Marketing Investment Framework (MIF) and econometrics study with Oxford University: SA Tourism briefing

Meeting report

Briefing by SA Tourism on its Marketing Investment Framework (MIF) and the econometrics study with Oxford University
The SA Tourism delegation comprised of Mr Sisa Ntshona Chief Executive Officer (CEO), Ms Sthembiso Dlamini, Chief Operating Officer (COO); Mr Tom Bouwer, Chief Financial Officer (CFO, Ms Margie Whitehouse Chief Marketing Officer; and Mr Wavela Mthobeli, Senior Researcher. Members of SA Tourism’s Board also in attendance were Ms Michelle Constant, Ms Judi Nwokedi and Mr Enver Duminy.
Mr Ntshona undertook the briefing.

SA Tourism had created a marketing investment strategy informed by an investment framework to achieve its 5-in-5 national tourism target, which aimed to add five million high value tourist trips within five years i.e. by 2021. The five million trips comprised of four million additional international tourist arrivals and one million extra domestic holiday trips. Domestic and international tourism was currently a R100bn a year industry for SA, with R26.5bn in total domestic direct spend in 2016 and R75.5bn in total foreign direct spend. The figures represented more than a 10% increase in tourist spend compared to the previous year. This would drive a combined annual spend on tourism to reach R142bn by 2021. Once the 5-in-5 target was determined it was necessary to develop a framework to map out how SA Tourism was to achieve this goal. Before embarking on the process of crafting a Marketing Investment Framework (MIF) and a Marketing Investment Strategy, SA Tourism made use of the sophisticated TDM (Tourism Decision Metrics) system developed by Oxford Econometrics. The model forecasted tourism demand for 190 countries. It estimated that there would be 1.5bn people travelling around the world in 2021. Of this number, the Oxford model estimated that SA’s share of global tourism would be 12.7m arrivals by 2021 if current levels of marketing investment were maintained. Using the Oxford model’s figure of 12.7m as a baseline SA Tourism decided to increase the figure to 14m. The envisaged MIF would therefore be the tool that would map out how to boost tourist numbers beyond the Oxford model’s baseline figure.

SA Tourism had engaged in extensive consultation with stakeholders on how best to achieve its 5-in-5 target. Taking into account contributions from stakeholders, the MIF was developed to map out how to achieve the 5-in-5 target by 2021. The MIF allowed SA Tourism to select the markets that it should focus on based on the potential of markets, SA’s ability to ‘win’ in the market and also to take into consideration the cost of acquisition per tourist from the source market. In total 29 “core” markets had been identified for dedicated in-market marketing investments. The MIF was used to develop optimal budget allocation scenarios based on SA Tourism’s organisational goals and national priorities. However, crucial issues to consider were supply and demand. Should demand for visiting SA be increased would the supply of tourism products such as accommodation be able to cope with the increase? Other possible barriers to achieving higher tourist numbers included the availability of air routes and flights, capacity of existing transport and infrastructure, personal safety issues as well as uncertainty regarding SA’s political climate. The current situation for SA Tourism was that it’s was targeting a potential global market of 2.9m air arrivals with a budget of R1bn per annum. Additional budgetary allocations by National Treasury allowed SA to invest in strategic markets like Nordics, Middle East and South-East Asia.

Possible scenarios emanating from the MIF were presented to Members. The first scenario spoke about investing an additional R240m on air markets which could lead to international tourist figures per annum increasing by 355 000 minimum. This translated into R6.bn in total revenue generated. The second scenario spoke to supply side air capacity which said that with an additional investment of R2.6bn an extra 6.5m extra arrivals could be achieved. Currently SA’s international airports could accommodate 11m passengers per annum. The third scenario covered supply side accommodation. It spoke to an additional investment of R850m that was required to bring an additional 2.1m tourists into SA to fill the 19.7m rooms that were available per annum. SA Tourism felt the third scenario to be the optimal one of the three to unlock the highest potential.

The MIF as a tool showed that even a modest increase in resource allocation could have a far reaching impact and could contribute towards fostering inclusive growth and transformation of the economy.
 
Discussion
Mr G Krumbock (DA) had interjected the briefing at one stage as Members were unable to tie in what was being stated with the briefing documents that were handed out.

Mr J Vos (DA) stated that Members needed the personal notes of Mr Ntshona.

The Chairperson agreed with the sentiments expressed by Members, and asked that Members be given copies of Mr Ntshona’s personal notes.

The notes were provided to Members whilst the briefing was ongoing.

Mr Krumbock stated that what was presented to the Committee was a model to explain the context. What he did not see was the ideal budgeting amount? SA was a country with historical legacies i.e. Apartheid etc. However, of importance was the R6.2bn return on investment information that was not provided to the Committee. The argument was that if the extra amount of funds had to be spent then it should generate an equal amount in tax revenue. If so much tax could be generated on money that was spent then it was worth the while to spend it. He asked what the information provided was really telling the Committee. What was the optimal budget spend figure?

Mr Ntshona explained that with all the models there were assumptions. It could be that everything stayed as it was. There was the assumption that every place in SA was as attractive as any other place, not taking into account geographic spread. A stress test was done with the industry itself. On air markets if a minimum of R240m was additionally invested then it could generate a minimum of 355 000 additional tourists per year. This in turn could translate into R6bn in expenditure with R2bn being generated in tax revenue. SA Tourism was still on a journey in getting equitable geographic spread.  

The Chairperson asked what had come out of discussions with National Treasury. Had SA Tourism received funds from National Treasury?

Ms Whitehouse said SA Tourism had been interacting with National Treasury. Additional funds had been received from National Treasury. A total of R174m had been received over the next three years. National Treasury could see that there was a possibility of a good return on investment. National Treasury was apologetic about not being able to provide more funds. There were great opportunities foreseen in the Nordic region.
Mr Wavela Mthombeli, Senior Reseracher, SA Tourism, added that the point was that tourists were coming to SA due to the spending efforts of SA Tourism.
Mr Krumbock pointed out that the figures showed that there were massive opportunities. SA Tourism needed to be more aggressive in its efforts, why was SA Tourism so cautious? There was a total of R174m in dedicated funds for the Nordic region. The Nordic exercise could be used as a case study where return on investment was calculated. There were empirical tools in place to do this type of modelling.

Mr Ntshona responded that SA Tourism was excited but that it preferred to move with caution. SA Tourism had a new operations model. SA Tourism wished to ensure that it imbedded the operations model properly. Having said this SA Tourism was doing its best to recruit the right people for the organisation. Funds could not be spent if the right people were not in place. SA Tourism intended to build the confidence of its stakeholders.

The Chairperson asked SA Tourism to provide something in written form in terms of what it had as a formal proposal. This would allow the Committee to support and assist SA Tourism by way of perhaps making recommendations in its Budgetary Review Recommendations Report (BRRR).

Ms E Masehela (ANC) said it seemed as if there was light at the end of the tunnel but she was concerned about domestic tourism. During the briefing, nothing had been said about domestic tourism. A way needed to be found to include domestic tourism. Boosting domestic tourism would create more jobs.

Mr Ntshona pointed out that domestic tourism was key and that it was part and parcel of SA Tourism’s deliverables. Domestic tourism had been resourced. A robust domestic tourism sector was needed in order for business to succeed.

Mr J Vos (DA) understood that a review of the Tourism Grading Council of SA (TGCSA) had taken place. There were thus new grading criteria and incentives etc. Ministerial approval was still awaited. He asked when SA Tourism intended to present the new grading criteria and incentives to the Committee.
The Committee had received information on the “We do Tourism” campaign by way of a flash disk. When he had visited various municipalities none of them were aware of the “We do Tourism” campaign. He had provided the information on the flash disk to them. He was concerned that somewhere there seemed to be a disconnect. Why were municipalities unaware of the campaign? He suggested that SA Tourism undertake a road-show on the campaign. The campaign should form part of the branding of municipalities. What connection was there between the “We do Tourism” campaign and domestic tourism?

Mr Ntshona, on the “We do Tourism” campaign, said that SA Tourism had just embarked on a six-week road-show. SA Tourism had engaged with provincial tourism authorities. The five million tourists within five years goal were broken down in each of the provinces. Each province had to do its part towards meeting the goal. There were performance agreements in place.SA Tourism used a cascading effect. The provincial tourism authorities were the entry points for SA Tourism. However, provinces differed in their levels of advancement. Delivery was done by the provincial tourism authorities. Provinces could now focus on the supply side. Ownership had to rest with the provinces. He pointed out that grading should not be a barrier but rather be an enabler. SA Tourism was using the TGCSA as a transformation driver. It was about how to make a bed and breakfast in SA accessible to a German tourist. There was a Provincial Master Assessor in provinces. The review of the TGCSA had been approved by the SA Tourism Board.

Ms Dlamini explained that the Minister of Tourism needed to sign off on changes to systems. The new grading criteria could be presented to the Committee. There was no need for the new criteria to be signed off. 

The Chairperson pointed out that the Committee undertook oversight visits to municipalities. Municipalities were after all where tourism took place. Some municipalities had good attractions but nobody was aware of them. She asked Dr Sibusiso Khuzwayo, the Committee’s Content Adviser, if he had anything to add.

Dr Khuzwayo stated that most of his concerns had been covered by Mr Krumbock. He felt that the briefing did not actually speak to what was optimally needed to market SA. However, the additional documentation to be provided to the Committee would assist. The Committee would be engaging with National Treasury and the Parliamentary Budgetary Office so as to unlock SA Tourism’s budgetary constraints. He reiterated that SA Tourism should provide the Committee with a formal proposal which could be forwarded to the Parliamentary Budgetary Office.

Mr Ntshona assured the Committee that a formal proposal would be forwarded to the Committee.

The Chairperson asked how comfortable SA Tourism was that the Department of Home Affairs (DHA) was doing what it should be doing to assist tourism.

Mr Ntshona said SA Tourism had sat down with the Minister of Tourism and the responsible Deputy Director General from the National Department of Tourism over the interaction with the Department of Home Affairs. There was an inter-ministerial committee in place. The DHA had supported “We do Tourism”. Alignment and coordination in government itself was important. At the last Cabinet lekgotla the intention was to bring the “We do Tourism” campaign to each government department and state-owned entity etc. SA Tourism would do activations. There were concerns around problems that had cropped up at OR Tambo International Airport about passengers being followed home and being robbed. However, a great deal of work being done behind the scenes.

Ms Constant stated that when the five million tourists in five years goal had come about SA Tourism had gone audacious. She felt that in the current climate this was perhaps the way forward. Tourism could contribute greatly towards the Gross Domestic Product. It was really about public-private partnerships.

Mr Duminy on the TGCSA and criteria for transformation stated that the TGCSA also looked at the employment side of transformation as well, by employing more female assessors.

Ms Nwokedi noted the importance of SA Tourism’s institutional change tying in with its vision. SA Tourism’s staff complement had to be readjusted to drive the vision. Cuba was a case in point of a success of domestic tourism. Cuba had a greater number of international tourists than SA. It had made a success of tourism notwithstanding the blockade. Yet Cuba was by no means a modern country.   

The meeting was adjourned.