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Tourism Performance Steady in Q1 2015

Amid calls for calm in various parts of the country, which have seen an upsurge of violence against foreign nationals, first quarter results of the TBCSA Tourism Business Index (“TBI”) show that business performance in the travel and tourism industry remained steady in the first three months of 2015, writes Kagiso Mosue.

TBI is a performance monitoring tool aimed at providing regular, up-to-date information on the performance of tourism businesses, including an outlook of performance over the next three months.

Commenting on the latest TBI report, TBCSA Chief Executive Officer, Ms. Mmatšatši Ramawela said although she was pleased with the steady performance, the Council was mindful of the lower performance level score achieved in this quarter and concerned about the impact of the negative publicity generated by the latest flare of violence against foreign nationals on the travel and tourism trade.

“Whilst we are pleased with the reported steady performance and TBI score of 99.9, our overall review of performance levels recorded over the past two years is showing concerning signs of a possible slowdown in tourism business activity. This does not come as a surprise to us given the challenges in the operating environment including the lingering effect of the Ebola outbreak and the introduction of the new immigration regulations. The situation has been further exacerbated by the current uncertainties over energy supply by Eskom. The recent spate of ‘xenophobic attacks’ on foreign nationals in various parts of the country are also likely to add fuel to the fire, impacting on South Africa’s reputation as an attractive tourist destination”, Ramawela said.

Delving deeper into the report, a slightly better picture emerges for the Accommodation business segment, which experienced better than normal business performance with an index score of 110.2 compared to the forecast score of 101.9. The Other Tourism Businesses segment (excluding accommodation performed somewhat less than normal at 92.1 compared to the forecast score of 102.7.)

In this quarter, TBI recorded a strong response rate for the car rental companies who registered lower performance than in the last quarter of 2014. This performance was also much lower than forecast. Marc Corcoran, President of the Southern African Vehicle Rental and Leasing Association (SAVRALA) said this “is likely to be due to the increased vehicle pricing starting to come through and the pressure to obtain the required price increases. The car rental industry however remains optimistic going forward.”

“What is encouraging though is that for the year ahead both sectors on balance expect a better than normal performance with a high positive balance of 37% from the accommodation sector” says Gillian Saunders, Head of Advisory at Grant Thornton.

“This also translates into the strong capacity growth expectations for the next quarter similar to what we have seen from the accommodation sector for seven consecutive TBIs, peaking at high levels in the last two quarters. Sadly though this is not translating as strongly into job creation as the accommodation sector is actually slightly negative on balance for job creation in the next quarter. Accommodation businesses are fighting the impact of other increased business operating costs such as rates and electricity by maximising labour productivity”, adds Saunders.

Through the TBI, the TBCSA has continued to monitor private sector sentiment on two key developments affecting the sector – the impact of the Ebola outbreak in three West African countries and the ongoing issues relating to South Africa’s introduction of new immigration regulations.

“On the impact of the Ebola outbreak, what is coming through quite strongly from business is that more could have been done from a PR point of view to address the negative perceptions and ignorance about the geography of the African continent. This is a key lesson we must learn from this painful experience”, explains Ramawela.

With the deadline of 1 June looming for the Department of Home Affairs’ implementation of the new immigration regulation regarding travelling with minors, the Other Tourism Businesses segment (59,3% of respondents) proves to be more prone to the negative impact of the requirement for unabridged birth certificates compared to the Accommodation business segment (24,5% of respondents). Twenty-five percent (25%) of all respondents say they have had a somewhat negative impact to their business as a result of the pending introduction of the unabridged birth certificates.

“Even with the slightly more pessimistic outlook going into the next quarter (with an index score of 97.3), we remain positive. We are pleased to see Government taking such a strong stance on the issue of the ‘xenophobic attacks’ and moving quickly to arrest perpetrators of these violent acts. Unfortunately, the social media has also been used by some as a tool to provoke and instigate violence and we hope the police will move swiftly to address this as well. As the TBCSA we will continue to liaise with our counterparts in Government and communicate any updates with members and the broader travel and tourism trade. What is key is to focus on ensuring that stability returns in the operating environment”, Ramawela said.

Download the full TBI Q1 report HERE.