South Africa’s beleaguered tourism industry was dealt another devastating blow in November when new travel bans were instituted globally against the country as a result of the newly discovered COVID-19 variant, Omicron. It means that scores of businesses in the tourism industry will not be receiving the much-needed shot in the arm that they need to recover from the heavily subdued industry performance of the last two years.
In light of this development, Arnold February, Regional Investment Manager at Business Partners Limited, says that small and medium-sized enterprises (SMEs) operating in this industry must once again prepare themselves for a period of uncertainty. It is estimated that South Africa’s tourism and hospitality sector has already lost more than R1 billion in travel bookings for the period between December 2021 and March 2022.
“The good news is that government has not implemented any new restrictions on businesses as of yet. But what is certain, is that the South African tourism industry is facing a difficult road ahead. Businesses that have made it this far should take the time to reflect on what survival strategies worked for them and see how they can be replicated and adapted in order to survive this next wave. The advantage of having come through the challenges brought on by the previous global travel bans and business restrictions relatively intact, is that we now have valuable practical survival experience.” asserts February.
He says that SMEs especially, have to develop robust strategies for the coming months, based on what worked and what didn’t work over the previous holiday season period. “Planning for the possibility of further lockdowns and getting a sense of what impact that will have is incredibly important now. One piece of advice that we can impart, is that SMEs should be cautious of making major changes within their operations.”
February refers to the pivoting of businesses in response to changing market dynamics. “When the market dips (like we are seeing in tourism), it is perfectly reasonable to change some aspect of one’s business to minimise losses or take advantage of new opportunities. However, there is such a thing as over-correcting, and pivoting one’s business too much can cut it off from future opportunities once the market starts to recover.”
He points to examples of businesses that have made significant changes in their operations that were ultimately to their detriment. “Some of the notable trends that we saw during the hard lockdown, was how some guesthouses converted their business setup to retirement and life rights properties or obtained longer term residential tenants on their properties. Doing something like this is a long-term change that involves a lot of cost and compliance with regulation. In the end, many of these gambits did not work out due to the cost implication and the limited opportunities that they offer.”
February advises business owners to only consider extreme pivots in their business model if the benefit significantly outweighs the cost, and if they have the resources to do it. After almost two years of little to no activity, incurring more debt should only be considered if the company can still afford it. “For the most part, smaller changes to one’s operations, could actually be more beneficial in the long-run. Of course, focusing on the safety and ensuring that potential customers understand that their health is your top priority, could go a long way towards removing uncertainty for tourists and encouraging more traffic to your business.”
He adds that the local market does seem ready to support the local tourism industry. “There are many South Africans and regional neighbours who did not have much opportunity to travel over the last December period, and there have been strong initiatives to attract local tourists to destinations across the country. While this is not a substitute for the activity that an influx of eager international travellers would have brought with their foreign currency, focusing on the local and regional market could at least soften the blow that the new travel bans have dealt us,” February concludes.