Cape Town - South Africa is on track for a bumper summer season, as report show an increase in tourism arrivals - yet while the TBCSA Tourism Business Index reports improved business performance in Q3, a number of factor indicate that the scoring is somewhat below normal.
The cost of inputs, competitor market behaviour and competitive supply remain key factors impacting negatively on business performance, according to TBCSA. In addition, respondents have expressed concerns about the impact of current developments in political and socio-economic landscape.
The TBCSA index represents performance of businesses operating in South Africa’s travel and tourism industry specifically related to accommodation, as well as other sectors - whose total contribution to the country’s GDP in 2015 stood at R375, bn or 9.4%.
In the same period this year, the industry’s total contribution to employment, including jobs directly supported by the industry was 9.9% of total employment or 1 554 000 jobs – this is expected to rise to 1 557 000 jobs this year.
'Index score somewhat below normal'
The latest Q3 TBI report shows a slight uptick in the industry’s overall business performance, buoyed by positive results in the accommodation sector. However, the index score is still somewhat below ‘normal’ levels of acceptable performance.
Commenting on the performance of the accommodation sector, Chairperson of the National Accommodation Association of SA (NAA-SA) Donovan Muirhead, says the feedback he’s received from members is that “the months of July and August were great periods, however September was a bit more challenging with occupancies and revenue per available room averaging a similar figure to last year.”
Federated Hospitality Association of Southern Africa (FEDHASA) CEO, Tshifhiwa Tshivengwa added that results of the accommodation sub-index needed to be contextualised.
“If there is an increase in bed nights, this could be attributed to corporate and inbound travellers. However, the fact that we are experiencing normal or acceptable business performance does not mean we are where we need to be. The cost of labour is still high; the cost of electricity is higher than inflation. If we deduct these two (factors), we might see that we are not doing so well.”
Labour and electricity costs still high
Whilst the issue of immigration regulations is topical right now, the index report highlights other factors which contributed negatively to performance in Q3, confirming Tshivengwa’s concerns. They are the cost of inputs (a recurring issue); the cost of labour and issues related to competitive market behaviour.
Elaborating on the challenges in the operating environment, Gillian Saunders, Head of Advisory Services at Grant Thornton says, “Local economic growth is seriously constrained and this impacts directly on business travel which is the mainstay of many businesses in the tourism sector. This, coupled with government reigning in the travel and conferencing costs means many businesses are seeing lower domestic demand levels and rate pressure”.
But, it is not all doom and gloom.
Respondents of the ‘other tourism businesses’ sub-index, with the weak Rand exchange rate seen as a positive contributing factor; followed by overseas business and leisure demand.
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