South Africa Tourism Report Q3 2009

Tourism Overview

In 2008, the growth rate in foreign tourist arrivals continued to slow compared with that recorded in the previous two years, with arrivals up 5.5% year-on-year (y-o-y) to almost 9.6mn. Although the most recent data are for just January 2009, there is continuing evidence of weakness in foreign tourist arrivals from important source markets. Indeed, only arrivals from Africa recorded positive growth (up 10% y-o-y), with every other region showing declines in visitor numbers y-o-y. Of note, Europe and North America recorded falls in arrivals of nearly 13% and 7% y-o-y, respectively; while visitors from the UK and Germany fell over 8% and 20% y-o-y, respectively. Overall, foreign tourist arrivals were up a modest 5% y-o-y in the first month of 2009.

Hospitality

We anticipate that the hospitality sector will experience a poor year in 2009, with latest figures suggesting noticeable weakness. The most recent data are for Q109 (preliminary data only) and show that the total number of foreign and domestic tourist room nights in all accommodation establishments decreased a marked 9.5% compared with the first quarter of 2008. This compares with a 17% y-o-y increase in the total number of tourist room nights recorded in Q108.

Forecast Scenario

Despite negative annual growth in foreign tourist arrivals from all regions except Africa in Q109, BMI maintains that total arrivals will increase slightly this year (highlighting the relative importance of Africa to South African tourism but noting caution over data on visitors from Zimbabwe). The weak outlook for 2009 is underpinned by further downward revisions to our economic forecasts in major source markets.

On a more positive note, short-term weakness of the South African rand against the euro and the US dollar should help support the competitiveness of the tourism industry. Additionally, the risk of crossborder contamination from a cholera epidemic emanating from Zimbabwe has decreased, with the epidemic apparently having passed its peak. In 2010 we expect growth in tourist arrivals and tourism receipts to pick up sharply, as the country hosts the FIFA World Cup and economic recovery takes place in key source markets.

2010 FIFA World Cup

In a press conference in May, the South African authorities confirmed that all airports being upgraded for the 2010 World Cup would be ready. FIFA is also closely monitoring the outbreak of the H1N1 virus (swine flu), although South Africa has no reported cases of the virus (as of 8 June 2009). The FIFA Confederations Cup, which takes place a year before the World Cup and is used as a dress rehearsal for the main event, takes place in South Africa in June. This will be an important test of how prepared the country is for the World Cup.

Sun International In its business update for the nine months to March 2009, South African hotel and casino company Sun International achieved overall revenue growth of 6% compared with the same period a year earlier (although trading conditions for the quarter to March continued to deteriorate). Casino and room revenues grew 6% and 7% y-o-y, respectively, in the nine-month period. The average room occupancy rate for the first three months of 2009 stood at 71%, down 7% on the corresponding period of 2008. The short-term outlook for the group’s casinos in South Africa remains subdued.