Currency offers short-term benefit for SA tourism

A DECREASE in the rand’s value usually has a positive spin-off for tourism in South Africa, because foreign currency goes further when compared to other long-haul destinations. But there are a few grey areas that do not make this notion as cut and dry.

In 2015, tourism in SA declined due to factors which included visa processing capacity constraints, the requirment for unabridged birth certificates and the Ebola virus among many.

In 2016 the rand took a knock in value and tourist arrival numbers improved, with SA receiving over 10 million tourists, a 12.8% increase on 2015 numbers. Aside from relaxation in visa regulation requirements, depreciation of the local currency may be cited as a contributing factor to the rise of foreign tourists to SA.

“The weaker rand is a shortterm windfall for the industry. However, businesses’ strategies are geared to long-term sustainability, and will continue to market their products accordingly,” said Charnel Kara, Tourism Specialist at FNB.

Hospitality-related businesses usually hedge the rand against the foreign currencies at a particular level, thus, foreign tourists coming to SA benefit from a stronger currency against the rand at a particular point in time.

“Currency fluctuations are not under the businesses’ control. Business should still take cognisance of increased input and operational costs that may dilute any sort of benefit from the depreciated rand. These costs are absorbed by business owners and are usually ahead of inflation. They also usually result in a negative effect on the bottom line,” said Kara.

Hoteliers and tourism-related businesses are mitigating costs by implementing green and energy-saving concepts, innovative pricing and revenue management, low-debt gearing levels, creative hotel/tour packages, loyalty cards, aggressive destination marketing and collaboration with relevant government departments.

Essentially, a weaker rand makes imported items and overseas travel more expensive for South African consumers.

Businesses that may feel the negative effect of a weaker rand are those focused on the outbound travel market, while those most likely to benefit are in meetings, incentives, conferences, and events (MICE) sectors – as it will be cheaper to host these in South Africa.

To benefit from the weak rand, businesses should price attractively. For example, selling block or group bookings at a slightly lower rate than single bookings, or perhaps charging less for longer stays.

It is one way to ensure ‘bums in beds’, where there is potential to spend more on other offerings, said Kara.