It may not be prudent to rush to turn your home into a guest house, what with hotel occupancy rates in the country running at 64%, and consumers spoilt for choice, but amid sombre news about the struggling South African economy, the tourism industry is providing a glimmer of hope as one of the critical sectors that will boost growth and create jobs this year.
Charnel Kara, Tourism Specialist for FNB Business, says while the tourism sector contributes a significant portion to South Africa’s GDP, its impact will be even more significant as the country faces the possibility of a recession, and the South African Reserve Bank cuts its growth forecast to 0.8% from 1.5% for this year.
According to Statistics South Africa, in December 2015, there were 1 547 900 foreign arrivals in South Africa. The arrivals were made up of 105 062 non-visitors and 1 442 838 visitors. The visitors consisted of 550 118 same-day visitors and 892 720 overnight visitors (tourists). The breakdown of the tourists by region is as follows: 234 523 from overseas, 642 721 from the SADC countries; 14 566 from “other” African countries and the remaining 910 tourists were classified as unspecified.
“Because tourism is a highly competitive and ever-changing sector, businesses that keep ahead of industry developments will reap the rewards,” adds Kara, as she unpacks five of the latest tourism trends:
- Currency fluctuations – the vulnerability of the rand against the US dollar will boost tourism in the country as foreign visitors seek to take advantage of the weak currency. As a result, we are bound to see an improvement in tourism numbers and an increase in per capita spend.
In addition, the weak rand will make it less feasible for South Africans to travel abroad. Thus, many consumers may opt to travel locally, thereby increasing domestic tourism and stimulating the local economy.
- Outbreak of the Zika virus – while the outbreak of the Zika virus has had a negative impact on the tourism industry in South America, it has had a positive spin off for the South African tourism market as tourists redirect to South Africa as an alternative long haul destination.
- Drought and water shortages – the current drought that is escalating food-price inflation will have severe consequences for the hospitality industry as food costs are one of its biggest challenges. Businesses should therefore proactively find ways to manage and keep food costs under control.
- Legislation – while legislative amendments are often beyond the control of businesses, policies and regulations usually have a severe impact on the long-term growth and sustainability of the industry.
- Hiking of rates – should be carefully considered as this affects the performance of the industry as a whole, especially for over-geared businesses.
“Consequently, businesses in this sector should be prepared to take advantage of the vast opportunities presented by local and international developments. At FNB, we remain confident in the growth outlook of this segment and its contribution toward South Africa’s economic wellbeing,” she says.
Asked about Airbnb, Kara observes that it has disrupted the traditional hotel accommodation model worldwide. It’s been well received by consumers in South Africa and is projected to grow further.
But the weakening of the rand should not be used as the basis to start a guesthouse, she cautions. There are other critical factors to consider for sustainability, inter alia, location, access to markets, segmentation, hospitality experience, cost overheads and gearing.
“Going into business is a long-term commitment that should be carefully considered. Like any new business, there are a number of market factors (above mentioned), risks and challenges that potential entrepreneurs have to prudently consider before turning their homes into guest houses.
“Currently, consumers have a choice between using the traditional hotel or the Airbnb concept. However, it should be noted that the traditional hotel model is well positioned for the challenge. Overall, consumers are spoilt for choice.”