By: Gillian Saunders, Head of Advisory Services at Grant Thornton Johannesburg and Global Leader: Hospitality and Tourism for Grant Thornton International and Mmatšatši Ramawela CEO of the Tourism Business Council of South Africa
The accommodation sector recorded its highest score since the inception Tourism Business Index (TBI) in the last quarter of 2014, consolidating a year of largely positive performance for the local travel and tourism industry.
The TBI report, which is compiled and researched by Grant Thornton and released by the Tourism Business Council of South Africa (TBCSA), highlights that the Q4 score of 113,3 for the accommodation sector exceeded the expected performance of 110,4.
Overall, the industry performed almost in line with expectations recording a score of 108,3 compared to the forecast score of 109,8 . A score of 100 represents normal trading performance.
TBI comprises two sub-indices: Accommodation which caters for the various types of accommodation establishments from guest-houses to hotels and Other Tourism businesses which includes the tourism transport sector, travel agents, retail outlets, conference venues, attractions and foreign exchange traders.
In Q4, the Other Tourism business segment (excluding accommodation) achieved a score of 104,4 points, five points lower than forecast but this still indicating a positive sentiment in the industry.
Reflecting on last year’s the key challenges, amongst these being the introduction of new immigration regulations and the Ebola outbreak in several West African countries, the report highlights that 2014 was by no means an easy year for the local travel and tourism industry. Although the nation experienced a dip in businesses performance in the second quarter it is somewhat of a relief to see that the fourth quarter concluded the year on a positive note.
The greatest positive contributing factor towards both Accommodation and Other Tourism businesses for the fourth quarter, is the weak rand exchange rate. Expectations are that the weak exchange rate will continue to have a positive impact on most businesses in both sectors for the next quarter.
The forecast for the first quarter of 2015 is confidently buoyant, with most respondents expecting normal trading conditions. Performance levels for Accommodation and Other Tourism businesses are forecast to reach scores of 101.9 and 102.7 respectively.
Assessing overall performance expectations for the rest of the year, industry outlook on indicators such as employment levels and capacity growth is fairly subdued.
When it comes to employment, the majority of all respondents (79.4% in both Accommodation and Other Tourism businesses) do not expect employment levels to change. A total of 16.8% of respondents expect to see an increase in employment levels and only 3.7% expect to see a decrease.
In terms of capacity growth expectations 75.9% of respondents surveyed do not expect capacity to grow this year.
Respondents were also asked to rate various markets’ potential for growth in 2015, which presented a mixed set of results:
– Almost half of the respondents expect low and significantly low growth in international and domestic meetings, incentives, conferences and events, highlighting a pessimistic outlook for the business tourism industry;
– Expectations for growth in domestic business travellers were high for a total of 40% of respondents
– The majority of respondents expected both foreign and domestic leisure markets to grow in 2015;
– The industry remained neutral with regards to forecasting growth for other markets such as
Reverting back to Q4, most concerning is that, cost of inputs remains the most cited negative contributing factor affecting business performance for the 10th consecutive quarter.
On the other hand, positive influences mentioned include the positive signs that the Ebola outbreak is being contained, greater business demand and lower fuel prices.
Q4 TBI results are on par with the results of other indices. Latest results of the quarterly RMB/BER Business Confidence Index (“RMB/BER”) showed an ‘uptick’ to better than normal business performance in Q4; whilst the SAACI Business Confidence Index (“SAACI BCI”) indicated a weakening general economy for 2014 but with a very slight ‘uptick’ in the last quarter.
Overall, it is pleasing to see the sector remains resilient, as reflected by the TBI results in the last quarter of 2014. TBI will continue to play a vital role in helping us to better understand the environment in which we operate.