What does a stronger South African democracy mean for tourism?

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As South Africans, we live and breathe politics. In our young democracy and the quest for a more equal society, not a day goes by where we aren’t trying to grow, share and reinvent the ways we do things. Tourism is no different – it’s one of the fastest growing sectors, both in revenue and job creation.

We compete against competitive destinations for a piece of the global pie, and according to Luxury Safaris founder Pieter Geldenhuys, we are doing well but not as well as we could be. Pieter shares his views on what the recent municipal elections could mean for tourism:

How will the evolution of democracy affect tourism in the next five years?

A de-facto, one-party state is never a good thing. It didn’t work for the Nationals under Apartheid and it hasn’t really worked for the ANC. Strong opposition parties taking control of various metros will serve as a wake-up call to the ruling party, forcing them to be more accountable. Furthermore, taking a stronger stand against corruption is likely to increase service delivery efficiencies.

A more effective government will lead to a rise in the literacy rates, providing much needed skills for our growing sector. It will also hopefully lead to less restrictions on passengers visiting South Africa, including more access for foreign airlines, less restrictive visa regulations and increased subsidy support for the sector.

It is a very exciting time for our country and our industry. I foresee the sector strongly outpacing our GDP growth in the next five years and being one of the major contributors to employment and prosperity - as well as skills transfer.

What impact will this have on South Africa?

If you consider that tourism is currently a bigger contributor to GDP than the traditional South African powerhouse, the minerals sector (currently tourism is at 9% of GDP, according to 2014 statistics), it is astounding that we still hold such a relatively low share of the global market. Of course, we have severe delimiters concerning our reputation around personal security, being a long-haul destination and onerous government restrictions around visas. That said, these are issues also plaguing Thailand, Australia and Costa Rica, to name just a few. Yet we lag behind all these destinations in core arrival and growth numbers.

Part of the problem is a lack of coherent focus from government and specifically municipal governments on stimulating growth for tourism. Cape Town is the obvious exception, where the tourism sector has enjoyed unprecedented growth in the region backed by a well-organised and coherent local City of Cape Town and provincial tourism administration. This is no doubt due to effective holistic government by the Democratic Alliance, which makes us hopeful that Port Elizabeth and the City of Tswane may see the same benefits with a more organised local legislature.

These two metros have recently come under control of the Democratic Alliance. Port Elizabeth, despite being the gateway to a multitude of incredible wildlife attractions and game parks and the popular starting or ending points for Garden Route excursions, has had the unfortunate tag as a gateway city where visitors do not particularly spend a lot of time. The Friendly City has a beautiful promenade, temperate weather, friendly locals and a multitude of amazing activities. There can be every expectation that a more proactive local government will help the city to lift its international profile significantly.

Tshwane, also known as Pretoria, boasts the Voortrekker Monument, the Union Buildings, Paul Kruger Square and the beautiful Jacaranda-lined neighbourhoods among other things. For the same reasons, the region might see an upswing in its tourism numbers.

What impact will a stronger rand have on tourism?

I remember traveling through Central America some years ago. Most of the countries in the region are a relative mess, with successive military coups and unstable governments leaving their infrastructure lacking. But they were cheap as chips and therefore great for a backpacker to visit. The exception was Costa Rica, which was relatively dear, by having stable government for a number of decades. It also occurred to me, however, that Costa Rica captures a lot more of the high-spend business from the neighbouring United States, and was probably more successful in tourism than Nicaragua or Honduras.

How does this relate to our situation?

It’s been bumper season for all local operators, and it can be traced back to a few factors:

  • Relative uncertainty in other markets (read: terrorism in Europe, continued unrest in Egypt and Turkey, etc.)
  • The dramatic fall in the rand after Zuma’s finance minister’s musical chairs.
  • A relook at restrictive biometric visas, specifically for the Chinese market.

It all comes back to security, pricing and accessibility – it’s that simple. But as a local operator, we definitely saw a massive increase in last-minute business as Europeans specifically rushed to take advantage of the exchange rate.

Conversely, the rand has strengthened again and with Brexit, the pound has fallen. I fully expect this to fundamentally impact arrivals in the coming summer. A stronger democratic balance as evidenced by the recent elections, could therefore cost us our more price-conscious travellers, as it will inevitably lead to a stronger rand.

However, while the world seems to be going to hell in a hand basket, with Isis, protests, Zika virus and other factors prompting people to look at new places to visit… we could still benefit.

Looking ahead into 2016 we already see signs of recovery in arrivals with most markets returning to growth, including China. Tourist arrivals for the first two months of 2016 showed a growth of 16.5%.

How will this affect the pricing for luxury accommodation in South Africa?

A funny thing happened at the start of this year - several of the luxury hotel groups in South Africa dramatically lifted their pricing to keep up with the USD/ZAR differential. Or put differently, in order to make the maximum commission, international agents were suddenly off-selling South Africa’s rand denominated product in favour of lodges and safaris in Tanzania, Zimbabwe and Botswana – which are dollar based. One would think a weaker rand would bring more tourists because of better value pricing, but in the luxury market, distribution is more important.

How does the value of the rand affect travellers’ perception of South Africa?

We have seen a massive increase in price sensitive markets in the likes of Spain and India to name a few. This has definitely helped us. One must be careful to overpromise and under deliver though – the spate of bookings made in February/ March are now arriving, but they booked with the assumption of R16.50=$1, and have arrived to find a R14=$1. We haven’t had significant blowback, but it would be interesting to hear feedback from travellers who expected a (very) cheap holiday.

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