Despite the fact that the hospitality sector has grown by 60 percent over the past two years, industry players say they are choking on taxes and high bank lending rates.
According to the Rwanda Travel and Tours Association, the harsh tax policies and rising bank lending rates are making it hard for tour agencies and hotels to operate profitably. The seasonal discrepancy in tourist numbers is also affecting the businesses.
Denis Manzi, the in charge of hotel reservations at Rwanda Travel and Tours Association, said 98 per cent of the hotel and travel agencies were servicing loans and were having problems meeting their loan obligations to banks due to high rates.
"This constrains us, especially when the number of tourists visiting the country is sometimes very minimal," Denis said in an interview with The New Times.
Tax policies, especially payment of value added tax (VAT) on basic consumable products, is another issue challenge that is causing unease in the sector.
"We pay VAT on about 80 per cent of our kitchen products, this forces us to raise fares, but tourists are not willing to pay," Fabrice Ngabo, an hotelier, said.
Ngabo also said having few local professionals and setting up better hotels remained a big challenge for the sector.
However, the association and the Rwanda Development Board were in consultations to try and find solutions to some of the challenges facing the industry, they added.
But not all is gloom; the sector is positioning itself to reap from the huge market presented by the East African Community bloc despite these challenges. The country is also attracting a big number of regional visitors, thanks to its many tourist attractions.
"With the East African Community, more visitors are finding it easy to cross from one country to another in the region. This, coupled with the many tourist attractions, make Rwanda a must-visit place for many tourists," Flavia Mutesi, the Time Legend Travels and Tours managing director, said.
Last year, Rwanda attracted over one million tourists, earning the country $281.8m (about Rwf178b).
There are over 86 travels and tour agencies registered with the Rwanda Development Board.
The director of tourism and conservation at the Rwanda Development Board, Rica Rwigamba, admitted that "getting tourists to stay longer in Rwanda was still the biggest challenge to the tourism industry".
"Therefore, having travel agencies bridging the gap is good news to the country's tourism," she noted.