The truth behind the arrival stats

This is a letter from Martin Jansen van Vuuren, Strategic Solutions Director, Grant Thornton Cape. 

I can understand the frustration of the tourism industry when they read and hear in the media that arrival foreign arrival figures are up yet they are not experiencing an increase in occupancies. The reasons for this are multiple and depend, to a greater or lesser extent, on where a tourism business is located and which market it is targeting.

As I see it, the answer lies in an amalgamation of the following factors:

Misunderstanding of the total foreign arrivals figure

In 2010 South Africa received around 11.3 million foreign arrivals, of which 3.3 million were same-day visitors who did not spend a night in SA. This leaves eight million foreign arrivals who stay overnight in SA. Of these, around 5.7 million are from Africa and 2.2 million from the rest of the world (or overseas). Around five million of the African arrivals arrive via land border posts with the majority arriving from our neighbouring countries, Lesotho, Mozambique and Zimbabwe.

The potential market for a hotel in Cape Town from these foreign arrivals would be around 2.2 million if it targets mainly overseas tourists and not the African market.  As the economists say, on the other hand, the potential market from these foreign arrivals would be around five million for a hotel in Nelspruit that mainly targets African arrivals.  Many tourism establishments believe they have a potential market of 11.3 million foreign tourists.

Dramatic increase in new accommodation establishments

This applies not only to hotels but also guesthouses and B&Bs. Although estimates vary as to the exact amount, we can safely say that the number of available beds has increased significantly in Cape Town and Johannesburg between 2008 and 2010.  Accordingly, a hotel in Cape Town (particularly in the upper star grading) has seen a significant increase in competition and occupancies and rates will suffer if the supply outstrips the demand.

On the other hand, accommodation establishments in smaller, more rural destinations have not experienced such an increase in the supply of beds, and their market, which is more domestic and business-focused, has not declined as much, with the result that they are not experiencing the same decrease in occupancies and rates as the urban centres.

Changing travel patterns

There has been a change in the travel pattern of tourists, with the length of stay of foreign tourists, in particular, declining in recent years.  Accordingly, the number of tourists may increase but, because they are staying for shorter periods, the actual number of bed nights is down, resulting in the lower occupancies.

Travel spend takes a knock

Tourists have been spending less on trips due budgetary constraints, resulting in them downgrading from five-star to three- and four-star hotels. On the other hand, some tourists have moved from three-star to five-star hotels where the five-star hotels dropped their rates closer to those of three-star hotels. Accordingly, hotels have been gaining or losing market share to each other depending on what their competitors are doing.

Lastly, I just need to add that, although the industry, on average, has been suffering, we have had anecdotal evidence of establishments that have weathered the storm well by focusing on the domestic business market and keeping their rates reasonable with a high standard service offering.  Keeping rooms spotless and being friendly and accommodating will not contribute to your expenses.

Taken from : http://www.tourismupdate.co.za/NewsDetails.aspx?newsId=59339