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Local tourism businesses facing unusual fluctuations with current market environment
The local tourism industry was forecasted to outperform South Africa's economic growth in 2015. However, as it currently stands, businesses within the industry are facing unexpected challenges as it heads into the quieter, winter season.
Gerrie van Biljon, executive director of Business Partners Limited (BUSINESS/PARTNERS), says that each year, most tourism businesses face a gigantic wave of seasonality – whether it be as a result of seasonal travel trends or related to the economic indicators. "Despite the weak rand and favourable exchange rate, which is currently encouraging foreign travel to South Africa, the country is reported to be experiencing an unusual drop in visitor numbers."
The World Travel and Tourism Council's Economic Impact of Travel & Tourism: 2015 Annual Update, published in March 2015, reported that the local tourism industry is expected to grow by 3.4% in 2015, faster than South Africa's economic forecasted growth of 2%, and up from its contribution of 2.9%* in 2013 (*Stats SA). The country was also ranked 48th out of 141 countries on World Economic Forum's (WEF's) Travel and Tourism Competitiveness Index and ranking number one in Sub-Saharan Africa, out beating Seychelles.
He says that the South African new visa regulations – requiring tourists to apply for their visa in person at a South African consulate abroad and for minors to travel with an unabridged birth certificate – is creating additional red tape for travellers, and in turn, businesses need to consider these challenges when planning ahead. "While these requirements have been around in other countries for years, they are new in South Africa and the timing is inopportune in light of low economic growth in the country," says van BIljon.
Van Biljon says that the impacts of these regulations, as well as misinformation about challenges such as Ebola, have reportedly had an adverse effect on international visitors choosing to visit South Africa. Statistics SA's Tourism and migration report reveals that the number of tourists visiting the country declined by 7.2% in February (year-on-year). Grant Thornton recently stated that South Africa's decline in foreign tourist arrivals experienced over the first quarter of 2015 is the worst decline witnessed in more than two decades.
Van Biljon says that the tourism industry is SME-intensive, and due to BUSINESS/PARTNERS remaining heavily invested in the sector, it has felt the pain that businesses within the sector have suffered during tougher times. "As with any new regulation, there is a possibility that industry players are negatively impacted as the industry comes to grips with the new guidelines. Tourism businesses will always have their ups and downs, as the sector by nature is susceptible to economic conditions, as well as political and social incidents within the region. The key to surviving the ups and downs is comprehensive planning."
He says that despite the new visa regulations, conditions remain tough for tourism businesses. "While the sector has grown post 2010, more businesses operate within the sector than in the past. Visitors, although more in number, are opting to stay for slightly shorter periods and spend slightly less than in previous years. Locals are also unwilling to spend money on holidays and travel as the economy continues impact disposable income."
He suggests methods that tourism businesses can use to plan for seasonality and fluctuations in the market place. "The first is to scrutinise the product and to reposition it to attract more business. A tourism business owner should be asking themselves if their offering is still relevant. It is a complex question that requires careful strategic thinking."
A marketing audit can also give businesses an edge in a difficult market, especially in light in the new regulations, says van Biljon. "It is amazing to see how many times two businesses offer the exact service or product, but perform very differently due to marketing strategies and channels.
"As the visa regulations are still new to the market, and therefore seem daunting, it is important to educate your clients, as well as potential clients. Clients should not only be informed of the new regulations, but provided with useful links and information that will help them to comply with these regulations. Another example is promoting 'early-bird specials', which will encourage travellers to book earlier than usual to account for the admin and possible visa delays.
"Despite the difficulties facing South African tourism businesses, the sector still offers opportunities. The key to ensuring that the industry remains successful is to effectively navigate the current environment with thorough planning," concludes van BIljon.
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