Fuelling the fires of the tourism economy

Source: Biz Community, 22/10/2018

Behind the scenes in tourism, an epic struggle is taking place: for
industry professionals, the rising costs of fuel and other commodities
are putting pressure on their businesses. Besides the challenge in
business, locals are also finding it harder to budget for travel for
the same reasons. The rand has been on a rollercoaster in 2018,
leaving the entire economy in a precarious situation.


The tourism industry is no holiday

The economic stimulus package presented by President Ramaphosa sounds
like it has potential, with tourism also garnering attention, but the
concept of tourism isn’t an abstract one. Although some may consider
it to be all about taking a break and chilling at the beach or in the
wilderness, the entire sector is inextricably interwoven with the
entire economy, with sectors as disparate as retail and even
construction linked to it. Add to that supply chains and the stifling
increase in commodities, vat, fuel from a supplier (industry) point of
view, weighing the cost of doing business against a demand from the
consumers who are also under pressure becomes problematic. Do tourism
businesses add to the challenge consumers face and risk haemorrhaging
more visitors?

Domestic tourism decline has been the biggest reason for the recent
downturn in tourism numbers recently, the industry is on tenterhooks
ahead of High Season, a period that traditionally enabled tourism
businesses to balance their books and push ahead into the following year.
South Africa is running on empty

According to Bloomberg, South Africa’s other economic issues meant it
is now one of the most expensive places in the world to be a motorist,
stating that this challenge is exacerbated by how little income locals
earn, and that we now spend more of our pay cheques filling up than
any other nation except Mexico. Supply constraints from the
Organization of the Petroleum Exporting Countries (OPEC), Venezuela`s
current political crisis, and renewed tensions between the US and Iran
are behind the metaphorical “sneeze” that is giving South Africa a
cold, bearing in mind that we are a net importer of fuel.

In the interim, there don’t appear to be many solutions. The choices
are to bite the bullet and continue travelling or to remain at home
and to enjoy exploring locally �` a staycation. Travellers can make use
of value-added offerings such as loyalty programmes �` indeed, some
loyalty programmes are directly linked to fuel �` and tourism
businesses would do well to consider such value-adds that don’t
negatively impact profit margins.

According to Stats SA, locals do prioritise travel, even during a
recession, so this is a hint that we will continue to see tourism
taking place. The exchange rate is likely to put pressure on locals to
travel locally rather than internationally to stretch their holiday
bucks further, and the exchange rate remains favourable to
international visitors.

Those who feel the rising costs of doing business most are the ones
we’re looking to for job creation: SMEs run by entrepreneurs. It’s no
secret that these businesses are under immense financial constraints,
particularly in their early phase. These SMEs need to navigate their
finances carefully and to take into account that there will be
negative influences on their cash flow, or risk running out of money
and having to close shop. The president is looking to tourism for
increased contributions to the GDP and to the pool of jobs available,
and he’s aware that SMEs will be the environment that most facilitates
both of those hopes coming to fruition, but it’s not enough to sit
back and hope the plan works itself out.
Sharing the load, adding value

Tourism businesses, whether SMEs or large enterprise ones, need
economic sandbagging at this time, with support from government. We
need to collaborate, partner and support one another �` perhaps we can
offset costs by sharing the load and adding value for visitors in this
way, offering more experiences.

Not everyone can be an economist or an astute financial manager, but
this is always a factor in weighing up a strategy that leads to
profitability. The tourism professional must add this to a portfolio
of skills to survive the lean times.

We believe that this sector is resilient enough to push through and
achieve steady growth, and that visitors will continue to regard our
attractions and experiences as world class, let’s ensure that we
endure and press ahead despite the many challenges faced.