South African Hotel Industry Complaints Against South African Airlines Dropping of Buenos Aires Route

Matías E. Ruiz: -What do the actual Tourism figures tell us about South Africa? What is the importance of the sector in the country's economy in terms of employment and GDP participation? How about the projections for 2014?
 

Daniel Bryer: -As with much of the world SA’s market is based on business travel, although the country’s leisure tourism sector is strong and growing every day. 

Statistics SA (http://beta2.statssa.gov.za/), which is the country’s central statistical service, indicates that a total of 9 188 368 international tourists visited South Africa in 2012, a 10.2% increase on 2011. 

South Africa’s tourist growth rate in 2012 was more than double the rate of average global tourist growth of about 4% estimated by the United Nations World Tourism Organisation (http://www2.unwto.org/) in 2012.

South Africa saw particularly good overseas tourist growth (tourists from outside of the African continent), which grew by 15.1%, one of the highest growth rates in the world last year.

Europe remained the highest source of overseas tourists to South Africa, growing by 9.5% on 2011 figures and attracting more than half the total number of overseas tourists.

Particularly strong growth was recorded in 2012 from Asia (up 33.7% on the figures recorded in 2011), driven by growth from China and India, and Central and South America (up 37.0%).

The latest annual economic tourism statistics that are available are for 2011. These are the following:

Direct tourism contribution to GDP went up by 5% to R84.3 billion in 2011 (beyond US$ 8 billion).

Direct employment in the sector as a percentage of overall employment in the country went up from 4.3% to 4.5% between 2010 and 2011. This was as a result of the increase of about 31,000 direct jobs in the sector from 2010 to a total direct employment of 598,432 in 2011.

An increase of 3.3% in expenditure by foreign tourists to R71.7 billion (US$ 6.8 billion).

The total domestic tourism expenditure increased from R69 billion in 2010 to R101 billion in 2011, which translates to an increase of over R30 billion.

We’re expecting to see similar growth patterns in 2014. South Africa’s economy is in a comparable growth phase to Argentina at the moment, although this country’s rate of inflation is steadier.

 

M.R.: -Considering the Protea Hotel Group's role as a major player in the business, what is the firm's evaluation with regards to those projections?
 

D.B.: -South Africa’s travel industry is growing steadily and has been for the past two years after an initial knock when the global economy crashed in 2008. 

Domestic tourism is extremely positive, and the country is also a very attractive destination for the international Meetings, Incentives, Conferences and Exhibitions sector. 

From a leisure perspective, inbound tourism numbers are recovering in a very satisfactory manner, with Cape Town and the Kruger National Park still the top two destinations. 

 

M.R.: -We have recently took notes of the South African Airlines' (SAA) decision to cut flights from Buenos Aires to South Africa and vice versa as part of its so called 'strategic plan', and in order to hand more domestic routes to low-cost subsidiary Mango. What is your opinion on this matter? Are you aware of any reactions and/or statements from the South African Embassy in Argentina? Should the Embassy take active part in this issue?

 

D.B.: -We’re not aware of any statements from the South African embassy in Argentina. To date comment on this matter has come from the airline or the SA government directly. 

However, Argentina’s ambassador to South Africa, Carlos Sersale di Cerisano, was quoted in South Africa’s leading business daily newspaper, the Business Day, as having criticised South African Airways move to end its service to Buenos Aires as a "political decision" not based on commercial criteria. 

According to the newspaper, Mr Sersale di Cerisano said when comparing the commercial performance of the Buenos Aires-to-Johannesburg route and the Sao Paulo-to-Johannesburg one, it was clear that both were losing money. But the Argentinian route lost less. The Buenos Aires route could make money if operated with more fuel-efficient aircraft.

 

M.R.: -Some people in the industry have characterized SAA's decision as a 'short-term' one. Would you agree? How does this measure affect the business in South Africa?
 

D.B.: -SAA has not been entirely clear on why it has chosen to cut this particular route when there are others around the world that are making losses as great, if not greater.

The issue is capacity. The bulk of the passengers coming via São Paulo in Brazil are corporate travellers, many destined for the oil and gas enriched countries to the north of South Africa. 

Cutting the Buenos Aires route means there’s going to be a capacity shortfall for leisure travellers and SAA has not explained how it intends to make up for this, which is especially worrying considering how much money South Africa has invested in the past three years in aggressively marketing this country as a leisure destination in Brazil. 

If SAA is intent on cutting this route that might be seasonally profitable, surely the short-term answer then is to increase the number of flights from São Paulo?

One has to question now whether that money was well spent if we’re going to dramatically cut the number of flights with which South American leisure travellers can actually get here.

SAA is not demonstrating sound reasoning, since the impact of the decision will also affect a far greater area than just South Africa. 

OR Tambo International Airport in Johannesburg is Africa’s most important inter-continental transport hub. Last year there were nearly 600 000 transit passengers through SA’s borders, most of them passing through the portals of this one airport, destined for other parts of Africa.

And that’s not counting those South American travellers who spent a few days in this country before proceeding to their next destination.

Doing away with this route effectively kills numerous tourism and trade opportunities for so many countries to the north of our border, never mind the negative effect on the South African tourism growth potential and the loss of revenue for our economy.

 

M.R.: -The Argentine Government has increased restrictions for Argentine travellers, by creating new taxes over credit card expenditures abroad. Were you aware of this event? It might show an impact on the number of Argentine nationals travelling to South African cities...
 

D.B.: -The tax increase has been reported on in travel trade media in South Africa and it is of course a concern for inbound tour operators, but we don’t believe it will have a dramatic impact on the number of leisure tourists visiting from Argentina. 

Because South Africa is a long-haul destination, most travellers spend a week or more in the country and to do that takes a reasonable amount of disposable income. Those people will still travel, regardless. What is of slightly greater concern is Argentina’s rising inflation rate, which will curtail spending across the board. 

 

M.R.: -Finally, what can you tell us about Protea Hotels Group's future expansion plans? Do these plans consider the South African's approach that tends to strengthen its ties with its BRICS partners?
 

D.B.: -The future of the Protea Hospitality Group for the next five to 10 years at least is likely to be focused on developing and expanding its brands across the African continent, which has massive development potential as more and more countries stabilise politically and their economies grow. Most nations in Africa have projected economic growth rates of between 4.5% and 8% for 2014 and are among the fastest growing economies in the world.