SA Tourism briefed the Committee on its Quarter 1 Performance Report 2017/18
Programme 1: Corporate Support: on vacancies the annual target was 7%. Progress to date was that SA Tourism had a vacancy rate of 15.8% due to the deferral on the filling of positions pending the finalisation of the SA Tourism organisational review process. With the annual target being to obtain an unqualified audit report, the Quarter 1 target of having annual financial statements, the Annual Performance Information report and the Corporate Governance report submitted to the Office of the Auditor General of SA, National Treasury and the National Department of Tourism on the 31 May 2017 had been done.
Programme 2: Business Enablement: On stakeholder satisfaction scoring the Quarter 1 target had been achieved with the stakeholder satisfaction survey being conducted in June and July of 2017 in order to determine a baseline score. The base line was set at 3.9. On the approval of a Tourism Growth Strategy the Quarter 1 target of coming up with a draft had been achieved with the Draft Tourism Growth Strategy being completed and approved by SA Tourism’s Exco. Board approval at the Board Lekgotla in September 2017 had been awaited.
Programme 3: Leisure Tourism Marketing: On international tourist arrival figures Members were provided with figures on both financial and calendar years. The Quarter 1 target in terms of calendar year was 2.7m with actual performance sitting at 2.6m. In terms of financial year, the Quarter 1 target was 2.5m with the actual figure being 2.4m. There were various reasons for the deviation one of them being that there was an 8.4% decline in Africa land markets.
Programme 4: Business Events: On the number of business events hosted in SA, the annual target was 145. However, the annual target was not yet due for reporting. SA Tourism tracked business events hosted and recorded 38 business events hosted. On the number of bids supported for international and regional business events the Quarter 1 target of 16 had been surpassed with the figure achieved being 26. The Quarter 1 target of hosting a Tourism Indaba had been achieved.
Programme 5: Tourist Experience: On the number of graded accommodation establishments achieved the Quarter 1 target was 1 376, actual achievement sat at 1 190. On the number of graded rooms achieved the Quarter 1 target was 29 888 the actual figure achieved was 27 294. The targets were not achieved due to 320 cancellations of establishments in Quarter 1. Of the 320 establishments that had cancelled 20 had been hotels. Three of the larger hotel groups had subsequently reapplied for grading.
The Committee was provided with insight into the financial performance of SA Tourism. For Quarter 1 total expenditure sat at 32%.
Members were concerned about grading not meeting some of its targets. What was the impact of the Tourism Indaba? SA Tourism was asked whether it was growing, static or regressing. Members pointed out that the recent mass shooting in Las Vegas that had made headlines the world over had not deterred tourists from going to Las Vegas. The apparently plausible explanation was that the gunman had not targeted tourists but had targeted locals. Members appreciated the efforts of SA Tourism in improving the South African brand in Australia. The concern however was whether there was value for money on the money spent down under. The issue was that some people abroad perceived SA to be a failed state. When people immigrated to places like Australia it was only human for them to convince themselves that they had done the correct thing to leave SA, hence the bad rhetoric on SA being spread by them. Members were not convinced that the limited budget of SA Tourism would be effective enough to change the emotional need for expats to feel this way. Could the level of negativity being spread about SA be measured? Members emphasised the need for tourists to first-hand experience SA for themselves. The point was to get tourists to SA.
Members raised concerns about certain towns and cities in SA becoming filthier by the day. This was a turnoff to tourists. A filthy city was a huge brand risk. City cleaning being a competency of local government, SA Tourism was asked whether it had raised the issue with the Department of Cooperative Governance and Traditional Affairs. Members felt that the National Department of Tourism also needed to be taken on board. On domestic tourism, Members were concerned about the drop in the number of domestic trips. Locals needed to be urged to travel. SA Tourism was asked whether it had considered charging South Africans discounted rates. Members asked whether an analysis had been done on what might be achieved if price differentiation was done. Given that visiting friends and relatives’ figures had dropped, SA Tourism was asked how it measured visiting friends and relatives.
Members were concerned about big business pulling out of the grading system. Did business not appreciate the importance of grading? SA Tourism was asked whether there were alternatives to grading that businesses were gravitating towards. Members appreciated SA Tourism’s efforts on providing grading support. Members asked whether SA Tourism had an internship programme and why it only had one internship. Members felt that establishments who were illegally using star grading plaques should be penalised. SA Tourism was asked what impact webinars had on tourism. To what extent was Airbnb encouraging people to use its establishments. Given the planned amendments to the Tourism Act, SA Tourism was asked how Airbnb would be regulated. Members urged SA Tourism not to over plan. Members also asked what impact the Cape Town Jazz Festival had on the South African economy. Were hotels like the Hilton graded or did they brand themselves?
The Chairperson highlighted the importance on annual performance plans. SA Tourism was congratulated on achieving an unqualified audit report. The Chairperson made special mention of Mr G Krumbock (DA) being the stalwart of the Committee.
Briefing by SA Tourism on its Quarter 1 Performance Report 2017/18
The delegation comprised of Mr Sisa Ntshona Chief Executive Officer (CEO); Ms Nombulelo Guliwe, General Manager: Finance; and Mr Darryl Erasmus, Chief Quality Assurance Officer Tourism Grading Council of SA (TGCSA). Mr Ntshona duly assisted by his colleagues kicked off the briefing.
The Report before the Committee covered reporting in both financial and calendar years. The “We Do Tourism” Campaign was doing well.SA Tourism was starting to feel the fiscal pressure given the expectations from tourism. Negative incidents were treated differently in different parts of the world. For example, the recent mass shooting of people in Las Vegas had not affected tourist figures. Las Vegas was jam packed after the incident. If it had happened in SA tourist numbers would have dropped. Not too long ago Dutch tourists had been attacked and robbed in SA. SA Tourism expected to see a drop in tourist figures from the Netherlands, Germany and from China as well.
For Quarter 1 the fiscal environment was quite constrained. Unemployment continued to rise growing to 27.17%, leaving consumers cash strapped even though Gross Domestic Product (GDP) had grown by 2.5% quarter on quarter which was primarily driven by a 30% growth in the agricultural sector. Travel was not a priority for South Africans. To make matters worse, expatriates from SA that had immigrated to Australia were bad mouthing SA.
The briefing continued with Quarter 1 performance information as per Programme. There were, however instances where quarterly targets were not applicable and annual targets were provided.
Programme 1: Corporate Support
On vacancies, the annual target was 7%. Progress to date was that SA Tourism had a vacancy rate of 15.8% due to the deferral on the filling of positions pending the finalisation of the SA Tourism organisational review process. With the annual target being to obtain an unqualified audit report, the Quarter 1 target of having annual financial statements, the Annual Performance Information report and the Corporate Governance Report submitted to the Office of the Auditor General of SA (AGSA), National Treasury and the National Department of Tourism (NDT) on the 31 May 2017 had been done. This was in line with statutory requirements.
Programme 2: Business Enablement
On stakeholder satisfaction scoring the Quarter 1 target had been achieved with the stakeholder satisfaction survey being conducted in June and July of 2017 in order to determine a baseline score. The base line was set at 3.9. On the approval of a Tourism Growth Strategy the Quarter 1 target of coming up with a draft had been achieved with the Draft Tourism Growth Strategy being completed and approved by SA Tourism’s Exco. Board approval at the Board Lekgotla in September 2017 had been awaited.
Programme 3: Leisure Tourism Marketing
On international tourist arrival figures Members were provided with figures on both financial and calendar years. The Quarter 1 target in terms of calendar year was 2.7m, with actual performance sitting at 2.6m. In terms of financial yea,r the Quarter 1 target 2.5m with the actual figure being 2.4m. There were various reasons for the deviation one of them being that there was an 8.4% decline in Africa land markets. On the total number of domestic trips achieved for the calendar year the Quarter 1 target had been set at 6.1m with actual number achieved being 4.4m. For financial year the Quarter 1 target was 5.6m with the actual number being 4.8m. The targets had not been achieved due to a decrease in visiting friends and relatives (VFR). The national campaign on domestic tourism would be launched on 26 November 2017.
Programme 4: Business Events
On the number of business events hosted in SA the annual target was 145. However, the annual target was not yet due for reporting. SA Tourism tracked business events hosted and recorded 38 business events hosted. On the number of bids supported for international and regional business events the Quarter 1 target of 16 had been surpassed with the figure achieved being 26. The Quarter 1 target of hosting a Tourism Indaba had been achieved with the Indaba taking place 16 – 18 May 2017 well within budget.
Programme 5: Tourist Experience
On the number of graded accommodation establishments achieved, the Quarter 1 target was 1 376, actual achievement sat at 1 190. On the number of graded rooms achieved the Quarter 1 target was 29 888, the actual figure achieved was 27 294. The targets were not achieved due to 320 cancellations of establishments in Quarter 1. Of the 320 establishments that had cancelled 20 had been hotels. Three of the larger hotel groups had subsequently reapplied for grading.
The Committee was provided with insight into the financial performance of SA Tourism. For Quarter 1 total expenditure sat at 32%.
The Chairperson asked how SA Tourism uploaded and collated statistics. Concern was raised about grading not meeting some of its targets. She observed that there was some quarterly over spending by SA Tourism. What was the impact of the Tourism Indaba? Was it growing, static or regressing. She also asked what the impact of the Tourism Grading Council of SA’s (TGCSA’s) Incentive Programme was, and observed that some hotels had withdrawn from grading. Was it a chain of hotels or sporadic institutions?
Mr Ntshona said that the Tourism Indaba’s star had been fading for the last three to four years. In 2017 the Tourism Indaba had done much better. The approach on the Tourism Indaba in 2017 had been different. The tourism industry was pulled in to assist. The intention was to get the Tourism Indaba on the United Nations World Tourism Organisation’s (UNWTO’s) calendar. The timing of when the Tourism Indaba should take place was always an issue. The Tourism Indaba could only get bigger and better. The important thing was that SA Tourism should not become a spectator to events that were happening in SA.
Mr Erasmus said that even though targets had not been met in the last year the number of graded establishments had increased. This year there had been a decrease in membership. The membership base was sensitive to changes. Year to date already 750 properties had required assistance. A total of R7.2m had been spent. The grading support programme was assisting. There was a decrease of just under 2%. Some reasons for cancellations were businesses closing down and changes in the shared economy. Even with the Tourism Incentive Programme (TIP), 30% of cancellations were due to the cost of getting graded. The biggest cancellations came from small to medium sized enterprises located in the Western Cape and the Gauteng Province. Large hotel groups that had cancelled had returned to the grading fold. The basket of benefits on offer to get graded was even revised. Grading criteria had been reviewed and was sitting with the Ministry of Tourism and the National Department of Tourism. National Treasury as of the 1 October 2017 had a new National Travel Procurement Framework.
Ms Guliwe on the over expenditure said that if there was non-cash it did not mean that there was no cash flow.
Mr G Krumbock (DA) felt that people around the world, especially in the USA, Europe, Australia, Japan and China were used to shootings happening in the USA. The perception was that gun laws in the USA were relaxed and expected these types of incidences on occasion. These types of incidents were seen to be the work of lunatics. Tourists had not been the target of the shooting. It was locals that had been targeted. If it had been tourists that had been killed it would have affected tourist numbers. He appreciated the efforts of SA Tourism on the “Come home Broer” Campaign in Australia to improve the South African brand down under. SA Tourism was asked how much value for money the exercise was. The problem was that the news coming out of SA was just an avalanche of bad news. People saw SA as a failed state. When people immigrated to places like Australia it was only human for them to convince themselves that they had done the right thing. Consequently, they spread the word of how bad things were back in SA. He was not convinced that the limited budget of SA Tourism would be effective enough to change the emotional need for people to feel this way. Could one measure the level of negativity that was spread by people on SA? How effective was the programme in Australia?
On focus areas for 2017/18 in relation to selling SA as a destination he said that for the 2010 FIFA World Cup he had been a brand ambassador for SA. He had not encountered a single person who said that SA was not what they expected. Everyone enjoyed the experience. Many people had said that they would love to come back to SA. People needed to experience SA for themselves. The point was to get people to SA. After that they could make up their own minds.
He was concerned about tourists going to towns and cities that were filthy. He spoke about his hometown Pietermaritzburg being covered in rubbish. It was unacceptable and also dangerous as rubbish attracted rats. It was a huge concern as Pietermaritzburg was the capital city of the KwaZulu-Natal Province. The Chief Executive Officer (CEO) of Pietermaritzburg Tourism was even advising tourists not to come to the city. The city was willing to take a short-term loss of tourism income to recover for the next three to four years. Tourists were advised to go to neighbouring towns rather than to see the filth. How selective was SA Tourism when selecting towns to promote? A filthy city was a huge brand risk.
He observed that international arrival figures were slightly down. He was aware that currency fluctuations affected figures. He noted that the wealth effect should be driving more people. SA Tourism was asked whether it had measured the actual amount of revenue in constant revenue in US dollars and British pounds. Currency fluctuations should be taken out of the equation.
On domestic trips, he also appreciated SA Tourism’s explanation on visiting friends and relatives (VFR) and holiday trips figures. The target for domestic trips for Quarter one had been 6.1m the actual achievement was only 4.4m. It was a serious shortfall. To what extent was SA Tourism succeeding in segmented markets. For example, giving pensioners a discount would still bring in income compared to no income if there were no tourists. He pointed out that his DA fellow member Mr J Vos always brought up the issue of South Africans should be charged discounted prices. He asked whether an analysis had been done on what might be achieved if price differentiation was done. Price differentiation worked in business so perhaps it should be tried. Revenue streams needed to be managed.
Mr Ntshona, on Australia, explained that one of the numbers that he considered was arrivals. Another consideration was the cost of acquisition of a tourist. Whether the cost of acquisition was high relative to previous years? On whether SA Tourism got value for money for its efforts he said that SA Tourism did have public relations firms in Australia. The efforts of SA Tourism was however being negated by negative word of mouth utterings by expatriates. SA Tourism had however created an approach to overcome this. He noted that people however had their reasons why they had left SA. The perceptions were that SA was going down. How could this perception be changed? One of SA Tourism’s efforts was the “Come Home Broer” Campaign. The Campaign encouraged expats to visit SA and to bring along an Australian.
Part of SA Tourism’s support to provinces was to look at the number of beds in the region where a convention was to be held. SA Tourism’s efforts were to inform and push provinces. SA Tourism would promote those places that were compliant with visitor’s needs.
On international arrivals and currency fluctuations, SA Tourism monitored the net effect. There was a great deal of tourism revenue leakage taking place. He had visited the Nelson Mandela capture site and could not even get a cup of coffee. There were no t-shirts or even baseball caps for sale. There was nobody to take photos as well. Much more could be done.
On domestic tourism and two-tier pricing or in modern terms, it was called dynamic pricing. The bottom line was that businesses were profit maximises. The reason why the prices were so high for domestic people was because they were competing with tourists for the same space. More products were needed to cater for different markets. Small businesses had to be supported. Patterns of travel needed to change which made a price lever important. Locals from around SA should not go to Cape Town during December, the prices would be high. Cape Town Tourism was doing good work at Table Mountain. They even offered dynamic pricing.
Ms S Xego (ANC) appreciated SA Tourism’s geographic spread of hosting events. On the decline in VFR SA Tourism was asked how it measured VFR. Was the measurement correct? She was concerned about big businesses pulling out of the grading system. Did business not appreciate the importance of grading? It surely could not be that they could not afford to pay the grading fee. Were there alternatives to using the grading system? She asked to which businesses were grading support given to. She suggested that SA Tourism take the “I do Tourism” Campaign to the provinces. SA Tourism was asked why it had only one internship. Was it meeting a quarterly or annual target? She asked what SA Tourism’s recruitment policy was on internships and contract workers. She felt that businesses that did not pay their grading fees but still displayed the grading plaque should be penalised. How long did the grading application process take?
Mr Ntshona said that SA Tourism did have roadshows to the provinces. Important issues that were covered in roadshows were that water, electricity and cleanliness were important. Everyone was aware of the demand side of things but focus should be given to the supply side of things too. SA Tourism offered to assist provinces with marketing. For instance, SA Tourism assisted with the marketing of the Cape Town Jazz Festival. SA Tourism could not force provinces but it could compel them.
Surveys were done to obtain figures on VFR. He conceded that it could be done differently. SA Tourism could use data points more. The surveys were still being done manually. The intention was to do them electronically. There were however always push backs.
The “I Do Tourism” Campaign was done province by province through roadshows. SA Tourism approached both provincial authorities and municipalities.
SA Tourism was holding back on internships. When SA Tourism was ready it would offer more internships. Internships needed to plug in. He saw it as a compliment when people from SA Tourism were poached by hoteliers. Unfortunately, SA Tourism did not yet have an internship programme.
Mr Erasmus explained that globally the hospitality industry used star grading to categorise different products. There were, however other systems available globally. An opponent to grading was adverts of online guest reviews. The best would be to use a hybrid of both grading and the online guest reviews. The Tourism Grading Council of SA (TGCSA) targeted all businesses. The majority of the 700 hotels in SA were graded. The main focus was however on the small to medium sized businesses. 85% of the TGCSA’s database was made up of small to medium sized businesses. The application process was done online. It could take an assessor one week to get to an establishment. The grading support programme, however required a lengthier process which was a requirement of the NDT. The illegal use of a grading plaque was punishable by fine or by imprisonment in terms of the Tourism Act. The TGCSA did struggle with enforcement as it lacked enforcement powers. The TGCSA was regulated by the Tourism Act. The TGCSA needed to do an international benchmarking exercise. Discussions were taking place.
The Chairperson asked what impact webinars had on tourism. Was it locally, continentally or overseas?
To what extent was Airbnb encouraging people to use its establishments? Given the amendments to the Tourism Act she asked how Airbnb was going to be regulated. Would there be grading regulations? SA Tourism was asked whether it tended to over or under plan. She suggested that SA Tourism should not over plan. She asked what impact the Cape Town Jazz Festival had on the South African economy. She pointed out that annually there was usually a Local Government Tourism Indaba. Cleanliness of cities fell under local government. She felt that the city of Johannesburg to be one of the filthiest. Cape Town was also not as clean as it used to be. It was however a good idea that Cape Town cleaned its city centre at night. Had SA Tourism brought up the issue of cleanliness of cities with the Department of Cooperative Governance and Traditional Affairs (COGTA)? SA Tourism also had to take the National Department of Tourism on board.
Mr Ntshona responded that webinars were very popular. It was started around ten months ago. Webinars did not make a distinction between “us” and “them”. Interactions not only took place with South African operators but people from abroad as well. Local tourism authorities needed to champion these. He agreed to provide the Committee with the impact that the Cape Town Jazz Festival had on the South African economy. People needed to be given a reason to travel.
Mr Erasmus, on Airbnb, said grading was done on legally registered businesses. Discussions were taking place on how Airbnb was to be regulated. The issue was about monitoring and regulating the sharing economy.
Mr Ntshona added that SA Tourism was engaging the NDT about guidelines for Airbnb. There had to be a level playing field with existing market players.
The Chairperson, on the issue of interns, asked SA Tourism to engage businesses and others in tourism to make use of interns. An exchange programme would be good. She asked whether hotels like the Hiltons were graded or did they brand themselves. She stated that annual performance plans were important.
Mr Ntshona stated that the quality of the intern programme would make interns desirable. Technology and Annual Performance Plans were front and centre. Efforts were in the pipeline and it was sitting with the Ministry of Tourism.
Mr Erasmus said the Hilton Group was a premier brand and hence relied on its brand. However, from a South African perspective they needed to be graded. There was a bit of a mix of the two. Grading offered the opportunity to activate different channels. It was a great hybrid model.
Ms Nomzamo Bhengu Chief Director: Strategy and Systems NDT, said the NDT had been working closely with SA Tourism over its reporting issue. She was pleased that the Committee was satisfied with it. The work of SA Tourism tied in with government imperatives like radical economic transformation, support of small businesses and youth programmes.
The Chairperson congratulated SA Tourism on its unqualified audit report. Tourism was an asset to SA. SA Tourism needed to look at agricultural tourism as well. A wine route was needed in SA as well. She was looking forward to the Tourism Amendment Bill. She thanked Mr Krumbock for being the stalwart of the Committee.
The meeting was adjourned.
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