FOR IMMEDIATE RELEASE
20 July 2016
PERSISTING TOUGH TRADING CONDITIONS AFFECTING TOURISM IN Q2 – TBCSA TOURISM BUSINESS INDEX
Pretoria, South Africa: The Tourism Business Council of South Africa reports that the persisting tough trading conditions in the South African economy are affecting businesses in the sector and have led to below normal levels of business performance as recorded in the 2016 Quarter 2 Tourism Business Index. However, the Travel and Tourism industry being the resilient sector that it is, both locally and internationally, role players have expressed hope of improved performance going forward.
These are the sentiments highlighted in the latest results of the Tourism Business Index (TBI), published today by the Tourism Business Council of South Africa (TBCSA). The report shows that businesses in the travel and tourism sector were trading under tough conditions in Q2, recording an index score of 78.9, significantly below the score of 100 points, which indicates normal business performance levels. The score is also 7.3 index points below than the 86.2 forecasted for the second quarter of 2016.
Commenting on the outcomes of the report, TBCSA CEO, Ms. Mmatšatši Ramawela, says that the Q2 results is a clear indication that the trading environment is tougher out there hence the results that are even lower than what we were expecting in the sector following on from the impressive results of Q1. It just shows that our recovery as a sector is going to be an even bumpier ride, considering all the added pressure inherent in the broader economy, which will no doubt affect our sector. We still have the after effect of Brexit to contend with, considering that both the EU and the UK are amongst our primary source market for both our business and leisure travellers,” says Ramawela.
Comparing the TBI with other economic indices in South Africa, it is apparent that there is a general trend of low confidence across South Africa’s economic landscape. The Q2 2016 results of the RMB/BER Business Confidence Index fell to a score of 32, which is below the normal confidence levels (a score of 50 indicating normal). On a slightly positive note, the SACCI Business Confidence Index (BCI) showed a slight increase in the quarterly average (from 93.1 to 94.1) in Q2 2016, although the overall trend is still downward from 2015. This being the case, it is going to be critical for role players in the tourism sector to “tighten” their belts and work harder to make South Africa a compelling proposition all around.
Head of Advisory Services at Grant Thornton, Ms. Gillian Saunders, says that insufficient domestic leisure demand was one of the significant factors that affected business performance in the second quarter of 2016. “The current economic climate, inflation and the increasing cost of living means that the average South African will think twice before taking a leisure trip and sleeping over at a hotel. This is why insufficient leisure demand contributed heavily to lower than normal and expected business performance levels in the travel and tourism sector for Q2”, says Ms. Saunders.
Taking a closer look at the two main components that make up the TBI, the report shows that the Accommodation sub-index scored lower than expected in Q2 at 92.2 index points, compared to the anticipated score of 101.6. The “Other Tourism Businesses” sub-index also scored below normal trading levels in Q2, with an index score of 68.7, slightly lower than the anticipated index score of 74.3. “From the car rental perspective, we continued to experience a drop in business performance due to new vehicle pricing which will need to be absorbed in future rental rates. However, looking forward, we expect tourism, and in particular, international tourism to continue to increase” said Marc Corcoran President of Southern African Vehicle Rental and Leasing Association (SAVRALA).
Despite 49% of Accommodation businesses citing a weak rand as a positive factor, this did not help the Accommodation sector to perform above normal trading levels. Adding his comment on the TBI results, the CEO of FEDHASA (Federated Hospitality Association of South Africa) Mr. Tshifhiwa Tshivhengwa, says that possible contributing factors to a drop in performance for the accommodation sector in Q2 are likely due to a decrease in government spending, and also an increase in the use of unlicensed accommodation offerings. “Although the intention is to tighten budgets and cut costs, the effect of a decrease in government spending on travel and accommodation services in particular, has had a negative effect on the accommodation sector. Also a second possible negative factor is a rising trend for the travel consumer to opt for the more affordable, but riskier, unlicensed accommodation offering”, says Mr Tshivhengwa.
Looking ahead into Q3, there is an anticipation that business performance will improve to 84.7, although still remaining below the normal trading levels. For the “Accommodation” sector, the forecast is that business performance will be above normal trading levels at 105.0 points, whereas a more pessimistic score of 69.0 is expected for the Other Tourism Businesses sectors. “We are looking forward to a third quarter that will hopefully reflect an upswing in business performance, driven by a recovery in government and bullish corporate travel; the impact of upcoming events with the spring and summer coming back as well as international tourist arrivals – our industry and economy needs this injection and the growth that follows.” concludes Ramawela.
An index score of 100 indicates normal levels of acceptable business performance. When the index shows performance or prospects higher than 100, this indicates better than normal performance, whilst below 100 indicates worse than normal performance
This information is designed to assist individual businesses, policy-makers, 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. The TBI report is compiled on behalf of the TBCSA by Grant Thornton South Africa.
- Download the full TBI report Here
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ABOUT TOURISM BUSINESS INDEX (“TBI”)
TBI is an overall indicator of the “health” of businesses trading in the tourism sector. This is a business tool that can assist particularly independent and small businesses to understand their operating environment, while large businesses are able to use the index to interact with their various stakeholders. Visit www.tbcsa.travel to download all index reports.
Tourism Business Council of South Africa (TBCSA) is a member-based organisation, made up of Tourism Associations as well as leading businesses operating in the Travel and Tourism sector. The Council seeks to ensure that the industry is unified and speaks with one voice when engaging relevant stakeholders on macro-economic issues affecting the sector.
Sector associations affiliated to the TBCSA are as follows:
- AHI – Afrikaanse Handelsinstituut
- AASA – Airlines Association of Southern Africa
- ASATA – Association of Southern African Travel Agents
- BARSA – Board of Airline Representatives of South Africa
- EXSA – Exhibition& Event Association of Southern Africa
- FEDHASA – Federated Hospitality Association of South Africa
- NAA –SA – National Accommodation Association of South Africa
- PHASA – Professional Hunters Association of South Africa
- SAACI – Southern African Association for the Conference Industry
- SABOA – Southern African Bus Operators’ Association
- SATSA – Southern Africa Tourism Services Association
- SAVRALA – Southern African Vehicle Rental and Leasing Association
- SAYTC – South African Youth Travel Confederation
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