THINC Africa 2017: Hotels must tap into the experience economy

2017-09-04 14:32 - Selene Brophy
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Cape Town - South Africa's R400+bn tourism economy is pegged to grow by some R10bn this year. But what are the key concerns the hospitality industry should be aware of to spur this growth and make it more appealing to both the domestic and International traveller? 

According to Tim Smith, managing partner at HVS South Africa - the global hospitality consulting firm that recently hosted the THINC Africa conference in Cape town, "hotel values are booming in Cape Town in rand but the return looks far less exciting when converted back in US dollar terms. That all comes down to currency; the rand weakened by 15% in 2016 vs. 2015 and is now up by 10% against the US dollar 2016". 

HVS launched its fourth edition of their 2017 African Hotel Valuation Index (HVI), which includes more markets and increasing progress for Africa, at THINC Africa last week. 

SEE: SA sees +10m International visitors as 2016 tourism growth hits 13%

“The number of markets included in the study continues to grow each year, exemplifying the ever-increasing interest in the African hotel market. In the first edition, we had 14 cities. That grew to 18 in the second edition, the third edition featured 21 cities, and we are now delighted to include 23 cities with the addition of Abidjan, Dakar, Kampala, Maputo in the fourth edition 2017 edition of the HVI,” says Tim Smith, managing partner at HVS South Africa. 

The HVI reports that the future of South Africa’s tourism is looking promising as the rand has recently strengthened again and more than 2,500 rooms are expected to be added over the next five years, including the new Radisson Blu, Radisson RED, Sun International, Marriott, Tsogo Sun and Ibis brands.

SEE: First Radisson Red hotel to open in Cape Town

According to John Loos, FNB’s property economist who also spoke at the event, the weak rand and a slow-moving Reserve Bank can work in SA’s favour. Loos said in tough times, people look for quality, quality places to live, and quality places to visit. 

There were 1.2 billion international arrivals in 2016 across the globe – but less than five percent of those came to Africa, and one percent to South Africa. Overall the tourism sector contributed R402bn in 2016 (9.3% of GDP) and is expected to grow by 2.5% to R412.2bn (9.4% of GDP) in 2017. 

“Those figures can either scare you, or excite you,” says Sisa Ntshona, South African Tourism CEO. “Scare you in that you think, that’s so bad, or excite you in that there are so many opportunities. To a large extent, we’re still undiscovered.”

Ntshona was one of the speakers on the opening day of the Tourism Hotel Investment and Networking Conference, THINC Africa, hosted by global hotel investment consultancy, HVS, in Cape Town last week. 

South Africa looking for disruptive, inclusive growth

Ntshona says while South Africa is looking for growth, it is looking for distributive growth that is inclusive of the majority of its citizens so as to reduce the Gini coefficient, which is one of the highest in the world. “The more tourism grows, the more people will become economically active,” he says.
To do so requires growing international and domestic tourism, says Ntshona, pointing out that when South Africa suffered a decline in tourism in 2014/2015, and international bookings were cancelled after the Ebola outbreak in West Africa, domestic tourism failed to step into the breach. “Most strong tourism economies are built off the back of domestic tourism, but not here.”
Ntshona believes South Africa’s troubled past has a lot to do with that.

“Hardly 30 years ago the majority needed visas to travel between cities,” he says. “Mobility is not ingrained in us. There’s a lack of confidence. We need to inculcate in South Africans the need to explore their own country.” 

SEE: More direct flight routes on the cards as Cape Town Air Access and SAT join forces 

SA Tourism has developed a ‘five in five’ strategy. It wants to grow tourism numbers by five million in five years; four million would be international travellers, and one million domestic. 

Various strategies are in place to do so, from starting to work with South African Development Community (SADC) neighbours to package experiences in neighbouring countries (such as visiting Victoria Falls, moving to Mozambique’s beaches before coming to South Africa) to encouraging everything from health and medical tourism to sport tourism and of course, business tourism.
Seasonal tourism isn’t good enough if tourism is to help grow the economy. People need jobs all year around, he says. Issues that have to be addressed are capacity, geographic spread, seasonality, domestic tourism, intra-Africa tourism and niche tourism.
“We don’t want to market ourselves as a cheap destination. We have a unique offering, so we’re offering value for money,” he says. “And,” he adds, “we’re not going to paint ourselves into a corner either. We’re not just beach, berg and bush.”

Demanding growth in the experience economy

Traveller24 caught up with some of the keynote speakers at the conference - with the overall trends of disruptions and demanding growth in the experience economy being key elements the industry needs to keep abreast of. Take a look