TOURISM

BEARS THE BRUNT

While most industries have had their share of the Covid-19 shockwave, tourism has taken the brunt of the economic impact so far with its enterprises in distress – many facing the possibility of permanent closures.

For an industry that depends solely on human mobility, and given the pervasive spread of the virus, it is no surprise that lockdowns and social distancing restrictions have taken a heavy toll. Being discretionary in nature, tourism is more volatile than other sectors, and has historically suffered more from strategic shocks such as the 2008 financial crisis (see figure 1). All segments – hotels, airlines, cruises, restaurants, and tour operators – have taken a strong hit. Many of the large global events that tourism thrives on, such as the Tokyo Olympics and the Cannes Film Festival are being cancelled or postponed.

In response to the pandemic, the South African Department of Tourism, working with the industry, developed a Tourism Recovery Plan that outlines a set of interventions to ignite the recovery of the sector and place it on a path to long-term sustainability. The recovery plan is aligned to the Economic Reconstruction and Recovery Plan (ERRP), which identifies priority interventions to drive the reconstruction of the South African economy. The interventions also outline the sector’s contribution to the following priorities of the ERRP: infrastructure, mass public employment, the green economy or sustainability mediations and the inclusion of women and youth, as well as skills development.

Figure 1. The tourism sector has historically been more exposed to strategic shocks than other sectors.

The Plan identifies specific enablers as well as the activities linked to them, their timeframes for implementation and the lines of accountability. Successful implementation will in part, depend on a set of enablers beyond the immediate mandate of the Department and the tourism industry.

“We anticipate that the interventions outlined in the Tourism Sector Recovery Plan will facilitate the preservation of R189-billion of value and recover the tourism sector to its 2019 output and employment levels by 2023. It will position the sector for longterm sustainable growth,” says Minister of Tourism, Mmamoloko Kubayi-Ngubane. The Department of Tourism and its marketing entity, South African Tourism, will lead, coordinate and support the implementation of the Plan through the reprioritisation of current resource allocation.

BIG LOSSES SHORT TERM

Worldwide, it is likely that tourist arrivals will drop by between 58% and 78%, leaving them at their lowest levels after eight years of steady growth and cutting international tourism receipts by up to $1.175-billion (see figures 2 and 3). Up to 75-million jobs could be at risk, according to the World Travel and Tourism Council (WTTC), with small- and medium-sized businesses making up 80% of the sector – most affected.

Source: kearney.com Figure 3. The decline in tourist arrivals could translate to a loss of $874-billion to $1 175-billion in international tourism receipts.

In South Africa, the overall number of travellers (arrivals and departures) decreased by 71% between 2019 and 2020 and by 50.7% over a 15-year period from nearly 24.6-million travellers recorded in 2006 to 12.1-million in 2020. Official ACSA passenger data shows that passenger recovery at the international terminal of the Cape Town International Airport in December 2020 was a mere 19% of December 2019 volumes. Aircraft were operating at only 51% of their passenger load factors (compared to 72% in December 2019).

This partially explains why the hotel industry, which is highly dependent on international travellers, has still not recovered.

STR (2021), who provide market data on the hotel industry, reports hotel occupancy levels in the Western Cape were at 32.7% in December 2020, compared to 68.1% in December 2019. In Cape Town, 5-star hotel occupancy levels were at 29% in December 2020, 4-star hotel accommodation at 34% and 3-star hotel occupancy at 31%. Similar results were reported for the Garden Route and the Cape Winelands.

In terms of domestic travel, vehicle counts nationally indicate that there was a reduction in the number of overland domestic travellers during the season. Traffic volumes have decreased by up to 27% on South Africa’s major highways.

The same trend was seen at our airports. The domestic terminal at Cape Town International Airport saw only 51% of the volume of travellers compared with December 2019. On a more positive note, aircraft had average passenger load factors of 72% which reiterates the importance of domestic travel in the current climate. With the announcement of hotspots and beach closures in 2020, coastal towns saw immediate cancellations from domestic markets. A survey by NightsBridge, conducted after the announcement of the Garden Route as a Covid-19 hotspot, found that one-third of guesthouses on the area indicated 50% of festive season cancellations and 12.7% of bookings in the Western Cape were cancelled.

A BUMPY BUT CERTAIN RECOVERY

The current unfolding of events does not seem encouraging with major airlines going bankrupt, small tourism businesses closing and discretionary spending decreasing. The industry might need to witness some structural changes in the short and medium terms (for example, renationalisation of airlines, incentives to promote travel and tourism, price hikes to recuperate losses) as it moves toward the longer-term stage where demand for travel returns to normal. Despite this bleak short-term outlook, the long-term recovery is certain, anchored by the vitality of the sector to the global economy and its historic resilience in the face of previous pandemics.

The tourism sector contributes more than 10% of the world’s GDP ($8.8-trillion in 2018) and accounts for one in 10 jobs (319-million). It has outpaced the global economy in terms of growth and proved resilient in the face of previous economic shocks (see figure 4). This shows us that recovery once the crisis is over is almost certain.

One major influence is the projected growth of a global middle class. According to the European Commission, this is expected to be in the region of 5.3-billion people by 2030, when middle class spending will have jumped to $64-trillion, compared with $37-trillion in 2017, accounting for a third of GDP growth.

Source: kearney.com Figure 4. The tourism sector has shown strong resilience even in the face of the previous global pandemics.

Figure 5. A staged approach will ensure a resilient emergence of tourism.

Figure 6. Various types of financial relief measures for the tourism sector are being used by countries.

A GUIDE FOR GOVERNMENT ACTION

Based on Kearney Consulting’s knowledge of the tourism sector, understanding of previous periods of recovery following earlier crises, and an analysis of current efforts around the globe, the company suggests the following phased approach for governments as countries continue the battle against Covid-19 (see figure 5).

STAGE ONE: REACT While the crisis continues, make sure mitigating steps are in place

Include tourism in recovery planning Include tourism in overall national disaster planning and prepare for recovery by setting up dedicated bodies to manage activity. Singapore, France, Greece, and Canada have all developed tourism recovery task forces. Provide stimulus and relief packages Lending a lifeline to tourism businesses is one of the most immediate and crucial actions to prevent the sector’s collapse. This can come in various formats (see figure 6). Cash injections ranging between 0.2% and more than 10% of the total stimulus package, representing millions (or billions) of dollars, have already been dedicated to the industry in various countries (see figure 7). These amounts are equivalent to between roughly 5% and 15% of the loss in international tourism receipts for some emerging destinations such as Hong Kong, Malaysia, and Singapore. Ensure tourist safety A critcal priority is protecting tourists. Japan has a 24-hour visitor hotline, and Mexico’s Guest Assist app connects tourists with local authorities. Another measure is deep-cleaning establishments and testing employees, which Jordan has begun doing at its Dead Sea resorts.

Communicate effectively Proactive and reactive engagement with the media will be needed to prevent misinformation, and to provide reliable information about the situation in each country and the actions being taken to tackle the crisis. This is typically being managed by government central communications units and should include regular media briefings, press conferences, and Q&A sessions, along with updates on the government’s response.

In Singapore, the Prime Minister is briefing the population directly every couple of weeks, as is President Ramaphosa in South Africa. In the UK, government press conferences have been made available on YouTube as well as its own website to give the latest statistics and measures being taken to mitigate risks.

Dedicated health emergency news sources are also important to keep citizens informed. The Australian Department of Health has created a webpage which gives daily updates on the spread of the virus, as well as details of its Emergency Response Plan and support available for those

Source: kearney.com Figure 7. Hundreds of millions (even billions) of dollars are being dedicated to the tourism sector.

An immediate measure identified in the South African Tourism Recovery Plan to protect the supply-side capacity of the sector is transformation via a Tourism Equity Fund. One of the five pillars of this strategy focuses on transformation, rural and township tourism development, enterprise development and investment. As a combination of grant funding, concessionary loans and debt finance, the fund will cater to the specific needs of black-owned businesses to acquire equity, invest in new developments or expand existing ones.

in immediate need. Singapore has also launched a public awareness campaign, using cartoons to communicate safety procedures to people of all ages, and is giving key updates via WhatsApp.

The South African government has devoted a special Covid-19 section on their website with daily updates on the virus count. The site provides information on our alert system, information for households, travel, work, vaccines as well as other resources.

STAGE TWO: RECOVER Get the industry back on its feet

Recalibrate the plan New travel behaviour will emerge after the pandemic has been suppressed, based on which destinations and source markets no longer pose a health risk, travellers’ willingness to take new trips, and their financial ability to do so. Those in the “resilient” category – businesspeople, millennials and seasoned wealthy travellers – are likely to return earlier. As for types of travel, domestic tourism is typically the first to tip back, followed by lower-cost regional trips within areas at a similar level of recovery, and then long-haul journeys (for example, a travel bubble between New Zealand and Australia; a travel bubble between Estonia, Latvia, and Lithuania; and talks of a potential travel bubble between China, Hong Kong, Taiwan, and South Korea).

The Indonesian government has identified domestic tourism as vital to countering the impact of Covid-19 on its tourism sector and has set aside millions of dollars to encourage citizens to visit the country. In Australia, the government is planning to launch a $7-million marketing campaign to draw back visitors from Japan, the US and New Zealand.

Rebuild tourist confidence

Once ready to reopen to visitors, extra safety protocols will be needed to eliminate a new outbreak. This means continuing to monitor the domestic and international situation to make sure inbound journeys do not pose a health risk to their destination. All touchpoints along the tourist journey will need to be safeguarded, for example: • Managing visa procedures online to reduce physical contact • At airports, tracking flights to and from areas of outbreak; putting

social distancing barriers and markings in place; providing mandatory hand sanitiser and personal protective equipment (PPE) to staff and travellers, and carrying out health checks or tests where needed; routine disinfections and deep-cleaning • On aircraft, allocating seating in accordance with social distancing regulations; reducing in-flight services; installing high-efficiency particulate air (HEPA) filters; routine deep-cleaning • At accommodations, rules for common areas to meet social distancing regulations; revised standards for food storage, handling, and catering plus ventilation and cleaning

Once the measures are in place, destinations should employ effective marketing to let the world know it is safe to visit again. The Indonesian government will spend almost 72-billion rupiah (US$5-million) on a social media influencer campaign to promote its tourist hotspots, while Australia plans to launch multimillion-dollar campaigns targeting its domestic and international tourist markets.

Attract new and returning visitors

With travel confidence having taken a knock and many countries trying to reignite the industry at the same time, competition to regain lost ground will be fierce. Clever marketing techniques and incentives will be needed to persuade tourists to choose a particular destination. These could include visa changes (such as waiving or relaxing visa requirements and extending permitted stays), announcing new flagship events to attract visitors, or giving people a helping hand where they might appreciate it most – their wallet. Malaysia, for example, plans to offer travel discount vouchers, and income tax relief for domestic tourists. Other incentives could be a reduction in visa fees or vouchers for popular attractions.

Identify new opportunities

The pandemic has unleashed a huge wave of innovation. In the future, countries might consider acknowledging efforts to fight the disease with landmarks, museums or scientific and educational facilities. Some museums are building coronavirus collections (for example, collecting personal items from citizens with Covid-19 to detail their crisis).

STAGE THREE: REBOUND Resume long-term ambitions, but prepare for future shocks

Develop contingency plans New diseases will continue to strike. These have become more frequent in the past few decades and are one of the top risks to human life and society. With tourism bearing the brunt of the impact on industry each time, becoming truly resilient means preparing for future shocks by anticipating risks with solid contingency plans in place. Countries are building these capabilities. In Spain, the national tourism plan was built around major trends that could affect the sector, while Finland launched its own future-facing tourism project several years ago.

Resume long-term ambitions

When the sector is in a healthier state, countries can pursue their longterm tourism ambitions, which may differ from their pre-pandemic state. GO BACK TO GO

While Covid-19 has undoubtedly changed life – and travel habits – beyond all recognition, the current crisis state will be temporary. Even while the battle against the disease goes on, countries and their governing administrations are looking ahead at what must be done to return society to some semblance of normality. Although the immediate impact to the industry has been bitter, there should be no further radical structural changes needed unless it falls prey to further unforeseeable shocks in quick succession. What is expected is that with careful management, and using a staged approach, governments will be able to move their tourism sectors into recovery, and that they will eventually rebound. Article courtesy: Kearney Consulting

THE SA STORY

According to Tourism 2020 released by Statistics SA, the direct contribution of the tourism sector to GDP (Gross Domestic Product) was R130.1-billion in 2018 and constituted nearly 3% direct contribution to GDP. In 2018, the tourism sector contributed about 4.5% of total employment in South Africa. In 2020, the volume of tourists decreased by 72.6% from 10.2-million in 2019 to 2.8-million in 2020. The distribution of tourists by region of residence shows that 74.8% of the tourists who arrived in South Africa in 2020 were residents of the SADC countries and 1.5% were from other African countries. These two sub-regions constituted a total of 76.3% tourists from Africa. Residents of overseas countries made up 23.6% of the tourists. On 16 March 2020, President Ramaphosa announced measures to combat the spread of Covid-19 in South Africa. These measures were in line with reducing and monitoring inward as well as departing travellers. Later a travel ban on selected foreign nationals from high-risk countries into South Africa was enforced. Of the 53 land ports, 35 were shut down, as well as two of the eight seaports.

The Level 5 (hard) lockdown introduced by the president in March 2020 resulted in numbers dropping drastically for both incoming and outgoing travellers. South Africa did not receive visitors from April to September 2020. In 2020, tourists from the UK topped the overseas visitor list. When comparing the 2020 volumes with 2019, the number of tourists decreased in all 10 leading overseas countries. Australia had the largest percentage decrease of visitors to South Africa (81.4%).

Overall, holiday continued to be the main reason for visits to South Africa. A majority (96%) of tourists came for holidays while businesspersons, students and medical treatment constituted 3.1%, 0.9% and 0.1% respectively of the 2020 tourists. In 2020, tourists from overseas and other African countries spent, on average, seven and five days per month respectively in South Africa, compared to tourists from SADC who spent only two days. Tourists continued to be predominantly male (53.8%).

Number of tourists visiting South Africa in 2019 and 2020.

Source: StatsSA

Tourists visiting South Africa from the top 10 overseas countries in 2020.

Globally, countries are competing to capture the market for remote workers. This is an important market right now, as this type of tourist is more resilient to the challenges that traditional tourism is facing given ongoing travel restrictions. Such tourists will be an important source of sustainable tourism post-pandemic.

Announcing his support for a “remote working visa”, Premier Alan Winde says: “Given the severe impact that Covid-19 has had on the tourism sector in South Africa, this innovative visa would be a great contribution to our recovery.” Wesgro is launching a dedicated portal that promotes services for longer-stay options in the Western Cape, following a successful campaign with Airbnb to encourage remote working domestically. Cape Town has made the 2021 list for the 50 Best Cities for Remote Working according to Big 7 Travel.