South Africa’s tourism sector needs to try harder
When you are preventing the world’s most populous nation from sending tourists to your country, you may have made a mistake. Chinese visitor numbers took the biggest knock from the controversial and onerous visa requirements South Africa threw up in 2014. And while the industry howled in pain, the then home affairs minister Malusi Gigaba accused those who criticised the scheme of “lies and cooked-up figures and surveys that have had no credibility whatsoever”.
The requirements – which included turning up in person at the South African embassy and carrying unabridged birth certificates for children under 18 – were eased in October 2015. However, an industry bounce-back has been slow, as South Africa’s poor economy is making recovery difficult for embattled tourism businesses.
Domestic tourism has suffered most. A recently released survey by Statistics South Africa showed a drop in domestic overnight trips from 45.5m to 43m between 2015 and 2016. Households from the lower living standard groups were significantly less likely to travel.
Foreign arrivals figures do reflect a rebound after the visa débacle. South Africa remains a cheap and popular destination, and international visitors grew 12.8% in 2016, against a 2015 increase of 6.8%. Visitors from China and India, who were particularly affected by the stringent visa requirements, increased by 38% and 22% respectively.
Residents of Southern African Development Community countries still make up the bulk (73%) of visitors. Consultants PwC forecast an increase in tourists in 2017, while hotel-room revenue will grow 10.1% to R17.5bn ($1.4bn), and then at an annual compound rate of 9.3% to 2021.
Others think the 2016 rebound may be short-lived. Martin Jansen van Vuuren, a director for hospitality and tourism at accounting firm Grant Thornton, says the growth in arrivals by foreign tourists so far this year has been subdued compared with last year, with arrivals from African tourists declining. “From South Africa’s main tourist markets overseas, tourism from the UK has been particularly slow, growing at just 2% so far this year, probably due to the fallout from Brexit,” he says. Tourists from Germany, for example, have grown 15% year-on-year so far this year, while there have been around 8% more tourists from the US.
Left with a glut of available hotel rooms after the 2010 World Cup, South Africa has seen relatively little new construction. According to PwC, only 700 rooms were added between 2011 and 2016. But hotel occupancy levels have slowly edged up, reaching 61.2% in 2016, creating some interest in building new hotels. Jansen van Vuuren points out that most construction has been focused on Cape Town, as occupancies in the coastal city are over 70%, while the rest of the country is at the 60% to 65% level. PwC expects 2,700 new rooms by 2021, just over half of which will be added in Cape Town.
US-based Marriott is spearheading new developments, with at least six projects in the pipeline – three to open in 2019 – according to Danny Bryer, a director at Protea Hotels by Marriott. “Key source markets remain the UK, US and Germany,” he says. “We do see travel coming in from Africa but the numbers remain limited. We are seeing a new trend in terms of arrivals from the Middle East and from India, and the arrivals from China and Asia are picking up again,” he adds.
Impact of Airbnb
Official figures may be misleading. Anecdotally, there has been a surge in the number of rentals through online platforms like Airbnb. “It is difficult to quantify how much of an effect, and it depends on which area,” says Pietro Calicchio, industry leader of hospitality and gaming at PwC Southern Africa. “In Cape Town it has had an impact, but whether it has taken away from hotels is difficult to quantify”. He says many guest houses that used different channels for marketing and bookings in the past are now listed on Airbnb, so it is unclear to what extent there are actually new rooms for rental.
For the industry, sorting out the remaining visa challenges remains a priority. “The full impact of the visa changes has not yet been completely reversed,” says Bryer, “but there is certainly an improvement”.
Jansen van Vuuren concurs: “The industry is still very much advocating for easing of restrictions and there has been a more lenient application of the regulation, but people are still being turned around at airports. There isn’t any clear interpretation, so, depending on who you are dealing with, you get turned around or not turned around”. He wants the country to find a better way to tackle the security issues while not turning away potential clients.
And getting those foreign tourists in is crucial for an industry which is finding it increasingly difficult to attract local holidaymakers. Jansen van Vuuren says businesses that are dependent on the domestic market are finding it tough. But in the long term, tourism in South Africa is still very much a growing industry, he says – and crucial in an economy with unacceptable levels of unemployment. “There is employment created, particularly for unskilled workers. Creating employment like that is far easier in the tourism industry, and for that reason alone government should be supporting the industry and removing restrictions which are limiting its growth,” Jansen van Vuuren says.
According to PwC’s ‘Hotels Outlook 2017-2021’ report, government is responding with increased funding, including R494m ($38m) for tourism promotion, and R120m ($9m) to drive growth for small and medium-sized entreprises in the sector. It predicts a 4% a year increase in foreign visitors to 2021. The growth in domestic tourism will be a little slower, at 3%.
South Africa’s broader political and economic challenges are playing a critical role in determining the growth of the country and its industries. Tourism, which is critical for jobs and economic development, is at its mercy.
From the October 2017 print edition