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Tourism Business Index Q4 2015

Strong Domestic Leisure Demand Lifts Q4 2015 Business Performance

Strong domestic leisure demand has helped to lift South Africa’s travel and tourism business performance in the last quarter of 2015, writes Kagiso Mosue.

The Tourism Business Index (TBI) report for Q4 2015 released by the Tourism Business Council of South Africa (TBCSA) shows that overall, the industry achieved above normal business performance levels, recording a TBI score of 106.5* compared to the anticipated but more subdued TBI score of 94.2. This is the only quarter in 2015 to achieve above normal business performance levels and the third highest recorded Q4 index since 2011.

Business performance outlook for the first quarter of 2016 is slightly below normal levels, reaching a TBI score of 94.6.

In terms of inbound tourism, both the Accommodation Sector and the ‘Other Tourism Businesses’ segment (excluding accommodation) cited the weak exchange rate as the most prominent positive factor stimulating foreign tourism leisure demand. However, domestic tourism leisure demand proved to be the biggest performance driver over this period.

“The festive season is typically one of our busiest times, presenting the trade with the opportunity to do some good business when many people, particularly locals, take some time off to travel. After a tough three quarters of trade, we’ve been anxiously looking towards to the festive period for some welcomed reprieve in the market,” said TBCSA Chief Executive Officer, Ms. Mmatšatši Ramawela.

Recent tourism statistics from provinces such as KwaZulu-Natal and the Western Cape suggest that the outlying coastal areas were the most popular tourism spots visited. “The weak exchange rate certainly made destination South Africa a lot more attractive to foreign tourists, but we must also keep in mind that it also made it a lot more affordable for South Africans to travel locally, hence the increase in domestic tourism demand ” Ramawela explains.

Other positive contributing factors cited for the improvement in tourism business performance in Q4 include a decrease in supply due to the closure of several establishments, new management in the value chain, an increase in marketing activities and improvements in customer service, flexibility and staff training.

Although the cited decline in supply is a positive outcome from a competitor point of view, Ramawela cautions that if this trend continues, it will reveal an overall contraction of supply, which is not a good sign for the industry. “Closures can be attributed to businesses being under tremendous pressure.
More and more of them are finding it hard to compete in the current environment that is largely characterised by rising cost of inputs, lacklustre business and leisure demand as well as uncertainty in government policies affecting the industry. As one of the few sectors that have a great potential to boost economic growth in the country, we simply must do more to ensure that this trend does not continue”.

When it comes to overall business performance outlook for the new year, business expectation is mixed. A large percentage of the Accommodation Sector (51%) anticipate business performance levels to remain the same, whilst a large portion of Other Tourism Businesses (44%) is expecting to achieve better than normal business performance (despite their pessimistic outlook for Q1).

Grant Thornton’s Head of Advisory Services, Ms Gillian Saunders, explained that given the dynamics in the operating environment and uncertainty in many business arenas, it is not easy to predict performance levels for the rest of the year, hence the differences in opinion on overall outlook.

Marc Corcoran, President of the Southern African Vehicle Rental and Leasing Association (SAVRALA) added that from a car rental perspective, even though overall performance over the festive season was good, the industry faces a difficult operating climate in 2016 as the Rand’s depreciation will impact on new vehicle pricing which is a critical cost driver in the car rental industry, inevitably resulting in higher rental rates”.

For this quarter, the index survey included additional questions on the impact of concessions announced by the Cabinet Inter-Ministerial Committee on Immigration. Respondents were asked about the impact of the revisions on the requirement for foreign visitors travelling with children to carry unabridged birth certificates. Almost half, 48.4%, of the respondents cite that there was no impact from the original requirements (i.e. not applicable), whilst 16.4% have seen a partial reversal of the previous negative impact as a result of the changes and 13.2% have continued to experience a strong negative impact regardless of the changes.

Similarly, respondents were asked about the impact of the planned implementation of biometric data capturing by the Department of Home Affairs. 62.2% of respondents were not affected by the introduction of the regulation (i.e. considered not applicable to their establishment), whilst 26.9% of respondents still feel the negative impact despite the move, and 10.9% noted a reversal of the previous negative impact.

“Even as we begin a new year, issues related to visa regulations and the broad issue of travel facilitation remains top of mind for us” Ramawela said. “So far, the figures are showing that the impact of the concessions announced have not had such a significant effect. We eagerly look forward to the announcement by the Department of Home Affairs regarding their work of implementing the concessions announced at the end of October 2015 by the Cabinet Inter-Ministerial Committee. Furthermore, we look forward to our engagement with the Departments of Home Affairs and Tourism and the local and international trade to work together to ensure that South Africa regains its market share of international and regional tourist arrivals.”

* An index score of 100 indicates normal levels of acceptable business performance. When the index shows performance or prospects higher than 100, this indicates better than normal performance, whilst below 100 indicates worse than normal performance

The full report can be downloaded at http://www.tbcsa.travel/storage/files/TBI_Q4_2015.pdf