Weekend Argus (Saturday Edition)
Tourism faces a costs crisis
SA pays most for fuel in the world behind Mexico and many residents unable to holiday like they used to
BEHIND the scenes in tourism, an epic struggle is taking place. For industry professionals, the rising costs of fuel and other commodities are putting pressure on businesses. Besides this, locals are also finding it harder to budget for travel for the same reasons.
The rand has been on a rollercoaster, leaving the economy in a precarious situation. The tourism industry is no holiday. The economic stimulus package presented by President Cyril Ramaphosa has potential, with tourism also garnering attention, but the concept of tourism isn’t an abstract one.
Although some may consider it all about taking a break and chilling, the sector is inextricably interwoven with the economy, with linked sectors as disparate as retail and even construction. Add to that supply chains and the stifling increase in commodities, VAT, fuel from a supplier (industry) point of view, weighing the cost of doing business against a demand from the consumers who are also under pressure becomes problematic. Do tourism businesses add to the challenge consumers face and risk haemorrhaging more visitors?
Domestic decline has been the biggest reason for the recent downturn in tourism numbers, the industry is on tenterhooks ahead of high season, which traditionally enables tourism businesses to balance their books and push ahead into the following year.
South Africa is running on empty, according to Bloomberg. Its economic issues mean it is one of the most expensive places in the world to be a motorist and this challenge is exacerbated by how little income locals earn. We spend more of our pay filling up than any other nation except Mexico. Supply constraints from Opec, Venezuela’s political crisis and tensions between the US and Iran are behind the metaphorical “sneeze” giving South Africa a cold, bearing in mind we are a net importer of fuel.
In the interim, there don’t appear to be many solutions.
The choices are to bite the bullet and continue travelling or stay at home and explore locally – a staycation. Travellers can make use of value-added offerings such as loyalty programmes – some are directly linked to fuel – and tourism businesses would do well to consider such value adds that don’t negatively impact profit margins.
Statistics SA claims locals prioritise travel, even in a recession, so this is a hint that we will continue to see tourism taking place. The exchange rate is likely to put pressure on residents to travel locally than internationally to stretch their bucks, and exchange rate is favourable to international visitors.
It’s no secret small and medium enterprises are under financial constraints, particularly in their early phase. SMEs need to navigate finances carefully and take into account that there will be negative influences on cash flow, or risk running out of money and having to close. The president is looking to tourism for increased contributions to the gross domestic product and to the pool of jobs available. He’s aware SMEs will be the environment that most facilitates both hopes coming to fruition, but it’s not enough to sit back and hope the plan works itself out.
Tourism businesses, whether
SMEs or large enterprises, need economic sandbagging at this time, with support from government. We need to collaborate, partner and support one another – offset costs by sharing the load, adding value for visitors, offering more experiences.
Not everyone can be an economist or an astute financial manager, but this is a factor in weighing a strategy that leads to profitability. Tourism professionals must add this to a portfolio of skills to survive lean times.
We believe this sector is resilient enough to push through and achieve steady growth, and visitors will continue to regard our attractions and experiences as world-class. Let’s ensure we endure and press ahead despite the many challenges faced.