How does country’s junk status affect tourism?

While stakeholders in the tourism industry are concerned about the potential negative impacts of the recent junk status rating of our economy by two ratings agencies, they agree that it’s too early to gauge the impact on the sector.

While the number of visitors over the summer season have been high, Janine Myburgh, president of the Cape Chamber of Commerce and Industry, said it was too early to tell what impact political instability could have on the sector.

“Although a weaker rand is a boon for tourists on the dollar, euro and pound, the downgrading will have a negative knock-on effect for the tourism sector where operating costs will increase. Whether the latter will overshadow the former, we do not know,” she said.

The major costs to the sector as a result of the downgrades, she added, would be the operating costs.

“Everything we import will cost more. That means more expensive petrol, medicines, clothes and food. These higher prices will work their way through the economy so it will affect virtually all input costs that affect tourism – from food to fuel.

“Although South Africa is a unique country, we still need to compete internationally on price, and with operational costs going up, this could erode our competitive advantage.”

Ms Myburgh added: “The average stay of foreign tourists is four days, and we have unconfirmed reports that although tourism figures are up, the retail spend by these tourists is down. The challenge is to get the tourists to increase their daily spend beyond just visiting the major attractions.”

Cape Town Tourism CEO Enver Duminy agreed that it was too early to tell what impact the downgrades might have.

“This may lead to a season of belt-tightening for local operators, however, tourism professionals are known for their creativity, and we’re certain that ways will be found to present excellent tourism offerings that will allow them to remain profitable and to retain jobs.

“For visitors, this may result in taking a different approach to planning holidays, such as avoiding international travel and enjoying domestic travel or even ‘stay-cation’, so while spend may be curtailed, there will still be room for leisure travel.”

Mr Duminy added that business travellers may look at ways of limiting expenses, although this has already been the case in the interests of good corporate governance.

He said that they would also encourage tourism operators to bear in mind the constraints on the domestic market, and to look at ways of making a stay in Cape Town more affordable for them. “It’s too early to tell what impact there will be for local tourists.

“We may find that they have less disposable income available owing to the inflationary impact of the downgrade. However, we encourage them to do thorough research before they travel to Cape Town so that they can identify periods when there will be lower rates, such as during the winter months when many establishments advertise special rates, and to take advantage of special packages on offer.”

Mr Duminy added that although they were still waiting for the final figures from the summer season, by all accounts 2017 would challenge previous years’ records in terms of the number of visitors. “The Airports Company South Africa (ACSA) provides an excellent indication of international arrivals, while domestic travel has also been high, considering occupancy rates at hotels and other places of accommodation. Overall, preliminary reports indicate modest, yet healthy, growth.”

He added that the tourism industry was crucial to the local economy. “The tourism sector is essential to the local economy, employing at least 38 000 people directly in full-time positions and roles.”

Emma King, the spokeswoman for the V&A Waterfront, said it was hard to tell what the longer term effects will be at this stage. “We have to sit tight, wait and see. We have come off the back of a bumper tourist season, and we have no reason to doubt that incoming travel will decrease in the next year or so, especially if the rand continues to perform weakly against foreign currencies, continuing to make South Africa an attractive destination for those traveling on stronger currencies.”

She said at the beginning of 2016, when the rand was very weak, the Waterfront saw a big upswing in its retail numbers over the summer season, driven by foreign visitors, especially in the jewellery and luxury sectors, where local traders were getting extremely good deals on items that would have been much more expensive in other countries.“So we may see this again, although this is likely to be offset by much less domestic travel and weaker spending power by locals as the longer terms effects of junk status start to push up the prices on essentials.”

Osman Shaboodien, chairperson of the Bo-Kaap Civic and Ratepayers’ Association, said tourism was a very important part of the fabric of the area.

However, he wasn’t worried about the potentially negative effects the downgrades could have, saying that a weaker rand would, in fact, attract more tourists.

“From a community perspective, we are all concerned about the downgrades, but South Africa has good infrastructure and the (sector) should not be too affected.

“Operating costs may increase but this doesn’t mean that the number of tourists will come down. Tourism is vital because it is one of the few sectors in the economy that has created significant jobs.”

Mr Shaboodien added that the sector needed transformation which would see communities directly benefiting from tourism.