The most recent data, for January-August 2011, show a modest 2.6% increase in tourist arrivals, compared with the same eight-month period a year earlier. Growth in the number of visitors from Europe was poor at nearly -7% year-on-year (y-o-y), though it was probably undermined by the strength of tourism in the base year 2010, when South Africa hosted the football World Cup. In contrast, arrivals from Africa – the key source market – were up by a relatively favourable 8% y-o-y. The strongest growth in visitors was from Asia, increasing by a solid 13% y-o-y, although the region accounted for just 3% of total arrivals. The key source markets in Europe, the UK and Germany, provided quite divergent performances, with growth of -9% and +7.5% y-o-y respectively. Interestingly, growth in arrivals from Zimbabwe was muted, up by just 4% y-o-y. Although the absolute numbers are relatively low, India and China continue to record strong growth in visitor numbers, rising by 33% and 20% y-o-y respectively.

Hospitality

The most recent available preliminary data for the first nine months of 2011 continued to show a downturn in the hospitality sector, though the rate of negative growth improved in Q311. The total number of foreign and domestic tourist room nights in all accommodation establishments fell by just under 8% y-o-y during January-September. After negative growth of 4.5% y-o-y in Q111, deteriorating to -11.3% y-o-y in Q211, negative growth in Q3 was more modest at -1.8% y-o-y, partly due to positive growth of about 2% y-o-y in September.

Forecast Scenario

Annual growth in tourist arrivals is anticipated to have slowed more than we previously expected in 2011, to about 2%, while only a modest pick-up in growth is forecast for 2012. Although the outlook is underpinned by solid economic growth in Sub-Saharan African (SSA), we have revised down our growth projections for 2011, 2012 and 2013 to 4.5%, 6.1% and 5.6% respectively. BMI has also revised down its growth figures for the eurozone, from 1.7% to 1.6% for 2011; from 1.2% to -0.2% in 2012; and from 1.9% to 1.4% in 2013. The South African rand was propelled lower in H211, partly by broad-based global risk aversion, and there is room for further depreciation over the short term given the adverse trends in the global financial markets. Our medium-to-long-term view, however, is for appreciation of the rand against the euro and US dollar.

O.R. Tambo International Airport

The most recent figures from Johannesburgs O.R. Tambo International Airport (ORTIA), for April- October 2011, show very slight growth in international passenger numbers of just 1% y-o-y. However, excluding sharp negative growth in June (-15% y-o-y) – the base year of which was the key month of the World Cup in 2010 – growth was a more favourable 4% y-o-y over this period.

South African Airways

For FY2010/11 (ending March 2011), South African Airways (SAA) recorded a net profit of ZAR782mn, up by a buoyant 77% y-o-y. Total passenger traffic, including SAAs low-cost airline Mango, was just over 8.5mn, which was a disappointing 2.4% y-o-y fall despite the World Cup. Domestic and regional passenger numbers fell by about 5% and by more than 2% y-o-y respectively. International traffic increased by 3.6% y-o-y to nearly 1.7mn passengers. The company said although visitor numbers and revenue from the World Cup were below expectations, the benefits of hosting the tournament will continue to help the country for many years to come. The main challenges for SAA over the short term include cost pressure from rising fuel prices hitting margins and increasing competition.

Sun International

In a business update for the quarter ending September 30 2011, South Africas Sun International announced a 6% y-o-y increase in revenue to nearly ZAR2.3bn. Casino revenue was up by 7% y-o-y to just over ZAR1.8bn. Revenue from rooms was in line with Q310 at ZAR223mn. The group achieved an occupancy rate of 62%, three percentage points (pp) lower than a year earlier. According to the company, although forward bookings indicated a slightly better trend for the next quarter, demand for rooms is expected to remain subdued for the rest of the financial year.