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PRESENTATION TO THE PORTFOLIO COMMITTEE ON TOURISM ORGANISATIONAL PERFORMANCE RESULTS QUARTER 2: 2016/17. 25 November 2016. Table of Contents. Situational Analysis Organisational Performance Overview Leisure Tourism Overview Business Events Overview Tourism Grading Overview
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PRESENTATION TO THE PORTFOLIO COMMITTEE ON TOURISMORGANISATIONAL PERFORMANCE RESULTS QUARTER 2: 2016/17 25 November 2016
Table of Contents • Situational Analysis • Organisational Performance Overview • Leisure Tourism Overview • Business Events Overview • Tourism Grading Overview • Human Capital Update • Financial Performance Overview • Governance • Key Focus Areas for the Next Quarter • Acronyms
Situational Analysis • The second quarter of 2016 showed recovery in terms of GDP growth. In spite of the positive economic growth experienced, the inflation rate remained above the desired threshold of 6% which indicates a constrained environment for consumers. • Connections to South Africa continue to improve with increased number of airlines flying into the country and others increasing their flight frequencies seasonally. Airlift capacity has also improved in Durban and Cape Town. • Last year, South Africa relaxed some of the visa rules, dropping the requirement for visitors to apply for visas in person at South African embassies. • Visa processing capacity constraints particularly in countries such as India continue to be a challenge; • Lack of understanding with regards to unabridged birth certificate requirement, affecting some source markets such as USA, Canada;
Organisational Performance for Q2 • SA Tourism achieved quarterly targets for five(5) of its 14 KPIs: • Number of international tourist arrivals achieved; • Number of domestic holiday trips; • Total tourism revenue achieved; • Number of graded rooms; and • Unqualified audit. • SA Tourism did not achieve targets for two(2) of its 14 KPIs: • Percentage of brand positivity achieved; and • Number of graded accommodation establishments. • The targets for brand positivity is based on the February 2016 wave of the BrandTracker. The next wave of the BrandTracker is expected end of November 2016. • Although the target on the number of graded establishments has not been achieved, the target for number of graded rooms has been achieved. • The remainder of KPIs were not due for reporting.
As part of the Enhanced Strategy for Growth, SA Tourism has set a medium-term goal to increase its tourism baseload by five million trips/visits in the next five years Goal To achieve the defined goal, SA Tourism has identified certain thrusts that will help steer the tourism economy in the desired direction Focus of this update Develop and implement a marketing activities investment strategy that allows SA Tourism to focus on prioritised markets and segments Build a recognised, appealing, resilient and competitive tourism brand for South Africa across all markets and segments Collaborate with partners, both local and international, to maximise synergies, enhance traveller experience and close sales Drive operational efficiency in all activities Build an inspiring and energised organisation Note: *Five (5) million tourists include ~4 million international tourist trips and ~1 million domestic holiday tourists
SA Tourism’s goal brings together both international arrivals (both leisure and MICE) and domestic holiday trips, as they contribute significantly to the economy Target Visitations1 Reference Period International arrivals Domestic Holiday Trips The goal considers international arrivals, as they are important to the overall economy The goal considers domestic holiday trips, as it is the baseload over which international arrivals can be built Five (5) years have been considered a suitable medium-term period for this exercise • To meet the goal, South Africa should add • For the domestic travel, South Africa should add • Add to the tourism baseload of 2016… • ~3.9 million more arrivals • ~1.0 million more holiday trips • ~5.0 million more arrival/trips • in the duration 2017–21 • in the period 2017–21 • in the period 2017–21 Note: 1Visitations refer to arrivals (in case of international) and trips (in case of domestic)
The volume contribution from the two markets (i.e., international and domestic) is expected to reach ZAR 126 Bn by 2021 • SA TOURISM’s GOAL FOR THE NEXT FIVE YEARS Domestic Holiday Tourists All International Tourists • To meet the goal aspirations, South Africa should reach • ~13.5 million arrivals… • Boosting the domestic holiday travel will allow South Africa to reach~3.4 million holiday trips… • …by international tourists, who, on average, spentZAR 8,8002in 2015 • …by domestic tourists, who, on average, spent ZAR 2,1002on holiday trips in 2015 • TOTAL TOURIST SPEND1 ZAR ~118.8 Bn ZAR ~7.4 Bn An increase of ZAR ~34 Bn from 2017-21 An increase of ZAR ~2 Bn from 2017-21 ZAR ~126 Bn by 2021 Note: 1Based on the spend in 2015, and not adjusted for inflation or currency fluctuations; 2Rounded down the averages to the nearest 100 Source: Departure Survey 2015; Oxford Economics; Grail Research Analysis
All the entities operating in South Africa’s tourism ecosystem need to have a unified focus on the destination’s tourism positioning, with synergised efforts and simplified processes Key Guiding Principles Inputs to Framework Clarity in Role • A clear understanding needs to be developed on the mandate of SA Tourism in the tourism value chain and its role in contributing to the economy of the country. Is SA Tourism responsible for growing the tourism economy or the general economy? • There should also be a clear consensus on destination’s tourism positioning as it determines the type of tourists who need to be targeted • A robust model that allows looking into South Africa’s existing positioning in various markets as a key component to develop new portfolio and identify markets that can be targeted for “quick wins” • Synergies must be achieved among different entities operating in the tourism ecosystem • The existing investment framework lacks consideration related to industry’s footprint in the market, and it is required to be corrected • A comprehensive model that takes into account the existing resources available in the market such as embassies, consulates and existing partner network that can be leveraged to create operational synergies Guiding Principles Synergy in Efforts Simplicity • Over the years, the addition of various elements to the existing processes for defining portfolios has resulted in making the processes complex and cumbersome; therefore, there is a need to define (redefine) clear and standard guidelines • An objective and scientific model, yet simple, which will allow to reduce bias or subjectivity in the selection of markets
Additionally, the efforts towards meeting the goal should be practical and allow for agility, and the impact should be assessed to establish effectiveness Key Guiding Principles Inputs to Framework • A nuanced model that will enable SA Tourism to assess its performance in the future and accordingly adjust strategy • The impact of various efforts that SA Tourism is making to enhance tourism growth in South Africa needs to be assessed. There should be a clear set of indicators to establish the ROI across various aspects of the tourism value chain, which will allow monitoring of different entities’ effectiveness Measurability of Impact • A robust and replicable portfolio review approach for SA Tourism, taking into consideration each market’s attractiveness, ground realities and the overall targets Guiding Principles • It is imperative that the efforts to spur the South African tourism industry should not only be based on a scientific approach but also factor in the realities of the operating environment Pragmatic Approach • A coherent framework to develop and test various market scenarios, and accordingly formulate an optimal investment plan and performance review schedule Agility • The evolving internal and external parameters, which impact the South African tourism ecosystem, need to be addressed expeditiously, to tap into the potential of emerging opportunities or quick wins
Foreign Tourist Arrivals • Foreign arrivals accounted for 2.2 million of total tourism trips and increased by 10.4% compared to Q2 2015. The fastest growing regions was Asia and Australasia (33.1%), the Americas (20.2%), Europe (17.5%), and Africa-air markets (16.4%). • In the first quarter, Africa-air markets and the Americas arrivals were behind the same period in 2014, but record growth was noted in Q2 2016. • Africa-land markets and Europe have remained relatively stable with growth of less than a percent. • The main driver of the increased foreign volume was tourists visiting for leisure (driven in particular by VFR tourists). • Business and medical tourists saw double-digit decreases.
Tourist arrivals grew by 10.4% in the second quarter of 2016 to record close to 2.2 million tourist arrivals. There was double digit growth across all regions, with the only exception being Africa. Europe • 241 670 arrivals • 14.9% up from 2015 North America • 101 168 arrivals • 16.7% upfrom 2015 Middle East • 14 417 arrivals • 31.0% up from 2015 Asia • 84 293 arrivals • 29.5% upfrom 2015 Central & South America • 12 712 arrivals • 17.6% upfrom 2015 Australasia • 30 638 arrivals • 12.2% upfrom 2015 AFRICA • 1 753 958 arrivals • 8.2% upfrom 2015 Indian Ocean Islands GRAND TOTAL • 6 302 arrivals • 24.9% upfrom 2015 • 2 248 082 arrivals • 10.4% upfrom 2015 Note : Tourist Arrivals figures shown above for Apr - June 2016 Source: Statssa Tourism & Migration release June 2016, SAT analysis
Geographic Spread • The provincial spread in South Africa has improved from an international perspective with the arrivals increasing in 5 of the 9 provinces in the Q2 of 2016. • Gauteng was the most visited province in this quarter and grew to reach close to 900 000 tourist arrivals with a total of 7.8 million bednights generating an estimated R8.1 billion in revenue. On average tourists stayed 8.4 nights. • Western Cape is the 2nd most visited province with almost 400 000 tourist arrivals generating 3.5 million bednights. • Most of the provinces saw arrivals decline from 2015 levels with the exception of Gauteng, Western Cape, Eastern Cape and Limpopo.
SA Brand Journey – Global Performance Global Targets Note: Jun 2016 wave has new markets and updated weights; Core Markets weighted according to relative investment spend: Australia=8.5%, Brazil=6.0%, China=6.7%, France=8.9%, Germany=13.5%, India=8.4%, Kenya=4.5%, Netherlands=6.6%, Nigeria=6.7%, UK=13.1%, USA=17.1%; Investment weighted according to arrivals: Italy=71.4%, Japan=28.6%; Global Average, weighted according to investment spend: Core=93.5%, Investment=6.5%; All rating questions have been analyzed using top 2 box approach Source: SAT BrandTracker Feb-15 through Jun-16
Foreign Tourist Arrivals • Tourist arrivals have returned to positive growth with recovery from last year across all regions. In this quarter, tourist arrivals grew by 11.6% to 2.2 million. This growth is ahead of the growth of Australia but is well behind Thailand when comparing the second quarter to the same period last year. • Driving this growth are the Asia & Australasia markets and in particular the Asian markets which have grown to record highs in this quarter over last year. This growth reflects a return to growth, not just recovery of lost ground from last year’s declines. • The Americas and Africa-air have grown past Q2 2014. Africa-land and Europe have recovered from the declines of Q2 2015 but are only slightly above Q2 2014 levels.
The pipeline is looking positive for South Africa as number of booking is also showing a positive trend that if things remain the same we can expect more tourist arrivals for the remaining months of 2016. Bookings thus far for 2017 are also ahead of the same level earlier this year. Slide no 31 Source: Forward Keys
Domestic Tourism Performance • Domestic tourism accounted for 5.4 million of the total number of trips for the quarter, a decrease of 6.0% compared to the 5.8 million trips taken in Q2 2015. • The decrease in domestic trips was largely driven by the shift in the Easter holidays; in particular this had a substantial negative impact on trips taken with a purpose of visiting family and friends. • Despite the overall decline in trips, holiday and business trips increased by 26% and 30% respectively compared to Q2 2015.
Domestic Tourism Performance • Total revenue generated from the domestic tourism market increased relative to 2015, totalling 4 billion in Q2 2016. • Holiday trips accounted for about one quarter of total domestic revenue. Slightly over half of total domestic revenue continued to come from Visiting friends and relatives (VFR) orientated trips. • The decline in the total number of trips had an adverse effect on total nights during this period. Limpopo continued to receive the most number of trips, followed by Gauteng and KwaZulu-Natal. • Of those people that didn’t take a trip in the quarter, the majority cited affordability as the main deterrent. About one in five respondents said they didn’t have a reason to take a trip whilst a few stated time constraints as a key deterrent.
Grading of Establishments • The TGCSA quality grades establishments according to eleven categories across all 9 provinces • The categories are as follows: • Backpacker & Hostelling • Bed & Breakfast • Caravan & Camping • Country House • Game Lodge • Nature Reserve • Guest House • Hotel • Lodge • MESE (Meetings, Exhibitions, and Special Events venues) • Self catering • Exclusive Use • Shared vacation
Total Number of Graded Establishments (as at 30 September 2016)
Workforce Profile SA Tourism’s workforce profile is as follows:
Vacancy and Occupancy Report per Business Area The organisation is operating at 86.14% occupancy rate against the approved staff establishment of 202. A detailed analysis on occupancy and vacancy rate has been provided below:
Outcomes of the Ministerial Review in relation to Organisational Structure and HR Development Build and enhance EXCO and leadership team capabilities to carry out their roles and duties as per their KPAs Conduct a review of the role, performance and capabilities of the HR function Create a culture of engagement and empowerment within and across all levels and units of the organisation • Introducing ways for middle management to engage in strategic discussions • Effective Delegations of Authority to devolve decision making to management • Change management process to shift organisational culture • Staff satisfaction surveys and implementation of recommendations Key Priorities Review and redesign the organisation structure taking into account the funding and resource constraints including currency risks and losses Skills Audit to understand the skills gaps
Setting the Context South African Tourism is currently in a transitional phase of understanding its mandate and aligning business operations to achieving the 5-in-5 targets. Project Ignite, has been earmarked as an opportunity to drive efficiency improvement across our operations, with key focus being placed on meeting the following objectives: Driving a performance based culture The removal of silo operations Strengthening our brand through partnerships Through integrated processes that encourage standardised practices across the board, and seamless operations and information sharing Working collaboratively with industry, private sector and government, to co-create solutions and share outcomes. Understanding what outputs need to be produced (what is our mandate?) and, ensuring that the outputs are results oriented and measurable
