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 A turbulent voyage of recovery ahead for SA tourism

 

 South African tourism, arguably the hardest hit sector in an economy reeling from the Covid-19 pandemic, will probably only return to its pre-Covid-19 levels in 2022, says Anton Roelofse, regional general manager at Business Partners Limited (BUSINESS/PARTNERS).

But even if the recovery timeline is difficult to predict, there is no doubt that the sector has lost none of its dynamism. It will bounce back, albeit with significant turbulence, realignments, and hardship in the foreseeable future.

When considering the recovery of the tourism industry, it is worth scoping the depth of the hole that it has to climb out of, says Anton. It is happening against a backdrop of an estimated contraction of six percentage points of the global economic growth from 3 percent to minus 3 percent. Globally, travel and tourism losses are estimated at between US$ 2.7 billion and US$ 5.5 billion, with job losses of between 92.2 million and 121.1 million workers.

Before Covid-19, tourism contributed 2.9 percent to the South African GDP and supported some 725 000 jobs. No less than 8.2 percent of the total investment into the economy in 2019 was in the tourism sector. Today, 438 000 of those jobs are at risk, and a loss of 75 percent of revenue for the industry is estimated for 2020, including losses of R3.2 billion in foreign receipts from tourists.

Airbnb bookings in South Africa this year is down by 77 percent, and on bookings.com the contraction is 80 percent compared to last year.

It is grim and unprecedented, says Anton, but recovery is certain, starting with local tourism.

Already there are green shoots visible since the restrictions on inter-provincial travel were lifted, says Anton. Many local attractions are already 100 percent fully booked, in what could possibly turn into a surge of local travel in reaction to the claustrophobia of lockdown.

But it is no simple bounce-back to previous levels. For one thing, the South African public generally has less to spend, so travellers and holiday makers tend to choose cheaper options, stays are shorter and peripheral spending while on holiday is restricted to tighter budgets. 

Furthermore, with international travel still shut down, establishments that usually catered for international tourists are therefore also targeting the local market. As a result, the local tourist pie is being cut up into smaller pieces in an overcrowded market.

On the positive side, even if international travel were to open up, says Anton, the rand-dollar exchange rate will certainly put an international holiday out of reach for local families who would have considered it in the past. They will now be going on local holiday trips, which should increase the domestic tourism market slightly. 

The timing of the recovery of international travel is more difficult to predict, because it depends so much on the trajectory of the pandemic. It looks increasingly unlikely that South Africa will be hit by a second wave of Covid-19 infections, so international travel restrictions imposed by the South African government might lift as soon as November, although more likely some time in 2021. 

But Anton points out that international tourism requires reciprocal lifting of restrictions. It will only start recovering once the countries of origin of foreign tourists to South Africa also lift their restrictions on international travel. 

The most important source countries of tourists to South Africa are Europe, whose citizens spent R30.8 billion in South Africa in 2019, and America with R11.8 billion. The South African tourism industry desperately needs that revenue, but these countries are arguably further away from lifting restrictions on international travel than South Africa, with a second wave clearly under way in Europe as their winter season kicks in.

South Africa’s relatively effective Covid-19 testing regime has kept the country as high as number five in the world rankings for the number of infections, a spotlight which might subconsciously put off future potential international tourists from visiting our shores, even after any danger from the pandemic has passed.

On the other hand, the rand-dollar exchange rate makes a trip to South Africa a clear bargain, and will certainly help to boost the recovery, says Anton.  

Thrown into the mix is the uncertain future of South African Airways. It would almost certainly have helped the recovery of tourism to have the national carrier fly at the operational capacity of its golden years. On the other hand, there are many airlines ready to fill the vacuum, and the shake-up might increase competition and bring down airfares to South Africa.

Anton says tourism businesses certainly face a turbulent year or two ahead. Overhead costs will play a major role in which businesses survive and which go under, as will their ability to negotiate with landlords and financiers. 

Tourism entrepreneurs face difficult decisions on crucial marketing, but with very little money to do so. They have to create a presence on social media which, more than ever before, is cluttered with messaging from equally desperate tourism businesses everywhere and decide on offering discounted packages at a time they can ill afford to.

Anton says he is struck by the extent to which South Africa’s tourism entrepreneurs have strived to save as many jobs as they could since the pandemic struck, even though it would have been easy to let workers go.

In the same way, it would be good for the South African public not to insist too strongly on discounts that will cut tourism businesses to the bone. Tourism entrepreneurs, the hardest hit of all business owners, have been exceptionally brave, says Anton. They deserve our support.
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