South African Tourism on its Strategic Plan and Annual Performance 2012/13

Meeting report

Mr Frank Kilbourn, Chairperson of the Board, SAT, said that South Africa had been achieving tourism growth above the global average. SAT recognised that the world scenario had been changing since the 2009 financial crash, as South Africa’s core market of European travellers had significantly decreased international travel. As a result, SAT was shifting focus to other markets, such as India, China and Brazil. SAT was also increasing efforts throughout Africa by opening regional hubs, as Africa was becoming an important source of tourism to South Africa.

Mr Thulani Nzima, Chief Executive Officer, SAT, said that SAT’s five-year plan contained five different programmes to comply with the National Treasury Annual Resource Plan template. These were:
▪ International Portfolio Marketing to increase international arrivals focusing on regional Africa;
▪ Head Office Marketing aimed to promote global visibility of the South African brand;
▪ Grading of Tourism Products using global best-practice grading systems;
▪ Head Office Financial Support to ensure quality execution of approved business plans and budgets;
▪ Head Office Administrative Support to provide the human resources, systems and structures.

SAT’s main goals were to increase:
▪ international arrivals and reach 12 million arrivals by 2015 and 15 million arrivals by 2020.
▪ domestic tourism from 14.6 million in 2009 to 18 million by 2020 and increase total domestic trips from 30 million to 54 million across the same timespan.
▪ international tourism GDP contribution from R189.4 billion in 2009 to R499 bn by 2020.
▪ domestic tourism GDP contribution from 52% to 60%.
▪ jobs and create 225 000 by 2020 (177 000 from tourism sector; 48 000 via direct government investment).

In terms of growth, SAT was focusing on growing tourist arrivals. For recording purposes, a “tourist arrival” was defined as a tourist spending at least one night in South Africa. A “tourist” was defined as an individual that stayed in South Africa and spent some money, as opposed to a traveller that simply stopped over in South Africa on way to a different destination. South Africa needed to place a greater emphasis on growing regional African tourism, as the average amount spent by African tourists was significant.

Tourism had contributed significantly to South Africa’s GDP (3.0% in 2007 and remaining steady at 3.0% in 2010 with a dip in 2009 at 2.9%). As for job creation, tourism generated 4.2% of jobs in YEAR and was remained steady at 4.3% in 2010. The impact of the economic meltdown was responsible for a lower rate in 2009 of 4.1%, but this figure rebounded in 2010 thanks to the World Cup.

SAT had developed new marketing strategies to improve tourism numbers. As part of SAT’s hub strategy, the hubs for West Africa were Nigeria and Ghana. The hub in East Africa was Kenya, as it was well positioned to serve the Uganda and Tanzania markets. SAT had established a new office in Angola and was currently working to set up another one in Nigeria. Lastly, the Democratic Republic of the Congo (DRC) served the Central Africa markets.

As for domestic tourism, as of 2009 the baseline was 14.6 million South African adults (48%). SAT hoped to increase that number to 16 million by 2015 and to 18 million by 2020. The annual revenue from domestic tourism had dropped slightly from 29.7 million in 2010. This occurred mainly due to the rise in airfare and accommodation prices. However, the number of travelling adults had increased. In terms of encouraging South Africans to travel, numbers were acceptable but there was room for growth.

Africa tourism offered a positive return on investment. The Africa land market was doing very well, making up the bulk of the total foreign direct spend (excluding capital expenditure). The Africa air market was very similar to numbers from the Americas and European markets, both in terms of total revenue and the average amount spent per tourist while in South Africa. Therefore, SAT was correctly directing South Africa’s investment into markets that were yielding increased returns. This was particularly important given that the core European markets were still facing major challenges in terms of tourism.

In an effort to make South Africa a most preferred Tourism Brand by 2014 by obtaining at least a 79% brand awareness, SAT looked at three criteria: brand knowledge, brand journey, and conversion of positive brand awareness to sales. Brand knowledge focused in increasing awareness of South Africa as a tourist destination. Brand journey aimed to convert a potential traveller from mere awareness to choosing South Africa as a future destination. Lastly, conversion of positive brand awareness to sales was complex and required significant investments globally.

In terms of key brand journey metrics, South Africa had room to improve (see presentation slide 24 for a breakdown by country).

Ms In 2011 there were 10 000 association meetings across the world, and 3 500 of those were international meetings. Of the 3 500 international meetings, Africa only hosted 304, and South Africa only hosted 86. This figure put South Africa first in Africa but 57^th in the world. Notably, convention delegates spent more than the average tourist since their employers or academic institutions often picked up some of the expenses. SAT was also working to grow business events activity in all the provinces, not just in the three major cities of Johannesburg, Cape Town, and Durban. SAT aimed to double jobs created from 36 000 in 2012 to 72 000 in 2020. In terms of skills development through international conventions in South Africa, SAT targeted to host 32 000 people by 2020 from the current figure of 16 000 in 2012.

As for SAT’s current budget, R407 million would be spent on international marketing and R40 million on domestic marketing. Overall the total government grant amounted to R753 million for 2012/13 and would increase to R825 million for 2013/14 and to R870 million for 2014/15. Additionally, the Department of Tourism had allocated R258 million to SAT specifically to invest in regional Africa over the next three years. SAT was grateful that the government had recognised the importance of SAT’s investments in regional Africa given its potential for growth. In addition to these funds, SAT received additional funds from Tourism Marketing Levy South Africa (TOMSA), grading fees, sundry revenue and other events, such as Indaba & Meetings Africa. A significant part of the funds were spent on international initiatives (R439 million). The Head Office Marketing was responsible for R275 million in spending, whereas the Head Office Support spent R115 million.

SAT worked with other organisations. For instance, Tourism Business Council of South Africa (TBCSA) and TOMSA help collect levies on SAT’s behalf. SAT held meetings with TBCSA often to share their visions on tourism and align interests. SAT also met regularly with the provincial tourism authorities to align goals, avoid duplication of activities, share budgets, and look for opportunities of collaboration.

SAT had a major interest in hotels and travel agencies represented by Fedhasa, the Association of South African Travel Agents (ASATA) and Southern Africa Tourism Association (SATSA) to share information to ensure goals are also aligned. SAT established a strong working relationship with the Department of International Relations and Cooperation as well as South African embassies overseas to train them on how to support South African tourism during their foreign mission assignments. The goal was to equip the delegations with the skills to spread South Africa’s coverage globally since SAT could not be present everywhere.

Ms Discussion
Mr B Mnguni (ANC) asked how SAT was promoting tourism to rural areas. He asked for SAT’s opinion on devising a funding scheme commensurate to the revenue each province generated, that is, the more revenue a province generated, the more it would receive. When promoting South Africa abroad, did SAT place staff in particular countries or did it use South African embassies and High Commissioners? Did SAT promote hunting tourism in the rural areas? And how did it affect the tourism industry when accommodations doubled or tripled their prices during high travel seasons?

Mr K Sinclair (COPE) asked whether SAT had any plans for using South Africa as a base for cruise liners, as this seemed to be a strong market that benefitted tourism in many countries around the world. He then emphasised that SAT must present a holistic South African approach when marketing internationally, while provincial tourism initiatives abroad must be secondary. Domestic tourism initiatives should focus more heavily on provincial tourism since there were so many local histories that South Africans were unaware of. Regarding the shocking high cost of domestic flights, was there anything SAT could do? He requested SAT to comment on South African Airways (SAA) notoriously poor service and its effects on the tourism industry.

Ms B Abrahams (DA) said that historical sites needed to be marketed in rural areas. In terms of skills development, what skill was SAT developing and who was benefitting? As for universal grading, she highlighted that many places have certification plaques but, in fact, failed to provide adequate access for disabled people (such as not enough bathroom space for a wheelchair). Therefore, who conducted the grading? She recommended SAT employ disabled people to conduct the verifications.

Mr F Adams (ANC) asked whether SAT had any plans to shift its focus from the core market in Europe toward the other BRICS (Brazil, Russia, India, China). He asked if SAT had any initiatives in educational or medical tourism (that is, tourism targeted to families that were accompanying patients receiving treatment in South Africa). Lastly, was there anything SAT could do to encourage cooperation and lessen the bickering surrounding the SAA rumoured decision to stop the route between London and Cape Town?

Mr D Gamede (ANC) asked how SAT monitored the quality of service in their grading responsibilities, since hotels often moved things around when they expected visits from the grading council. Since the start of the Pan-African Parliament, Members tended to come with families but had difficulties obtaining visas. Was there a way to address this issue, given its potential for positively impacting South African tourism? Given that countries like Russia and China used history as a driving force behind their tourist attractions, was SAT using South African history and heritage to attract tourists? Lastly, was SAT working on any niche areas of tourism?

In an effort to more effectively target and market ad campaigns, SAT was working to determine what factors influenced tourists’ decision-making process when selecting their travel destinations.

As for funding, the more money that was assigned to SAT, the more money that would be invested in tourism. SAT had always lobbied for more funding because of the transformative power of tourism. The best strategy was to lead by example.

Regarding SAA’s poor service quality, SAT understood that there was an important strategic link between the growth of tourism and a well-established airline. SAT’s mandate would be well supported with a well-rounded, competitive airline. And the government must give the airlines the tools to compete. In terms of the flights to and from London Heathrow, SAT of course was disappointed to hear about the decision to cancel the SAA Cape Town-London routes. At the same time, SAA’s decision was understandable when considering the economic rationale behind the decision.

On the question about cruise liners and niche markets, it was difficult to decide which niches to promote. Provinces had the competitive advantage to find these niche areas. For instance, last year SAT supported and worked very closely with the Northern Cape when it held an extreme sports event. It would not be feasible for SAT to promote 115 specialist events; thus, niche markets were better initiated from a level below SAT. The SAT could then assist in a supporting role such as by offering platforms and financial support, and attracting international media attention.

Regarding the expansion of South African tourism in the BRICS countries, SAT had expanded promotion in Brazil and would further leverage this link throughout the 2014 Soccer World Cup. Numbers had also improved in India, where 24% planned to visit South Africa within the next 18 months even though only 64% actually knew about South Africa (see presentation slide 24). Additionally a new flight to China would generate additional business from China. Russia was not currently on SAT’s radar since it took several flights and long travel times to and from South Africa.

Ms Kunene aid that SAT reviewed the Universal Accessibility (UA) grading policy and decided to include a new set of criteria, which was developed in consultation with the South Africa Disability Association (SADA). The assessors responsible for conducting the grading were trained by experts in the field. SAT had found that there were a lot of experts in the field working independently and giving poor advice. This explained many of the complaints received for inadequate access for the disabled.

SAT recognised the presence of unscrupulous establishments throughout the country that attempted to contravene the grading system by, for instance, moving furniture around. In response, SAT had terminated the grading of several establishments and would continue to do so in the future when notified of such violations. She then urged the committee to forward any complaints received for poor accessibility so that SAT could more effectively ensure compliance.

SAT’s domestic tourism strategy aimed to promote tourism by South Africans and work to ensure South Africans shared their experiences with others. Most South Africans had difficulty identifying the top two tourist attractions in each province. Achieving this collective agreement on each province’s top two attractions would help create a snowball effect via word mouth that would further promote tourism outside of the major cities.

SAT had the responsibility to market South African provinces internationally, and there were certain events where SAT supported tourism initiatives by the provinces, such as in the World Travel Market. However, internationally, the strategy was very clear to promote South Africa first above the provinces. Provincial tourism initiatives internationally were always secondary to the South African brand.

South Africa had not achieved the type of image, iconic association that came to everyone’s minds when they thought of very touristy countries such as France, England, or Australia. In order to compete internationally, South Africa needed to create such an image in people’s minds.

Adding to previous comments on niche markets, SAT had been working on different initiatives to leverage medical tourism as well as religious tourism.

Regarding the high price increases during popular events or seasons of high travel, all the parties at play needed to understand that they should be working cohesively to promote South African tourism in general. The goal was to retain tourists for longer periods of time so they could spend more money and travel to more places within South Africa.

SAT engaged in brand checking when trying to determine why people decided to come to South Africa. For instance, affordability and service were two areas that rated highly when tourists decided to visit South Africa. Failure to deliver in these areas negatively impacted South African tourism. SAT continually engaged with the entities at play on a one-to-one basis because tourism was a collaborative process and success required the entire industry to work together and perform well.

The Department of International Relations and Cooperation (DIRCO) had indicated it did not know enough about tourism to train ambassadors before deployment. SAT was collaborating with DIRCO to share knowledge and experience where possible, and there was no confusion or conflict between the two entities. Both recognised that collaboration reduced costs and fostered better understanding. DIRCO currently helped SAT with intelligence in the different international markets.

Ms Aneme Malan, DDG: International Tourism Management, National Department of Tourism (NDT), said that the National Treasury was revisiting the budget structure between national and provincial allocations. Regarding DIRCO, with the establishment of the new international tourism branch in the NDT, the NDT was working very closely with DIRCO as they recognised that tourism was a key aspect of South Africa’s international relations strategy.

Meeting adjourned.