Local industry hopes for a better year

Johannesburg – A better year may be in the offing for the local tourism industry, but industry players warn that it's too soon to celebrate a turnaround.

The Tourism Business Council of South Africa (TBCSA) and First National Bank’s Tourism Business Index (TBI) published last week shows that the industry’s performance for the fourth quarter of last year not only exceeded expectations, but was also significantly better than in previous quarters.

According to the fourth-quarter index the accommodation sector – which in the wake of the World Cup soccer tournament suffered low occupancies, high input costs, closures and consolidation – also showed sharp improvement.

The index uses 100 points as a base. This is defined as normal business performance at a certain period. From the first quarter of last year the index systematically declined to settle at 70 index points in the third quarter, but in the fourth quarter it shot up to 87.3 index points and is expected to reach 82.2.

The index was compiled by processing the responses of 119 respondents in industry.

According to Gillian Saunders, head of advisory services at Grant Thornton and the compiler of the index, the upturn in the index in the last quarter was not caused by seasonal factors, as these are effectively remove from the index.

Saunders says the reason probably lies in the expectations of tourism businesses for the first quarter, and this figure indicates that the industry does not expect as sharp an increase in business activity.

Prospects are better than they were early last year, but the index does not clearly show that the industry is entering an upturn, she says.

Saunders says there are indications that the industry will do better this year than last year, but uncertainty around the European debt situation and its impact, in particular, make it difficult to do any forecasting.

According to TBCSA chief executive Mmatšatši Marobe, the latest index is a sign that the industry is slowly heading for recovery as far as general performance and tourist movements are concerned. Marobe reckons that because of the seasonal nature of the travel and tourism sector the industry is cautious in expecting these strains to persist in the first quarter of the year.

City Lodge chief executive Clifford Ross says the fourth quarter of last year certainly showed signs of the industry already having touched bottom. Occupancies, compared with the previous two years, showed signs of stabilising.

He believes that before any predictions can be made about an upturn, it is necessary to see what happens in the first two months of this year.

Ross says there is still an oversupply of hotel rooms. He does not expect the upturn to be rapid or strong, but to take place gradually. He believes it will take time for the new hotel rooms to be absorbed into occupancy figures.

He hopes that 2012 will show moderate growth for the industry, compared with last year. But he does warn that it will take another two to three years to match the 2007 and 2008 occupancy figures.

The uncertain economic situation will probably be the accommodation industry's biggest challenge, says Ross. Most companies assess their processes and programmes according to what happens in the economy.

Michael Tatalias, chief executive of the Tourism Services Association (Satsa), also does not believe that the sharp rise in the index points to a turnaround in the tourism market. He considers it rather an indication that the market has stabilised.

It's also an indication that larger businesses in the hotel, conference, car-hire and airline industry have eventually experienced increasing expenditure by corporates.

Tatalias says that although there is not an influx of travellers, government and corporates have again begun to travel. But the focus is still on value for money.

He said 2011 was a difficult year following the soccer tournament, and corporates had reined in their spending to ensure they remained profitable. Large businesses are certainly regaining their business confidence. Small businesses are still behind the curve, he says.