Domestic tourism to the rescue

COMMENT

Tourism plays an important role in the development of the South African economy. According to the World Travel and Tourism Council (WTTC), the sector contributed 1.5-million jobs and R425.8-billion to the economy in 2019. 

The tourism sector has an extensive value chain that stimulates economic activity in other sectors, such as services and the creative and cultural industries. South Africa started 2020 with weak consumer demand as a result of a collapse in consumer and business confidence, high and increasing gross government debt of up to 80.5% caused by excessive expenses such as salaries, and a high unemployment rate due to the economic slowdown and not enough jobs being created. GDP growth in 2019 was just 0.6%, a further contraction from the 0.8% registered in 2018. The official unemployment rate was 29.1% in 2019 up from 27.6% in 2018. 

Prior to the Covid-19 crisis, South Africa’s growth outlook for 2020 was 0.9% with expectations that the tourism sector would register an 8.7% year-on-year growth in inbound arrivals.

The pandemic has devastated global travel and trade, and South Africa has not been spared. Because of lockdown restrictions on international travel, the tourism sector’s contribution to GDP for this year (2020) will dip significantly with a subsequent impact being a massive shedding of jobs. 

More short-term pain is on its way for the sector. Having been assessed as a level one to level two activity within the country’s risk-adjusted framework, the tourism sector still faces a significant period of constrained activity, which will be relaxed once measures have been developed to mitigate Covid transmission risks.

The impact of Covid has been felt across the tourism sector’s entire value chain. For travel distribution and intermediary businesses, the restrictions on movement have disrupted revenues. With many cancellations and very few insurance payouts, these businesses are struggling to reimburse consumers. Between April and July 2020, international air traffic declined  by more than 80%, with associated airport revenues declining by at least 45%. In the accommodation industry, hotels are operating at occupancy levels below 20%, which has resulted in losses that range in the billions and counting.

To resuscitate the sector, government-driven and tourism-related relief measures include a R200-million tourism relief fund and a waiver on tourism grading fees. But more is required to turn the sector’s fortunes around. 

Stakeholders are thus pushing the government to consider and deploy an enhanced tourism support package worth R15.4-billion. Septi Bukula, the founder of the Seeza Destination Network, says the aim of the proposed package would be to incentivise the domestic market to book and pay now for travel to be undertaken after the lockdown restrictions are completely relaxed. He adds that the package is expected to go a long way to aid small and medium enterprises (SMEs) in the sector that require credit to keep operations running.

Tourism is one of those low-hanging fruits that South Africa should exploit to resuscitate the economy post-Covid-19. To achieve higher and more inclusive tourism sector growth and job creation, the government will need to reposition the tourism sector strategy to focus on the domestic consumer and how they can save the sector. 

The prevailing outlook for sector reopening has been driven by the government’s risk-adjusted strategy, which indicated full domestic reopening in the last quarter of 2020. 

Domestic tourism will initially be oriented towards local experiences, specifically day trips and weekend retreats, as well as business travel to critical customers and suppliers. Although a significant portion of the population has been affected by retrenchments and downward salary adjustments, social distancing and being forced to stay at home is one factor that is expected to boost local tourism during the short and medium term, an aspect of which sector stakeholders should take advantage. 

Migration to level two has resulted in a noticeable jump in interprovincial travel, including holiday-making, and this trend is expected to continue to rise over the rest of the year. However, this extended grace greatly depends on behaviour and being responsible. Were the Covid cases to spike again after restriction relaxations, travel and tourism could be restricted further, yet again affecting short- and medium-term fortunes for the sector. 

If we are to continue to view sector prospects with level two optimism, visitor attractions and experiences will play a crucial role in rebuilding tourist confidence within the country. The government of South Africa intends to encourage South Africans who would have otherwise travelled abroad to instead travel domestically. The chief executive of SA Tourism, Sisa Ntshona, said he foresees the recovery of the tourism sector being led by domestic tourism, from walks in the park to vacation travelling and overnight stays.  

The drive towards domestic tourism in the short term will structurally change the domestic market as experience-based local travel becomes entrenched across a broader base of the local market. 

While domestic tourism alone will not fill the vacuum of lost international business, more South Africans travelling domestically will have the potential to deliver much-needed revenue to the sector. The sector should, therefore, transform around better serving its domestic customer. Discounts, preferential charges, specials, and other incentives should be considered to grow and sustain demand. Differentiated loyalty programmes could also be introduced that reward more travel across the country as opposed to frequenting one destination.

To protect its public, the South African government has adopted a proactive approach to establish protocols to reduce transmission risk within the tourism sector. These are aligned with the World Health Organisation guidelines. The protocols allow for the phased reopening of certain activities along the tourism sector value chain. Several tourism sub-sectors (adventure and recreation, food and beverage, attractions, and leisure excursions) have been identified for early resumption, between September and October 2020, and initial steps to allow business travel operations will be used as an evidence base for the broader reopening of all activities within the sector.

The Australian example

Australia can be used as a case study for successful reopening of the tourism sector. Like the South African government, the Australian government provided financial relief in the waiving of fees and charges for tourism businesses and an aviation industry relief package of R8.8-billion. In addition, measures were implemented by the Australian Tourism Industry Council (ATIC) to further promote domestic travel destinations to locals. In 2019, domestic travel made up about 70% of the visitor economy in Australia, earning revenues of R1.8-trillion from both day and overnight trips. Tourism Australia and holiday rentals company Stayz launched a road trip pledge to encourage Australians to support domestic travel.

Asian economies

The current global shutdown has no precedent, but mirrors the experience of Asian economies, which had to rebuild their tourism reputation following the Severe Acute Respiratory Syndrome (Sars) epidemic of 2003 and Middle East Respiratory Syndrome (Mers) of 2015. The SARS epidemic affected 26 countries and resulted in more than 8 000 cases in 2003. Since then, a small number of cases have occurred as a result of laboratory accidents. In 2015, South Korea experienced the largest Mers outbreak outside of the Middle East with 186 cases and 38 fatalities. Tourist arrivals dropped by more than 50% between May and October 2015 and revenue growth declined to a record low of –49% in July 2015. 

After the threat of the virus had been eradicated, a 100-day tourism recovery plan was implemented, which involved inviting domestic and foreign tourists through sponsored programmes, offering special tour packages, the waiving of visa fees and capitalising on traditional holiday periods in neighbouring countries such as China. In 2017, tourist arrivals in South Korea exceeded pre-Mers levels, registering a 50% year-on-year revenue growth.

From these cases we learn that charity begins at home. For the short-term South Africa’s tourism sector should endear itself to its local population to sustain its revenues. This will require a bit of effort but comes with the benefit that over the longer term, a culture of domestic tourism will have developed to a level that it can almost sustain the sector’s revenues and fortunes.