The Truth Debate – How to Generate Profits in a Post World Cup Economy

Rhino Africa was asked to participate in a Truth Debate (organised by Dummett & Co) at the Truth Cafe and Roastery in Green Point, Cape Town. The topic of the day was ‘How to Generate Profits in a Post World Cup Economy’.

Surrounded by great coffee in the Truth Cafe and Prestwich Memorial (to the legacy of slavery in South Africa), the scene was set for some very interesting perspectives on the fate of South Africa post World Cup.

Master of ceremonies was Les Aupiais, Editor of Private Edition magazine. The speakers included Peter Bacon, ex CEO of Sun International, Sheryl Ozinsky, former head of Cape Town Tourism, David Donde of Truth, Jason Stewart of Have You Heard and Rhino’s own Ross Bowers.

There were plenty of media in attendance, including Penny Haw(Sunday Independent), Clayton Barnes (Cape Argus), Carol Lazar (Business Day), CNBC and Karen Burger (Rapport).

Some interesting topics were discussed including the merits of hosting the World Cup. Why do we need a major sporting event to stimulate much needed spending on infrastructure and housing and are we actually doing enough to ensure a meaningful legacy from the World Cup? Sheryl Ozinsky suggested that we are not ready to bid for the Olympics, but that we should rather consolidate. Peter Bacon discussed a focused approach from industry and government in targeting new source destinations. David Donde spoke about the need to offer value for money and warned against price wars and market manipulation, while Jason Stewart spoke about the huge positive publicity and positive word of mouth potential created by the World Cup.

Ross was the third to speak after Sheryl and Peter. Below is a transcript of Ross’s speech…

The World Cup was a resounding success – it was a fantastic marketing campaign for the country. The country is undoubtedly on a roll – for instance South Africa was recently voted the most popular long haul destination in the British Airways in-flight magazine. But now we must make sure that we keep up the momentum.

In terms of generating profits in a post World Cup economy, I want to focus essentially on three things:

1) firstly, marketing – promoting new destinations within South Africa and marketing South Africa to new non-English speaking source destinations;

2) second – we need to address the concern that South Africa has become an expensive long haul destination through aggressive pricing and marketing; and

3) finally and most importantly, we need to focus on sustainable tourism – protecting the natural resources and wildlife from which everyone in the tourism industry makes a living.

Diversification of Marketing

With stadiums scattered around the country, we broadened the list of top South African destinations so that visitors won’t just come to Cape Town and the Kruger but so that they come back to South Africa again and again to spend time in the Karoo, Cederberg, the warm winter sun in Durban, the Midlands, the Golden Gate National Park, the Underberg or the Eastern Cape. The list is endless.

We need to follow up on that. Cement those destinations onto the tourism map particularly for second time visitors, which will bring much needed revenue into lesser known parts of the country.

Not only can we market new destinations in SA, but now is our opportunity to market to new destinations outside of SA.

According to ‘Statistics South Africa’, the leading country for overseas tourists visiting South Africa in 2009 was the UK. USA, Germany, Holland and France complete the top five.

If we look more closely though, the number of visitors from the USA is actually about half that of the UK. When you consider that the population of the USA is over 300 million compared to about 61 million in the UK and that South Africa currently accounts for a total of only 1% of US outbound travel, we begin to see the opportunity that the World Cup presented in terms of promoting South Africa in the United States. If every American tourist went back to the US a happy chappy with a couple of hotel, restaurant or tour operator recommendations, just think of the word of mouth potential. Again, we must follow up.

We also now have an opportunity to promote South Africa to non-English speaking nations such as Brazil, Argentina and Uruguay – what a brilliant, untapped market. Second tier source countries beyond our normal source markets such as the UK.

Not only is the UK a saturated market, but the reality is that the UK debt is actually worse than the ailing Greek economy. We need to be aware of the difficulties facing those traditional source markets and diversify against that risk.

As an industry we need to diversify into multiple languages and follow up on the interest generated in those non-English speaking countries during the World Cup. Brazilian friends stayed with me during the World Cup and were absolutely blown away by this country – it crushed all of their negative preconceptions – they loved it and will hopefully be back soon.

Visitors did not necessarily leave South Africa thinking that it was a cheap or even a good value destination.

We now see reports that high prices are slowing SA’s growth as an international tourist destination. Since 2002, prices have risen by as much as 140%. The average price per bed night over the past 20 years has risen from R480 to R1,200.

Between 2000 and 2003 the Rand lost almost 40% of its value against the dollar and local suppliers hiked up prices significantly. In 2003 the Rand began to recover and in 2004 had made up all its previous losses but accommodation prices were not adjusted accordingly.

From the beginning of the global recession SA prices have risen more than 20% and that’s excluding the price increases for the World Cup!

So when the global tourism industry was contracting in 2009, other countries were dropping their prices but South African service providers in general went ahead with normal price increases. The strengthening of the Rand pushed up these prices even further for foreigners whose disposable income in the current economic climate was already under pressure.

So what I’m trying to say then is that although the SA tourism industry has grown, it could have grown even faster if prices had not risen so rapidly – we must not lose our competitive advantage over other long-haul tourist destinations. Our competitive advantage is affordability and great value for money.

The key for the next few years is aggressive pricing and multi-layered marketing – we need to emphasise that South Africa is still a great value long-haul destination not just to existing source destinations, but to those new, second tier destinations such as Brazil, Argentina and Uruguay.

Sustainable Tourism

For us at Rhino Africa the most important thing however, is that we have an opportunity to implement a sustainable future for South African tourism. South African tourism currently accounts for little more than 8 percent of GDP. There is still massive potential for growth and it is critical that we protect the industry from which we make a living.

Sustainable tourism is not just about being green – it’s about ensuring a long term future for South African tourism based on partnership and community benefit. Unifying as an industry so that we can reap the rewards in years to come rather than decimate our natural resources and habitats for short term gain.

We have to realise that our primary tourist resources in Africa are wildlife and natural beauty. We do not have the historical and architectural attractions of Europe and so we need to protect those resources.

Sustainable tourism requires complete buy-in from government and communities. Tourism certainly offers employment, but unless the communities have ownership and tourism pays its way, there is no incentive for marginal communities to support or protect it. Try explaining to a hungry, local subsistence farmer and his family why they shouldn’t kill and eat game that has co-existed in that area for millennia, when existing tourism resources deliver no direct return to him or his family.

The beauty of the tourism industry is that it offers employment opportunities which are not necessarily highly skilled. Skill development is relatively easy and inexpensive.

We as an industry can facilitate sustainable tourism which empowers and uplifts local communities. We can play a role in educating tourists on how to minimise their carbon footprint and instead leave a meaningful legacy.

Wherever possible Rhino Africa supports companies that involve and empower local charities and community programmes in the interests of self-sufficiency.

While we believe in supporting the initiatives of our partner companies, we have also started our own initiative called Challenge4aCause which aims to support the conservation of Africa’s endangered animal and plant species and will finance projects that seek to uplift poor communities.

We do this by running an Annual Challenge.  This year our more intrepid members of the team cycled 330km across the Damaraland desert in Namibia to raise over R800,000 for the Save the Rhino Trust and other charities. The Save the Rhino Trust focuses on anti-poaching of the endangered desert-adapted rhino population of Namibia. If every establishment could take on one such sustainability project each year, the effect would be considerable…

Tough Times

So although some companies are doing well, others are not. We cannot deny that we are in some tough times globally. Talk of a double dip recession is gathering momentum.

Most industries have suffered over the last couple of years and I think it is safe to say that we are not out of the woods yet. The World Cup came at a great time for South Africa. We exceeded our visitors’ expectations. Previous World Cups have shown that travel bookings to the host country have increased 30 days post the World Cup after an initial lull. If we follow this pattern, it means that bookings should be picking up right about now!