South Africa has become ‘high price, low value’ tourist destination!

The annual Tourism Destination Conference, organised by Cape Town Routes Unlimited on behalf of the Western Cape Department of Tourism, on “Elevating our Destination’s Global Profile”, was held in the Waterfront yesterday, and had a sobering message for tourism players – South Africa, and the Cape with it, has become too expensive!   Tourism players were encouraged to relook their rates, and contain their costs, to see how they can offer better value.  Ironically the theme of the Conference focused on global marketing, but more than one speaker encouraged the industry to invest in domestic marketing, rather than international marketing, even at provincial level. 

The Conference was intended to provide “a platform for the tourism industry to engage on relevant topics that could enhance our destination’s competitve advantage to contribute towords industry growth”, Western Cape Minister of Tourism Alan  Winde said ahead of the Conference.  Cape Town Routes Unlimited CEO Calvyn Gilfellan added that “Platforms such as the Cape Town and Western Cape Destination Conference are critical to ensuring that everyone in the industry is working towards a common goal: the enhancement of the Western Cape tourism industry”.

Western Cape Minister  Winde said pertinently that Cape Town is not cheap, and despite the oversupply of accommodation, the resultant effect of the law of demand and supply in leading to lower rates is not evident in the Cape.  He said that a comparative study of hotel prices locally and internationally will be conducted by FEDHASA, the hotel association.  Winde said that the focus of his department’s marketing is to increase the market share of the Western Cape, which has been overshadowed by KwaZulu-Natal.  Africa as a source continent is vital for Cape Town, but there are no direct flights between Cape Town and major African cities, all African tourists having to fly via Johannesburg.  Asked how a region like the Garden Route, which is suffering extremely low tourism numbers, can improve its performance, the Minister encouraged players in regions to work together, to attract tourists, Cape Town residents in particular.  He mentioned the example of Knysna and Franschhoek, who are ‘tourism twined’ now, and are going on marketing trips to Gauteng and to the USA, to benefit both towns.  The recently created Cape Country Meander passes on its visitors to the next towns, and includes Elgin/Grabouw, Bot River, Caledon, Villiersdorp, and Greyton.  The recently signposted Cape Whale Coast route shows how tourism players can work together to share more broadly their tourism success.   Minister Winde said that many players in tourism are insular, and think they are ‘the centre of the universe’.  To meet President Zuma’s goal of 5 million jobs to be created by 2015, the tourism sector would have to grow four to five times.  But he said the responsibility cannot be placed on corporates alone to achieve this goal, and that small and medium sized businesses must show growth, to achieve growth in employment.

National Minister of Tourism, Marthinus van Schalkwyk, encouraged the tourism players to evaluate what Cape Town can do more to allow it to compete with the best in the world.  South Africa had its best ever tourism performance last year, with 8 million foreign arrivals, and a 15 % growth.   Now the country needs to capitalise on the top of mind awareness that was created for it through the World Cup, and meet the goal of 15 million arrivals by 2020, and to increase tourism’s contribution to the economy from R190 billion in 2009, to R499 billion in 2020.  Awareness needs to translate into sales, he said.   Tourism is now one of the six cornerstones of economic growth and job creation, and the success of the tourism industry must lead to the greater economic benefit for the South African population.  Minister van Schalkwyk urged the provincial tourism marketing bodies to focus more on domestic marketing, given the restricted marketing funds.   The Minister indicated that the traditional markets of the USA, the United Kingdom and Europe are the largest source countries of tourism, but are still strongly influenced by the recession.  He highlighted the importance of Africa as a tourism market, showing a growth of 4 – 7 %.  The tremendous potential shown by the Chinese market has been recognised, and direct flights between Beijing and Johannesburg will be introduced by SAA later this year.  SA Tourism will allocate a share of its marketing budget to attract Chinese tourists.  The Minister also said that whilst 50 airlines service South Africa currently, more are needed to fly to the country, so that supply and demand can drive down the cost of flying to this destination.   Airport tax increases were identified as a deterrent to tourism growth.

The biggest challenge that Minister van Schalkwyk threw to the industry was ‘green tourism’.  By going beyond talking about sustainability and biodiversity, and taking the lead in creating low carbon cities, a competitive advantage can be created for South Africa.   “…as the world changes around us, it is imperative that we as a travel and tourism industry in South Africa stay one step ahead.  This will mean challenging ourselves in terms of how we understand the environment, our responsibilities, our markets and our consumers.  It means innovative and strategic thinking in terms of how we plan for the future, as well as the flexibility to adapt to rapidly evolving circumstances” he concluded.

Peter Bacon is an industry player, and was a previous CEO of Sun International, and currently is the Chairman of Cape Town Routes Unlimited and of the Tourism Grading Council of South Africa.   He said that South Africa is doing better than most long-haul destinations in respect of tourist arrivals.   It was good to hear him say that Cape Town is the ‘jewel in the crown of S A Tourism’.   Cape Town does not suffer a decline in demand, explaining the decline in accommodation occupancy, he said, it is suffering from an oversupply of accommodation created by the opening of six hotels in the last two years.   Coupled to this is that corporate demand for accommodation is down severely, as businesses come to grips with their policies on company travelling.  It was Bacon who said that South Africa’s image has changed from being a  ‘low cost, high value’ destination to one that is ‘high cost, low value’.  Overall average tourism spend is down compared to the past, and the average tourist stay is two days shorter.   He urged the industry to package Cape Town ‘beyond the beach’, and to address the poor value image.  He did understand that rising costs, especially those for electricity, make it difficult to cut rates, but South Africa must be competitively priced, and our destination is not!   Bacon also urged that domestic marketing take the foreground.  Bookings are increasingly on-line, and he urged the accommodation industry to be where the bookings are, on Hotel.com, Expedia.com etc.  Cape Town, and South Africa with it, is a world class destination, and its tourism marketing must be aligned.  He also requested event organisers to not program events in the Cape on the same days – e.g. the Cape Town International Jazz Festival, and the Cape Epic taking place this past weekend.  He said: “We need to package our destination and the diversity of its attractions and experience more effectively.  We need to address the value proposition by differentiating South Africa from other long-haul destinations”.

The presentation by Dr Nikolaus Eberl, a branding consultant to the World Cups in Germany and South Africa, was one that attracted me to attend the Conference, but it was disappointing that he went back to the past, focusing largely on the success of the World Cup, and then showed video clip after video clip of Hawaii’s cliff-diving industry, neither addressing the topic of the Conference.  He did remind the audience that South Africa’s World Cup FIFA score of 92 %, 4 percentage points higher than Germany, was an exceptional performance record, and that South Africa could be Plan B to Brazil!   What did make the World Cup such a success was the ‘ubuntu’ of the South African nation, radiating its friendliness and care to visitors and locals alike.  An interesting case study presented was that of the Harley Davidson Club, showing how a ‘brand community’ can be created around a product or service that consumers naturally concentrate around, mentioning the example of the now dead polar bear Knut, who received a world following in the Berlin Zoo.   He talked about creating Brand Ambassadors, which is what visitors to Cape Town become, through word of mouth and social media communication, and this can lead to a ‘brand community’, he said.  

Although the most eloquent speaker, the City of Cape Town’s Pieter Cronje’s talk disappointed in not revealing which other mega events are lined up at the Cape Town Stadium or elsewhere in the city, other than Neil Diamond’s concert in April. He did say that the city would bid for the Olympics, but not for 2020, as Cape Town’s public transport system is not yet ready to handle such an event.  He also indicated that Cape Town has seen an increase in the number of event proposals since the World Cup, which will be good news for the tourism industry if they are staged.   He said what all in the room know already – events create money for the economy, and benefit all tourism players.

With tourism contributing 10 %  to the Western Cape economy it has a significant effect on economic growth and job creation.   The Conference had a contradictory outcome, in that its theme was global marketing, yet its message was one of domestic tourism marketing first.

Chris von Ulmenstein, Whale Cottage Portfolio: www.whalecottage.com  Twitter:@WhaleCottage

8 replies on “South Africa has become ‘high price, low value’ tourist destination!”

  1. Nick Jones says:

    Hi Chris,

    As a regular reader of your excellent blog (for which many thanks) & a regular visitor to your wonderful country since the late 90s, I’d like to comment about the decline in tourism.
    Obviously the recession is a problem as is the wekaness of our poorly £. However, we have noticed the incessant increases in the cost of B&B accommodation (Whale Tales excluded!). We’re fotunate because our hosts in both Camps Bay, Knysna & Stellenbosch have rewarded our loyalty by freexing our rates for the past 5 years.
    The other factor is the problem of European charter airlines to obtain slots into & out of SA. This artificially inflates the prices, I guess in order to protect SAA.
    Rgds,
    Nick

  2. Thank you for that insight Nick, and for the compliments.

    We can all feel the drop-off in enquiries from the UK in particular, which was our largest source market.

    We have held our rates since 2007, and can only thank the Reserve Bank for its interest rate decreases, and for currently holding the rate, to absorb the other increases we face.

    Our Whale Cottage Loyalty Card rewards our guests with one night free for every 10 nights they stay. I hope you still have your Card.

    Chris

  3. I’m a South African living in Germany. Since 2002 I’ve holidayed in South Africa every year for at least 3 weeks (some years even more). We always stay at B&Bs in Cape Town, the winelands, along Route 62 and the Garden Route. My experience: a South African holiday has indeed become expensive in the sense of “what you get for your money”. Die “Preis-Leistung-Verhältnis” has changed for the worse, if you catch my drift. (I find the description “high price, low value” to be a wrong description.)But, that’s not always the fault of the B&B owner (in my experience). Mainly higher air ticket, car rental, restaurant prices etc. are to blame.

    And now to the point I want to make: none of the big heads at the Tourism Destination Conference correctly identified the main reason behind this drop in “Preis-Leistung-Verhältnis”. And that’s a bit worrying. Because it has very little to do with the players in the tourism sector – as a group, or individually. It’s a factor outside of the control of the tourism industry. But, a factor which should, nevertheless, be identified and clearly pointed out as the culprit. Still, no-one did. (Or otherwise you would have mentioned it, oder?)

    And the culprit is: the rand. At R9.90 to the euro it is overvalued by (my guess) at least 20%. And that’s the 20% which makes all the difference for the tourism industry. At R12 to the euro the visitor numbers would look quite different, you must agree.

    Why doesn’t the rand drop to R12, where it belongs? Because of the mining sector and the big global demand for commodities and SA mining shares. In other words, money which flows into the JSE, where it benefits (narrowly) the mines and damages the rest of the economy (by keeping the rand artificially strong).

    This is the tourism industry’s problem. And this is what people like Kortbroek van Schalkwyk should be concentrating on (if he wants to work for the sector), namely he should take every opportunity to propagate a government-led effort to weaken the rand. A tricky task, but unavoidable, because the high rand is killing off every sector dependent on imports/exports of goods and services, except the mining industry.

  4. Vielen Dank Christo.

    The Rand exchange rate was briefly mentioned, in an off-hand manner, by one of the speakers (think it was Peter Bacon), but none of the government speakers addressed the issue.

    On top of this, the UK market is taking a hammering anyway, and the strong Rand is not helping.

    Gruesse an das Heimatland!

    Chris

  5. Anon says:

    …..and then when costs such as “electricity” increase at an unreasonable rate…

  6. Agree Ryan.

    The only thing that has kept many businesses alive has been the interest rate reductions.

    Chris

  7. Alan Winde says:

    On the Rand matter, I agree that this is a big contributor, but I am not a supporter of government intervention to weaken the rand. On the other side of the equation, when the rand was very weak many of our businesses took total advantage and pushed their prices up to match the international currency value. Now they are finding it very difficult to reverse the situation.

    Perhaps we should have spoken of the Rand strength, the electricity price increases, the cost and productivity levels of labour, the flat line growth projection in our core markets and the slow take up in new markets, but the conference was to get industry to talk, and as I understand, this has started.

    Many of these matters are related to national policy and this was a provincial tourism conference. I will however take these up at a national level and thanks for the comments.

    regards Alan Winde

  8. Dear Alan

    As always, I am impressed that as our provincial Minister of Tourism you are Social Media savvy, and picked up on this blogpost and the Comments made.

    I remember the R20-to-the-pound bonanza – the winners were the tourists. I do not know of any opportunistic operators that raised prices at that time. We think and operate in Rands, and only look at the exchange rate when we see business dropping.

    Thanks for all your hard work for tourism to and in the province.

    Chris

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