11 August 2014

South Africa’s tourism sector in good shape

Despite global, regional and domestic challenges, the South African tourism sector remains in good shape.

Tourism Minister Derek Hanekom at the Satsa conference

Together we need to do everything possible to sell our country as a brilliant value-for-money destination. – Tourism Minister Derek Hanekom

This was the message from Tourism Minister Derek Hanekom at the opening of the Southern Africa Tourism Services Association (Satsa) conference, held at Spier wine farm near Stellenbosch from 7 to 9 August 2014.

Hanekom highlighted South Africa’s compound annual growth in foreign arrivals of 9.3% over the past 10 years, compared with the global tourism growth average of 4.5% per year. 

He also highlighted the 14% increase in revenue from all accommodation categories in the accommodation sector in 2013 (when compared with 2012) on the back of solid growth in international arrivals, recovering occupancy rates and an increase of 8.4% in average room rates.

South Africa’s car-rental industry also saw a 14% increase in rental days during the first five months of the new inbound tourism season in 2013, compared with the same period in 2012. 

The minister acknowledged, however, that strong performance at the top of the pyramid does not necessarily mean it filters through the whole value chain. ‘Having had sight of the latest TBCSA Tourism Business Index, I know that some of you, including those recording these impressive results, are feeling the pressure of, among other things, rising input costs,’ he said.

Commenting on the performance of the South African tourism sector in the global context, Hanekom said South Africa has to carefully manage its risks by balancing its focus on domestic, regional African and long-haul overseas markets and by investing in both mature and emerging markets.

‘This carefully crafted market segmentation finds expression in South African Tourism’s fifth portfolio review, which determines where we will be investing over the next three years,’ he said.

He added that while tourism growth forecasts are positive – the UNWTO expects global growth in international tourist arrivals of between 4% and 4.5% again this year – South Africa needs to remain realistic about potential ‘wild cards’ such as fickle outbound growth from some regions, potential airlift disruption due to the spread of epidemics, and volatile and rising jet fuel prices. 

Domestic tourism flows, he said, may also be moderated by high fuel prices and sluggish growth in disposable income. 

‘If we add to this the more value-conscious post-recession consumer; shortening booking cycles and the trend towards the so-called "staycations" and shorter trips; and intensifying rivalry between destinations to attract the lucrative millennial traveller segment, we have our work cut out for us,’ he said. 

Hanekom also commented on the emergence of ‘disruptive business models' in the so-called sharing economy, with entrants such as Airbnb, Uber, blablacar.com and Zipcar posing new challenges to the tourism sector.

‘For some of you this new trend of peer-to-peer sharing will bring new threats, and you will have to adapt; others will be on the cutting edge of these new innovations,’ he said.

Tourism growth a priority

The South African government is convinced that tourism can contribute a great deal to the triple challenges of persistent poverty, unemployment and inequality, said Hanekom. 

Adding up the direct and indirect impacts, tourism generated 9.5% of South Africa’s GDP in 2013 and accounts for more than 1.4-million direct and indirect jobs in the country.

‘What further gives value to this sector is that the experiences offered are not at risk of running out, and in many instances even assist us in our conservation efforts. More than any other, it is a green-economy sector and an export sector, in the sense that tourism generates valuable foreign currency,’ he said.

He added that for South Africa to capture a significant share of the growing international tourism market – international tourist arrivals are expected to grow by 60% in the next 15 years from the current 1.1-billion annually to 1.8-billion in 2030 – the tourism sector has to carefully consider which building blocks have to be put in place.

Hanekom also observed that the tourism sector is the quintessential example of an industry that depends on public-private partners – a sector where government should play a largely facilitative role, rather than excessively regulating the industry. 

‘Government should create framework conditions to build our destination’s competitiveness. Together we need to do everything possible to sell our country as a brilliant value-for-money destination,’ he said.

South Africa’s regional African and domestic markets will remain key building blocks moving forward, he said, with sub-Saharan Africa one of the fastest-growing economic regions in the world and domestic tourism closely linked to the imperative of shared growth.

‘We must find more creative ways to extend the benefits of this sector into poorer communities and create sustainable livelihood opportunities through tourism. Tourism has the potential to be a major catalyst for rural development, the growth of SMMEs and the development of new skills,’ he said.