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Cost of doing business hits travel industry hard Today's News

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The Tourism Business Council of South Africa (TBCSA) has delivered a mixed bag of results in its Tourism Business Index (TBI) for the first quarter of this year. The 'accommodation' sector has remained steady, but ‘other tourism businesses’ (travel agents, tour operators, airlines, vehicle rental companies, coach operators, conference venues, attractions, retail outlets and forex traders) are in decline, with the second quarter of 2016 expected to be even softer.

Some of the reasons cited for the lower than normal business performance levels for ‘other tourism businesses’ include high cost of inputs, the impact of competitor market behaviour and the cost of finance.

Gillian Saunders, head of advisory services at Grant Thornton, noted: “The rising cost of electricity is one of the factors pushing up the overall cost of inputs. Businesses in the sector are mindful of this and many have indicated that extensive plans are being implemented to become more energy efficient. With the latest 9,4% electricity tariff coming into effect from the beginning of April, the timing couldn’t have been better.”

Commenting on the overall outcomes of the report, TBCSA ceo, Mmatšatši Ramawela, said it was clear from the results that businesses, particularly in other tourism sectors, were facing pressures in the operating environment.

Sharing specific views on the performance of the car-rental sector, president of Savrala, Marc Corcoran, said that, despite the emergence of above-inflation vehicle prices, his members remained optimistic.

“With general inflation hovering around 8%, our members are optimistic that the necessary price increases will be absorbed by customers who are aware of the inflationary impacts on car-rental costs,” he said.

Other factors negatively impacting 'accommodation' include the cost of labour and insufficient domestic leisure demand. ‘Other tourism businesses’ have cited the impact of competitor market behaviour and the cost of finance as contributing factors.

From an inbound tourism perspective, strong overseas leisure demand and the weak exchange rate remain the most prominent positive contributing factors.

“We welcome the positive results seen in the accommodation sector, as also highlighted in Stats SA’s Tourist Accommodation report for January,” says Tshifhiwa Tshivhengwa, ceo of Fedhasa. “We believe there is still scope for travel and tourism to grow and for occupancies to increase going forward. However, given the rise in food inflation and adjustments in corporate and Government travel spend amongst other issues, we remain cautious going into the next quarter.”

Mmatšatši said of forecasts for the second quarter: “At a domestic level the combination of various factors such the emergence of above-inflation food and vehicle price increases, the impact of the drought, uncertainty ahead of the local government elections, upcoming rating agency results and the tumultuous political and socio-economic environment, are all likely to continue weighing heavily on the economy and business sentiment.”

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