Tourism business index shows significant drop in Q2 performance

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Pretoria, South Africa, 20 July 2015: South Africa’s travel and tourism industry performed significantly lower than expected in the second quarter 2015, says the Tourism Business Council of South Africa (“TBCSA”).

In the period between April and June, business performance levels across the tourism value chain slipped from a Tourism Business Index (“TBI”) of 99.9 in Q1 to an index score of 83.6 in the second quarter.   This is the lowest performance level since the third quarter of 2011, when the industry registered a very low index score of 70.0.

TBI is a quarterly performance-monitoring tool, initiated by the TBCSA in 2010, to track business performance in the industry. The index reports on changes or expected changes in demand and profitability which are expressed relative to the expected normal levels of trade for the relevant period. An index score of 100 is regarded as an indication of normal levels of trade. When the index shows performance or prospects below 100, this indicates worse than normal performance.

“The results are worrying, says TBCSA CEO, Mmatšatši Ramawela. “To be realistic, we anticipated that there would be some decline, judging by our member feedback and the outcomes of the impact assessment study on the new immigration regulations. The past couple of months have been particularly tumultuous for our industry and generally business confidence is low. However, despite the decline in trade conditions, what’s coming out strongly from the latest TBI report is that maintaining employment levels remains top priority for many operators”.

As expected, new visa legislation with regards to biometrics and unabridged birth certificates topped the list of key factors contributing to the drop in performance. Whilst the lingering effect of the Ebola outbreak seems to be subsiding, with more than half of respondents citing no or neutral impact, only 16,9% of respondents cited negative impacts as a result of the xenophobic attacks which broke in the second quarter. Labour unrest, electricity and water shortages and reduced demand by the public sector were also cited as negative factors.

The accommodation sector saw worse than normal business performance, with an index score of 82.6 compared to the forecasted 102.7. Other Tourism Businesses (excluding accommodation) also recorded lower than normal business performance with a score of 84.4 compared to the anticipated 93.2

Interestingly the accommodation sector is still planning to increase capacity in spite of poor recent and expected performance. Gillian Saunders, head of Advisory Services at Grant Thornton says “Expansion plans for accommodation capacity increases have long lead times and many projects were no doubt planned during the high performance years of 2013 and 2014, and cannot be shelved now without worse financial consequences”.

On the positive side, the hosting of large summits, long-weekends and school holidays were highlighted as positive factors. Whilst the overall outlook for the next quarter is somewhat pessimistic, it is hoped that the weaker exchange rate, as well as the implementation of new promotional initiatives will boost trade in Q3.

“Times are tough for us right now but we are a resilient industry and will bounce back”, said Ramawela. Comparing the latest TBI score to other economic indices such as the SACCI Business Confidence Index, Ramawela said it was evident that travel and tourism was not the only industry experiencing some strain. “We are working hard to address the industry’s concerns around the visa regulations and have recently met with officials from the Department of Home Affairs.   In addition, individual businesses are reviewing their strategies to adapt to the changes in the operating environment. We will continue to forge ahead as an industry, cautiously optimistic that in the medium to long-term stability and growth will return”. Ends

The TBI report is compiled on behalf of the TBCSA by Grant Thornton South Africa. The information is designed to assist individual businesses, policy-markers, investors and all other relevant stakeholders, understand the travel and tourism operating environment. Furthermore, the information is aimed at helping individual businesses to plan for the likely, future tourism environment

ENDS

For further information please contact:

Ms. Kagiso Mosue

  • TBCSA: Corporate Communications Manager
  • Tel: (012) 654 2660 / 073 015 4530
  • Email: comms@tbcsa.travel

Ms. Lianne Osterberger