SOUTH AFRICA: SA Tourism Business Below Normal

Insufficient overseas leisure demand is the greatest negative contributing factor to business performance for both the accommodation sector and other tourism businesses, according to the latest Tourism Business Index by the Tourism Business Council of South Africa (TBCSA) released on Wednesday.

Almost half of respondents cited the introduction of the new requirement for unabridged birth certificates (UBCs) as one of the leading negative aspects affecting business performance in the third quarter.

"By simply reading our respondent’s comments about cancellations, losing inbound or outbound business as a result of the late issuing of UBCs, it is quite disheartening”, said TBCSA CEO Mmatšatši Ramawela.

“Without rushing the process, we hope government’s inter-ministerial committee tasked with the responsibility of looking into the unintended negative consequences of these regulations will conclude its work soon so that we can capitalise on the weak currency, reduced oil prices and lead the industry into a level of recovery.”

At the same time 39.4% of all respondents said the new immigration regulations had no or a neutral impact on their performance.

In the past - for eleven consecutive times - input costs were regarded by the business tourism industry as the biggest negative contributing factor.

Insufficient overseas business demand, insufficient domestic business demand and the cost of labour are amongst other important constraining factors, according to the latest index.

The weak exchange rate, however, stands out as a positive factor impacting on business performance. Other positive factors cited include new management, renovations, competitive tariffs or discounted rates, increased marketing and improved guest service delivery.

Overall, the index shows tourism businesses in SA continue to operate under strain. The latest report, which covers the third quarter of 2015, shows the industry is still performing below normal levels.

It achieved the second lowest third quarter performance index since 2011.

The last time businesses in the tourism industry performed close to normal index levels were in the first quarter of 2015.

According to the TBCSA the latest index score is, however, slightly better than the expected and a slight improvement on the second quarter of 2015.

In the period between July and September, the accommodation sector registered better than expected results.

Expectations for the fourth quarter are also positive for the accommodation sector as the TBCSA cautiously expressed the hope that performance will be slightly above normal levels as the year draws to a close.

On the other hand, business performance remains subdued for the "other tourism businesses" segment. This includes the tourism transport sector, tour operators, retailers, travel agents, attractions and conference centres.

The TBCSA has expressed concern that performance is still significantly below normal levels.

“At a time when foreign tourists should be flocking to South Africa and leveraging on the weaker exchange rate, we are sad to note that this is the second consecutive quarter, wherein business has cited insufficient overseas leisure demand as the greatest negative contributing factor to their performance," said Ramawela.

She is, however, encouraged by what she calls signs of improved performance and optimism emerging in the industry.

Car rental
Marc Corcoran, president of the Southern African Vehicle Rental and Leasing Association (SAVRALA), the industry continues to feel the impact of the current tough trading conditions.

The car rental industry recorded its lowest performance of 78 on the index, which is well below the forecasted performance of 92.7.

“The industry, however, continues to be optimistic for the next quarter, given tourism's great growth potential and belief that both the tourism industry and government can combine efforts to realise the rich opportunities,” he said.

For Grant Thornton’s head of advisory services, Gillian Saunders, the next year's outlook remains neutral for the accommodation sector and slightly negative for other tourism businesses. Longer term confidence is not evident.

“Considering the tough operating environment with constrained local economic growth, the visa and birth certificate issues and global slow down in emerging markets in particular, businesses are under pressure to remain profitable and sustainable," said Saunders.