Tourism Grading System in South Africa & Tabling of proposed Dashboard for tracking of Committee resolutions: TGCSA briefing

Tourism

05 November 2019
Chairperson: Mr S Mahumapelo (ANC)
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Meeting Summary

The Tourism Grading Council of SA (TGCSA) briefed the Committee on the tourism grading system in SA. The TGCSA, at present, was focused primarily on the grading of accommodation establishments due to resource constraints but would like to move into other areas of the value chain. To date, 5 200 properties had been graded of which 80% were small establishments and the remaining 20% was hotels. Members heard what the grading process entailed. The grading process was automated and digitally driven. It was also an annual, levied system which was voluntary. The grading fee charged by the TGCSA depended on the number of units the establishment had; categories the establishment had and also on what the establishment’s room rate was. There was however a Small, Medium and Micro Enterprise (SMME) Grading Fee Support Programme in place for those establishments that could not afford to pay the grading fee. Qualifying properties could be given up to a 90% discount. Grading criteria was in place and it was reviewed every three years. The criteria was aligned to international trends and technological advances but had to be unique to SA. The TGCSA had six Provincial Quality Assurance Specialists (PQAS) across SA and also had 62 accredited assessors operating across SA. All assessors currently were third party service providers and were paid on a commission basis. The briefing continued on the use of the TGCSA’s star insignia and rules on compliance that went with the displaying of stars at any establishment. Grading was valid only for one year and thereafter had to be renewed. Those who knowingly or unknowingly were noncompliant could face legal action and/or prison time. Members were given insight into the processes that were followed when there was illegal use. The briefing was concluded with a graphical representation of grading performance from 2018 to 2019. Grading membership was hugely impacted on by how the South African economy was doing.

Members observed that over the past few years, the TGCSA had not met its annually set targets. Were the targets realistic? How were targets set? The Committee’s predecessor had recommended that grading be free and compulsory. Members were concerned about the cost attached to grading. The TGCSA was asked whether grading was actually working. Members also asked what the extent of influence of Community Tourism Organisations (CTOs) on grading was. The TGCSA was asked what the advantages and disadvantages of hiring graders on a commission basis were. Members noted that a survey had shown that 54% of respondents believed grading to be expensive. Members asked whether the TGCSA had considered making grading free for the first three years of a new business’ existence. There was a need to grow the base of people coming into the sector. Cost was a major challenge for a start up business. The TGCSA was asked whether it had a system in place to reach rural areas and to educate people about the benefits of grading. The TGCSA had in the not too distant past not been able to meet its targets. Members observed that the TGCSA had consequently decided in 2018/19 and 2019/20 to reduce its targets. Why was this done? Members too observed that the TGCSA was only grading accommodation establishments. When did the TGCSA expect to move into other parts of the sector? Members informed the TGCSA that the main focus of the Committee was that tourism needed to be directed towards villages, townships and small dorpies. The call was not for tourism efforts in cities to be abandoned but rather to focus more on areas where nothing was being done. Members suggested that the TGCSA reward companies/establishments which opened up businesses in rural areas by offering them the grading service for free. The idea was to encourage establishments to go to poor areas. Where grading certificates had expired, the TGCSA was asked what action it took. The concern was that star grading plaques could be illegally used. Members asked the TGCSA what it did about un-gradable establishments. Did the TGCSA make follow ups on these types of establishments to check on whether they had improved to such an extent to become gradable? The TGCSA was asked whether it did quarterly random checks on establishments to check whether standards were maintained. How were backpackers’ lodges graded? Members felt it important in today’s times for four and five star establishments to offer free WiFi. Members asked whether the TGCSA worked with the Department of Health and municipalities on health and hygiene standards. Quality assurance should be broad and cover all aspects. Were tour operator companies graded? Members also asked whether vehicles that tourists were transported in were graded. The entire tourist experience/ package should be looked at. Members further asked whether the TGCSA did follow ups on establishments in upmarket areas which did not even meet the criteria for a one star grading. The TGCSA was asked whether it was pleased with the growth of businesses from small bed and breakfasts to big establishments within the 25 years of SA’s democracy. Members observed that there were instances where the attractiveness of an establishment was affected by environmental challenges such as sewer spillages around the establishment.  This should not detrimentally affect the star grading of the establishment as it was something beyond their control. TGCSA assessors should bring these types of matters to the attention of municipalities. The TGCSA was asked to elaborate on instances where assessors had been found guilty of misconduct. Members observed that the TGCSA seemed to have challenges around enforcing compliance. When establishments used star grading plaques illegally, the TGCSA was left toothless to enforce compliance. Perhaps there was a problem around laws and regulations that needed to be tightened. This was something that fell into the domain of the Committee. The Committee needed to give the TGCSA teeth with which to bite. There had to be some level of enforcement in terms of legislation. Perhaps the Committee should check for loopholes that needed to be closed. Members noted that government had for years been urged to use graded establishments. Members proposed that the Committee be briefed on the extent of the TGCSA’s work with government and with National Treasury on regulations which stipulated that government use graded establishments. The Chairperson gave the TGCSA a picture of what life was like in rural villages. Basic amenities that tourists were used to were not there. That was the nature of rural life and it was all part of the experience.  He was concerned that a number of establishments were leaving the fold of grading. The TGCSA was asked whether an establishment had parking and security was taken into consideration on grading. If there were 5200 graded establishments in total he asked how many ungraded establishments there were. He suggested that the TGCSA create a new category of grading that included villages. He noted that perhaps there needed to be separate associations established for graded and ungraded establishments. Then there could be a peer review mechanism between the graded and ungraded establishments. The TGCSA would be required to work with them on getting more of the ungraded establishments graded.  He stated that the TGCSA did affect the way people looked at SA from a quality assurance perspective, especially international tourists.

Meeting report

Chairperson Introductory Remarks
The Chairperson congratulated the Springbok Rugby Team on winning the Rugby World Cup 2019 in Japan. One had to look at the opportunity cost of what this meant to boost tourism in SA. The Department of Sports and Recreation had to work with the National Department of Tourism (NDT) on this. It was the first time that a black person had captained a RWC winning team. He said that it was a proud moment for SA that Mr Siya Kolisi had captained the Springboks to victory. President Cyril Ramaphosa had gone to Japan to support the Springboks. He hoped that the win would bring SA together as a nation.

He continued that the Committee had wished to meet with the Tourism Grading Council of SA (TGCSA) for two reasons. The first was to familiarise the Committee with the TGCSA and what it did. The second was to ensure the TGCSA understood where the Committee was coming from in terms of conducting oversight over tourism throughout SA. The oversight would not be done in an antagonistic manner as cooperation was key. The Committee could not be easily co-opted. The Committee also believed in a reciprocating approach. Tourism needed to grow as it was a driver to eradicate poverty, inequality and unemployment.  

Ms Dawn Robertson, SA Tourism (SAT) Board Member, said tourism quality grading was one of the most important aspects in the sector. She noted that SAT and the Tourism Grading Council of SA had done a good job to put a system in place which many other countries had emulated.

Briefing by the Tourism Grading Council of SA (TGCSA) on the tourism grading system in SA
Mr Darryl Erasmus, Chief Quality Assurance Officer, TGCSA, said that currently, the TGCSA was focused primarily on the grading of accommodation establishments due to resource constraints but would like to move into other areas of the value chain like grading restaurants, venues and tour operators etc. To date, 5 200 properties had been graded of which 80% were small establishments, such as bed and breakfasts, and the remaining 20% was hotels.

Ms Nelisiwe Yengwa, National Quality Assessment Manager, TGCSA, spoke to what the grading process itself entailed. The grading process was automated and digitally driven. It was also an annual, levied system which was voluntary. The amount of the annual grading fee charged by the TGCSA depended on the number of units the establishment had, categories the establishment had and what the establishment’s room rate was. There was however a Small, Medium and Micro Enterprise (SMME) Grading Fee Support Programme in place for those establishments that could not afford to pay the grading fee. Qualifying properties could be given up to a 90% discount.

Ms Noxolo Daniel, Provincial Quality Assurance Specialist, TGCSA, said grading criteria were in place and reviewed every three years. The criteria were aligned to international trends and technological advances but had to be unique to SA.

Members were given insight into the star grading system itself, how it worked and how scoring was done. Given that the global tourist had become more demanding and discerning, in 2019, the TGCSA introduced the concept of accolades. Accolades provided recognition for achievements or distinguishing features that the establishment offered. The TGCSA also provided an establishment with a separate plaque for meeting Universal Accessibility (UA) criteria i.e. mobility, visual and communication.

Ms Yengwa said the TGCSA had six Provincial Quality Assurance Specialists (PQAS) across SA. The TGCSA also had 62 accredited assessors operating across SA. All assessors currently were third party service providers and were paid on a commission basis.

Ms Genevieve Joseph, Quality Protection Manager,TGCSA said there were rules on compliance that went with the displaying of stars at any establishment in terms of the TCGSA’s star insignia. Grading was valid only for one year and thereafter had to be renewed. Those who knowingly or unknowingly were un-compliant could face legal action and/or prison time. The establishment only received a new plaque once it handed in its old plaque. She elaborated on the protection of the star insignia as set out in the Tourism Act of 2014 and processes followed when there was illegal use. These included the sending out of letters and emails to the offending establishment. She however made the point that the letters/emails from the TGCSA did not hold much clout. Grading was after all voluntary. The TGCSA needed higher authoritative support from the South African Police Services (SAPS). Currently the TGCSA had 79 cases of illegal advertising that it was pursuing.

Mr Erasmus, said SMMEs in rural areas could be assisted through speed marketing. Speed marketing created a platform where new and existing products in the tourism industry got exposure to local and international tour operators in building a quality visitor experience. It offered a great opportunity to influence and empower tour operators on the unique selling points of a product or service offering in SA.

The briefing was concluded with a graphical representation of grading performance from 2018 to 2019. Grading membership was hugely impacted on by how the South African economy was doing.

Members were encouraged to attend the Lilizela Awards to be held on Saturday, 9 November 2019, in Tshwane.

Discussion
Mr M de Freitas (DA) observed that over the past few years, the TGCSA had not met its annually set targets. How were targets set? Were the targets set realistic? He pointed out that the Committee’s predecessor had, in its 2016/17 Budgetary Review Recommendations Report (BRRR), suggested grading should be free and compulsory. He was concerned about the cost attached to grading. He asked how the “one man show” in a township was supposed to afford to pay the grading fee. In a township, the last thing people were worried about was being graded. He observed that 15% of large hotels were graded. Was grading really working? Perhaps grading should be free and compulsory.

Mr Erasmus responded that it was a policy matter on whether grading should be free or have a charge attached to it. Compulsory versus voluntary too was a policy issue. The TGCSA collected between R22m and R25m in fees. He agreed that making grading free was perhaps a better option but that it would make the TGCSA reliant on the state for funding if there was no revenue stream. Voluntary grading also seemed to be the way to go. He clarified the 15% Mr de Freitas was referring to was the large hotel groups which made up 15% of the TGCSA’s database. He noted the TGCSA had the highest filtration in formal hotels.

Ms H Gumbi (DA) asked what the extent of the influence of Community Tourism Organisations (CTOs) on grading was. He also asked about the advantages and disadvantages of hiring graders on a commission basis. On the cost of grading, a survey showed that 54% of people believed grading to be expensive. He was aware the TGCSA had financial constraints. The TGCSA was asked whether it had considered making grading free for the first three years of a new business’ existence. He felt grading should be free. There was a need to grow the base of people coming up in the sector. Cost was a big challenge for start up businesses.

Ms Yengwa, on the advantages and disadvantages of hiring assessors on a commission basis, said revenue from grading fees was only R22m. Most of this went towards assessors’ fees. The TGCSA had looked at the possibility of employing assessors on a permanent basis but it was far too expensive, with the cost sitting around R45m. The advantage of payment on commission basis was a reduction in operating costs. The disadvantage was that assessors might think about making a quick buck and that assessments could possibly not be properly done. 

Mr Erasmus said the TGCSA dealt with Community Tourism Organisations from provincial level right down to local level. On the advantages and disadvantages of paying assessors on a commission basis, he said the decision to do so was purely done on a cost basis. The TGCSA did not have to pay assessors contributions towards pension, medical aid or transport costs. It was a cost exercise. Where 54% of participants in a study had said that grading costs were too high, the TGCSA went on to unlock grading support funding. As much as 90% of the grading fee could be subsidised. 

Mr K Sithole (DA) asked whether the TGCSA had a system in place to reach rural areas and educate rural people about the benefits of grading. The TGCSA had, in the not too distant past, not been able to meet its targets. Consequently the TGCSA, in 2018/19 and 2019/20, decided to reduce its targets. Why was this done? He observed the TGCSA, at present, was only grading accommodation facilities. When did it intend to move into other parts of the sector as well?

Mr Erasmus explained that targets set had been part of a five-year planning process. He conceded that the TGCSA’s targets got away from it. For the present year, targets were reweighted. Why were targets not met? The TGCSA found itself in a volatile environment and had to sell value all the time. The economic situation in SA was not the best and many establishments were closing down. Some establishments simply could not afford to pay the grading fees. 

Mr P Moteka (EFF) said the main focus for the Committee was that tourism needed to be directed towards villages, townships and small dorpies. The call was not for tourism efforts in cities to be abandoned but rather to focus more on areas where nothing was going on. He proposed the TGCSA reward those companies/establishments that opened up businesses in rural areas by offering them the grading service for free. The idea was to encourage establishments to go to poor areas. The down side was that a great deal of profit would not be made in rural areas. He asked what action the TGCSA took when grading certificates expired. Star grading plaques could possibly be used illegally.

Ms Yengwa answered that if a renewal was not activated, the grading would be cancelled. The TGCSA did do a check on whether perhaps payment was late hence the renewal could not be activated. She added the TGCSA did send out warning letters where subscriptions were not renewed.

Ms Joseph said that before a certificate expired, the establishment was sent an email to remind it renewal was imminent. The establishments were also informed of funding opportunities they could take advantage of. Where establishments cancelled their grading, the TGCSA forwarded details of these establishments to assessors. These cancellations were business opportunities for assessors to convince the establishments to re-subscribe.  Illegal use of plaques or illegal adverting which gave the impression the establishment was graded when it was not also reached the TGCSA through its assessors. Often 80% of illegal activities were reported by assessors. The TGCSA tried to make it easier for people to report illegal activities through its Whatsapp business line or if people sent in pictures where illegal plaques were used.

Mr Erasmus explained that on rooms, hotels had a minimum of ten and with boutique hotels it was a maximum of 80.

Mr T Myeni (ANC) asked what the TGCSA did in an instance where a person/establishment had not renewed its grading. Did the TGCSA trace such businesses/persons? If those persons/businesses were located, what action did the TGCSA take? Most of the TGCSA’s efforts were in the cities. How were people in rural areas taught about the benefits of grading?

Ms Yengwa explained that rural areas were reached by having partnerships with provinces and local government. The National Department of Tourism (NDT) also offered capacity building and service excellence workshops.

Ms M Gomba (ANC) observed that one did come across establishments that were un-gradable - they were considered to be so far off from grading criteria. She asked whether TGCSA assessors made follow ups on these establishments to check on whether they had become credible. Once a star grading was awarded, she asked whether assessors on a quarterly basis randomly checked whether standards were maintained. The TGCSA was asked how it graded backpackers’ lodges. Was it difficult to grade backpackers? She suggested the TGCSA beef up its requirements for four and five star establishments. In today’s times it was important to have technology at hand and WiFi should be made a requirement for four and five star establishments. She asked whether the TGCSA worked hand in hand with the Department of Health and municipalities around health and hygiene standards. Food was a huge challenge in the sector. Quality assurance should be broad and cover all aspects. Checks had to be done on the quality of food that service providers supplied. She was concerned about certain star graded establishments over charging its patrons. The prices charged were not on par with their star grading. Were tour operator companies also graded? The TGCSA was also asked whether the vehicles that transported guests were also graded. Or was it only fixed assets that were graded? The entire tourist experience/ package should be looked at.

Mr Erasmus said the TGCSA did not get involved in pricing. Pricing was left up to the establishment to determine. The TGCSA was tasked with quality assurance.

Ms Daniel responded that the TGCSA did look at un-gradable establishments as well as homestays. The TGCSA encouraged such properties to become graded. Perhaps the challenge was that these types of establishments did not qualify to be graded. She said a tender closing in November 2019 was being put out in this regard. It would also cover properties in rural areas. The TGCSA had called for tenders to get a service provider to take on the project. The pilot was intended for the Eastern Cape province. It was supposed to be rolled out in other provinces as well. The project was initially planned to be rolled out in 2018. On how a backpacker was graded, she explained one had to be familiar with what was expected. The expectations could not be the same as that of a hotel. There was thus a level of expectation.

Ms Yengwa confirmed the TGCSA did work with the Department of Health. For instance, there had to be an Occupational Health Certificate in place. There were regulations around food and cleanliness of kitchens. There should also be insurance cover. Municipal zoning laws had to be abided to. Many things had to be in place before an establishment could get graded. There were teams at provincial level for quarterly visits. Post audit verification was done. Every month the TGCSA did a round up to check whether everything was in place. She added that WiFi was one of the criteria that had to be met by three, four and five star establishments.

Mr Erasmus said factors such as cleanliness, hygiene and safety would be looked at for un-gradable establishments and homestays.

Mr Gumbi made reference to establishments in civilised upmarket areas but did not even meet the requirement of a one star grading. The TGCSA was asked whether it did follow ups on these types of establishments.

Ms Yengwa said an assessor was required to provide guidance for establishments not meeting core requirements. If an establishment seemed to be failing in meeting grading criteria then the TGCSA offered them a grace period to get on track. This process could take between one and six months where hand holding was taking place. The TGCSA offered guidance on what the establishment needed to put in place. The TGCSA also provided the establishment with an improvement report.

Mr Z Peter (ANC) asked whether the TGCSA had a programme that was flexible to accommodate upcoming businesses in the hospitality industry. Perhaps there could be a programme to sensitise them around the benefits of grading. After 25 years of democracy, the TGCSA was asked whether it was pleased with the progress on growth of businesses in the sector. He was referring to bed and breakfasts and guest houses growing into bigger establishments. He was pleased that the TGCSA took small dorpies into consideration. Sometimes there were factors beyond the control of establishments that could affect their attractiveness. This could take the form of sewer spillages around establishments. It was after all not their fault. When assessors went to assess establishments they had to look at the surrounding environment as well. These assessors could sensitise local municipalities about such spillages and not necessarily penalise the affected establishment. The TGCSA was asked to elaborate on instances where assessors were found to be guilty of misconduct and whether processes have been followed.

Ms Yengwa, on instances of misconduct by assessors, pointed out that one assessor had presented fake assessments to the TGCSA. The assessor in question had not even been at the premises. The actual client had lodged a complaint against the assessor. Actions by the TGCSA were to terminate the assessor’s contract and lay charges against the individual. However, the TGCSA had learnt from such experiences and now had service level agreements which made provisions for actions to be taken where there was misconduct. Amongst the actions that could be taken was to terminate contracts, pay back fees, black list them and also lay charges against them.

Ms L Makhubela-Mashele (ANC) observed that it would seem as if the TGCSA had challenges around enforcing compliance. When establishments used star grading plaques illegally, the TGCSA was left toothless to enforce compliance. Perhaps there was a problem around laws and regulations that needed to be tightened. This was something that fell into the domain of the Committee. The Committee needed to give the TGCSA teeth with which to bite. There had to be some level of enforcement in terms of legislation. Perhaps the Committee should check on whether there were loopholes that needed to be closed to ensure there was compliance. Government had, over the years, been encouraged to use graded establishments.  She proposed the Committee be briefed on the extent of the TGCSA’s work with government and National Treasury about regulations which covered government using graded establishments. The briefing could also cover to what extent government was using graded establishments. On global benchmarking, she asked why Dubai was not on the list of countries that the TGCSA had used. Over the past five years, Dubai was one of the most popular destinations for South Africans. What attracted South Africans to Dubai? This could assist with improving standards in SA. How many rooms was a boutique hotel supposed to have?

Mr Erasmus stated that the TGCSA had looked at Abu Dabi and Dubai for benchmarking.

Ms Joseph confirmed the TGCSA needed a higher authority on tools and resources to recognise the authority of the TGCSA.

Ms Gomba asked whether the TGCSA gave a star grading on whether a continental or English breakfast was served.

Ms Daniel responded that there too was a level of expectation on the breakfast.

The Chairperson asked the TGCSA if the Southern Sun Hotels would be downgraded should they smell like cow dung. Most of the houses in villages used cow dung for their floors. They also used mud for the maintenance of their homes. There were also no sanitation facilities which tourists were used to. Livestock was also slaughtered as part of African traditions. There was also no electricity and paraffin lamps were used. Cow dung was also used to make cooking fires. This was the picture of a tourism experience in a village. How would the TGCSA grade such places? This category of graded establishment was not covered in the briefing. This was what a tourist perhaps wished to experience. In villages, people sang and danced. This was all part of the experience. What star grading would they get? The TGCSA was asked whether it graded home stays. The Tourism Amendment Bill was yet to come before the Committee. He was concerned that a number of establishments were exiting the grading scheme. Were these establishments in cities or were they to be found in villages, rural areas or in small dorpies. He asked whether a village person could pay the TGCSA in kind by way of livestock. In villages, donkey carts were also the mode of transport of the day. He asked whether the TGCSA took into consideration parking and security that was provided by establishments. If there were 5 200 graded establishments in total, he asked how many ungraded establishments were there. The TGCSA was asked whether it graded a caravan or the caravan park that the caravan was in.

Ms Yengwa said that it was the caravan park that was graded. There were around 900 cancellations annually. Where there were cancellations, the TGCSA had a 24% rejoined rate. Establishments cancelled grading subscriptions for various reasons but most were around economics. Many establishments closed down due to the slump in the economy and there were also challenges of affordability. The TGCSA did not accept cattle as payment. The TGCSA relied a great deal upon the Tourism Incentive Programme (TIP). There were also special funding projects run by provinces where establishments did not pay out of pocket. On the products the TGCSA worked with, it based its calculations around the 2010 FIFA Soccer World Cup. The TGCSA also worked with Statistics SA. The number of accommodation establishments was work in progress.

The Chairperson asked the TGCSA to look into the case of people actually staying in the caravan. The Committee needed to be provided with the framework the TGCSA alluded to where tenders were being put out for a service provider. Assisting persons in rural areas was high on the priority list of the Committee. Perhaps the TGCSA needed to create a new category of grading that included villages. On the work that assessors were doing, tourism was a concurrent function and bylaws of municipalities could make provision for municipalities to do assessments and report on them. Perhaps there should be an association of graded tourism establishments and an association of ungraded tourism establishments. He also suggested that perhaps there should also be a peer review mechanism between the graded and ungraded establishments. The TGCSA could work with them to get more of the ungraded establishments graded. This could be formalised in some form of structure. The TGCSA did affect the way people looked at SA from a quality assurance perspective, especially international tourists.

Committee Minutes
Minutes dated 30 October 2019 was adopted without amendment.

Proposed Dashboard for tracking Committee Resolutions
The Committee agreed to the tabling of the Proposed Dashboard.

The Chairperson encouraged Members to attend the Lilizela Awards that was to be held in Tshwane on Saturday, 9 November 2019, at 4.00pm.

The meeting was adjourned




 

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