales an iconic species for the tourism industry. The following report sets out findings of the extent of economic activity attributable to the whale watching industry. In 2006, there were more than 9,800 whale watch participants in Tonga, representing annual average growth of 20% since 1998. These whale watchers generated a total estimated expenditure of approximately Tongan Pa’anga (TOP) 3.82 million (USD 1.89 million). Key findings are presented below: Economics: Direct expenditure on whale watching tours in Tonga in 2006 is estimated at TOP 1,515,069 (USD 749,959). Indirect expenditure due to whale watching tours in Tonga in 2006 is estimated at TOP 2,283,673 (USD 1,130,418). Executive Summary Year: Operators: Whale Watchers AAGR1 (%) 1994 22 200 NA 1998 5 2,3343 103 2006 14 9,804 20 1 AAGR – refers to annual average growth rate – see methodology for explanation. 2 Reported by IFAW, and supported by whale watch operator interviews. 3 1994 & 1998 figures are taken from: Hoyt, E. (2001), Whale Watching 2001: Worldwide tourism numbers, expenditures and expanding socioeconomic benefits, a report for IFAW – Hoyt uses figures taken from: Orams, M. (1999), The Economic Benefits of Whale Watching in Vava’u, The Kingdom of Tonga, Centre for Tourism Research, Massey University at Albany, New Zealand. Year: Direct Expenditure: Government Revenue: Indirect Expenditure: Total Expenditure: TOP USD TOP USD TOP USD TOP USD 1994 10,000 NA NA 35,000 1998 55,000 NA NA 422,000 2006 1,515,069 749,959 25,606 12,675 2,283,673 1,130,418 3,824,348 1,893,052 TOP USD Indirect Expenditure (excl. travel): 1,892,172 936,625 Travel Expenditure: 391,501 193,793 Total Indirect Expenditure: 2,283,673 1,130,418 6 Conservatively, the Tongan government earned an additional estimated TOP 25,606 (USD 12,675) in revenue due to whale watching through departure taxes and whale watch license fees, without taking into account income, consumption or fuel taxes. Total expenditure derived from the whale watch industry is estimated at TOP 3,824,348 (USD 1,893,052) in 2006, having grown from USD 422,000 in 1998. Using data gathered from interviews with operators, along with the data provided by the Tongan Visitors Bureau, there were an estimated 9,804 participants on whale watch tours in the 2006 season across the country, approximately 740 or 8% of which were tours undertaken outside of the main whale watching region ofVava’u. This equates to an annual average growth rate (AAGR) in whale watchers of 20% since 1998 levels of 2,334 whale watchers. This compares favourably against the AAGR of visitor arrivals in Tonga (by air) of 4.05% between 2000 and 2005. Despite these strong growth rates it is important to note that repeat whale watchers, undertaking multiple trips during their stay in Tonga, are the drivers of this growth. Research indicated that approximately 3,200 individuals visited Tonga in 2006 to whale watch. On average, whale watchers undertake three trips during their stay. It is assumed that this rate of growth is approaching a plateau at around 3,200 visiting whale watch tourists annually. Growth is now being generated from repeat whale watch episodes, with expenditure growth driven by increasing prices of whale watching participation. Our research indicates that of majority of holiday-maker tourists visit Vava’u during the whale watching season, and of these, approximately 70-80% undertake a whale watch trip during their stay. This figure therefore indicates that whales are a key attraction to holiday-maker tourists. The numbers of employees directly engaged by the industry across the country is approximately 44 – 32% foreigners and 68% Tongans. Industry Dynamics: Results show that the industry may be facing some capacity constraints in theVava’u Island group that are restricting continued strong growth. The growth in this base level of 3,200 tourists travelling to Tonga for whale watching appears to have slowed down over recent years. These capacity issues relate to a combination of factors including: access constraints to certain regions (particularly consistency and regularity of flights into Vava’u), a limited number of whales limiting appropriate whale watch opportunities, availability of hotel beds, whale watch vessel capacity and, in Vava’u, capped number of licenses. Despite these constraints, operators report high demand for whale watch tours, with many being booked out well in advance of the season. In response to this high demand as well as to reflect the increase in operational costs (particularly fuel costs), the Tongan Whale Watch Operators Association reports many operators are increasing their ticket price for the 2007 season by 50%, from TOP 150 to TOP 225.This will increase direct expenditure in the 2007 season to an estimated TOP 2 million or just below USD 1 million - an increase of approximately 30% compared with 2006. 7 It is therefore likely that growth in the short term will primarily be driven by an increase in revenue per tourist rather than additional tourists. As a large proportion of whale watch companies are foreign owned or managed businesses (being Tongan registered) and as many of the bookings are made in advance from overseas, it is possible that some government revenue through taxation has the potential to be missed if undeclared in the country, or if income remains offshore (e.g. through booking agents). This is then considered an economic leakage, of which there is very little information to calculate accurate estimates and as a result this has not been accounted for in this report. We would assume this figure to be low. However, to offset any potential leakage, these foreign managers bring with them capital, skills, business experience and tourism distribution networks that assist in developing the Tonga“brand”of tourism which has also not been accounted for in this assessment. We see these intangibles as offsetting any lost income for the country through leakage. With debate still occurring regarding the impact of whale watching, particularly “swim-with” whale activities, on the marine mammals, it is likely that growth in revenue per tourist, as opposed to growth in numbers of international arrivals, will be a more sustainable option in the longer term. Our findings indicate that with a continuation of the same dynamics of the industry in Tonga (i.e. numbers and size of vessels, and focus on swimming with whales), and without substantial increases in whale abundance levels in Tongan waters, levels of whale watching will remain close to those reported in this study with little capacity for continued growth. Revenue per tourist growth will continue to drive up revenues for the industry, but in order to increase whale watcher participant numbers, the dynamics of the industry will be required to change. Most importantly, this would mean a stronger emphasis on whale watching (as opposed to swimming with whales) which can provide higher numbers of tourists with whale watching opportunities on the same number of vessels as currently exist for a negligible increase in impact on the whales.With a constant number of vessels (and hence an assumed constant rate of vessel - whale interaction), larger vessels would be required to carry more passengers to view whales.