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Electricity hikes big concern for tourism sector

May 01 2016 19:00

Pretoria - Notwithstanding the rising inflation and slow economic growth, overall business performance levels in South Africa’s travel and tourism sector have remained steady in the first quarter of 2016.

This is according to the latest results of the latest Tourism Business Index (TBI) of the Tourism Business Council of SA (TBCSA).

The report shows that businesses in the tourism sector experienced almost normal business performance levels in the first quarter of 2016, recording an index score of 97.8, slightly below the score of 100, which would indicate normal performance levels.

Although there was a small decline in performance compared to the fourth quarter of 2015, businesses in the sector performed closer to normal levels in this quarter, buoyed by strong performance in the accommodation sector, according to the report.

First quarter performance levels came in higher than expected in the accommodation segment. This is one of the strongest performances for this segment, only surpassed previously in the first quarter of 2013.

In contrast, the other tourism businesses segment recorded lower than normal business performance levels.

Commenting on the outcomes of the report, TBCSA CEO Mmatšatši Ramawela said it is clear from the results that businesses, particularly in other tourism sectors, are facing pressures in the operating environment.

However, she emphasised that overall, the travel and tourism still faired far better than other economic sectors in the first quarter of the year.

“This is the second lowest first quarter TBI score recorded since 2011, but when we compare our results with other recognised economic indices in the country, it is quite apparent that travel and tourism remains far more resilient which is very comforting and encouraging,” said Ramawela.

The rising cost of electricity is one of the factors pushing up the overall cost of inputs in the tourism business sector, according to Gillian Saunders, head of advisory services at Grant Thornton.

“Businesses in the sector are mindful of this and many have indicated that extensive plans are being implemented to become more energy efficient. With the latest 9.4% electricity tariff coming into effect from the beginning of April, the timing couldn’t have been better.”

The accommodation segment, also cited the cost of labour (40%) and insufficient domestic leisure demand (32%) as other key factors contributing negatively to performance. Meanwhile, other tourism businesses segment cited the impact of competitor market behaviour (58%) and the cost of finance (44%) as contributing factors.

From an inbound tourism perspective, strong overseas leisure demand and the weak exchange rate remain the most prominent positive contributing factors.

“We welcome the positive results seen in the accommodation sector, as also highlighted in Stats SA’s Tourist Accommodation report for January”, says Tshifhiwa Tshivhengwa, CEO of the Federated Hospitality Association of South Africa (Fedhasa).

“We believe there is still scope for travel and tourism to grow and for occupancies to increase going forward. However, given the rise in food inflation and adjustments in corporate and Government travel spend amongst other issues, we remain cautious going into the next quarter.”

Ramawela said business is understandably not so bullish in its overall outlook for the second quarter.

“At a domestic level the combination of various factors such the emergence of above-inflation food and vehicle price increases, the impact of the drought, uncertainty ahead of the local government elections, upcoming rating agency results and the tumultuous political and socio-economic environment, are all likely to continue weighing heavily on the economy and business sentiment," she said.

"Business performance will be affected somehow but, we are a resilient sector. We will continue to do all we can to boost tourism arrivals to drive growth in our sector and the overall economy.”

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travel and leissure  |  tourism

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