While South Africa’s recent downgrade in credit rating and the depreciated rand may bring more tourists, the increase in arrivals is likely to be somewhat negated by higher operational costs, keeping the sector on its toes.
Last week, both Standard & Poor’s and Fitch downgraded South Africa's credit rating to BB+, also known as junk status. SA Tourism CEO, Sisa Ntshona, also said tourism had the potential to pull South Africa out of its current downgrade.
South African-based tour operators remain cautiously optimistic that the devaluation of the rand will attract more overseas tourists.
However, while Craig Drysdale, General Manager: Global Sales at Thompsons Africa says the devaluation of the rand will make South Africa a more attractive destination, outsiders’ perception and increased operational costs wipe out any benefit. “Food costs go up, interest rates go up, so your input costs into hotels and businesses will increase,” says Drysdale.
Echoing the same sentiments, Sean Kritzinger, Managing Director at Giltedge Travel, says although there may be more tourists, they will inevitably pay more to enjoy the country’s food, wines, activities, products and services. “Whether these two factors will balance each other out is impossible to tell right now, but overall it is not good for the majority of South Africa and that means it’s not good for our tourism industry,” says Kritzinger.
From an international perspective, overseas operators say South Africa’s credit rating downgrade is unlikely to affect tourists’ decision to book. On the US front, Julian Asher, MD of Timeless Africa, says there have not been “massive changes” in booking patterns. Travellers will only notice the effects of a downgrade when they start looking at pricing, where SA could overtake other dollar-based destinations. John Haycock, from Africa Explorer, says that tourists are unlikely to care about the downgrade to junk status and are more concerned about the exchange rate of the pound to the rand. On Monday, April 10, £1 was equivalent to R17.17.
Travellers who were previously caught between two safari destinations, may be more inclined to book an itinerary in South Africa. Asher explains that the preference gap between different Southern African destinations could widen and the exchange rate could be the tipping point between South Africa and other dollar-based destinations.
Drysdale also says that the devaluation of the rand will decrease its marketing, sales, and travel spend. He adds that destination and product training will also slow down, leaving some overseas agents not knowing much about South Africa.