OBG talks to Marcel von Aulock, CEO, Tsogo Sun Group

Interview: Marcel von Aulock

To what extent has the hospitality industry emerged following the 2010 FIFA World Cup?

MARCEL VON AULOCK: The oversupply that resulted from capacity expansion for the 2010 FIFA World Cup has been steadily absorbed by growth in demand. However, the recovery has been slower than we hoped, due in part to a lack of transient business travel, which comes from growth in the economy. When the local economy grows, one sees an emergence of owner-managed small and medium-sized enterprises and expansion activity in corporations, which always involves travel. With sluggish growth, however, one continues to see low occupancy levels. The only way this can be turned around is when economic growth begins to hit 4%, instead of the 1.9% growth we saw in 2013, as this will prompt an up-tick in transient business.

How has the meetings, incentives, conferences and exhibitions (MICE) segment contributed to driving growth in business tourism?

VON AULOCK: The MICE segment will be a key driver of business tourism for South Africa in the future. The country has the infrastructure and the regional positioning to leverage this important revenue generator, which accounts for around a third of spending in the sector. The cities of Johannesburg, Cape Town and Durban boast world-class facilities and the country’s strong emerging-market status positions it as a suitable destination for large-scale local and international conventions. The recent establishment of the National Conventions Bureau should boost conference volumes as well as cooperation between the three cities. Growth in this segment can further be used as a tool to offset seasonal fluctuations, as well as enable business visitors to eventually become leisure ones.

What can be done to boost international tourism?

VON AULOCK: Given South Africa’s position as a long-haul destination, anything that facilitates travel will benefit international arrivals. Developments like open-skies agreements, looser visa requirements and more direct flights are beneficial. Flight costs from traditional markets such as Europe or even Africa make up a large portion of total travel costs, which is why we will never compete with cheaper holiday package destinations. Increasing access and lowering travel costs must be the focus going forward.

Besides the facilities available and the general affordability, a weakened rand will always make South Africa more attractive. When the rand weakens, the shopping market picks it up almost immediately, like a switch, and shopping activity shifts from destinations like Dubai and Singapore to here in Johannesburg.

We are also beginning to see an uptick in arrivals from emerging markets in Asia, which are expected to become a strong source of additional tourism in the future. I say additional because we cannot neglect traditional markets in Europe, for these have a higher direct spend and a relatively shorter haul.

What factors are holding back the industry’s growth?

VON AULOCK: The key factor holding back the sector is an underperforming economy. If we see economic growth the sector will grow. Other issues are administrative burdens like restrictive new visa requirements in source markets. However, the sector is resilient and administrative issues are solvable, so we are confident of growth once the economy starts to show recovery.

How does entertainment drive domestic tourism?

VON AULOCK: Domestic tourism very much makes up the bulk of the industry. While domestic spend is not as high as it is for international tourists, whether leisure or business, local tourism is still a market the sector pays a lot of attention to. This is especially the case for the gaming and entertainment segment, which is a locals market; we do not pull international tourism for gaming. Adding casinos, theatres and retail around hotel developments creates a clustering effect, setting up an entertainment hub catering to the middle class.