Playing host: Capitalising on infrastructure, the country looks to attract new event and business tourism

Some momentous sporting occasions have come to pass in South Africa in the post-apartheid era, such as the Rugby World Cup won by its hosts in 1995. However, no previous events have been as momentous for the country’s tourism industry as the 2010 FIFA World Cup, a spectacle that attracted over 300,000 visitors directly for the event and that reached 3.2bn viewers around the globe.

Aftermath

The World Cup had a substantial direct impact on South Africa’s hospitality industry and its economy overall. According to consultancy Grant Thornton, the event generated a direct spend of R3.64bn ($445m) in the country, providing a shot in the arm to the tourism and retail industries. During the World Cup, average room rates were up by 61%, while hotel occupancy rates increased 18%, according to the consultancy. At the same time, visa spending rose 55%, retail sales were up 7.4%, and food and beverage income jumped 10.4%.

As well as these direct effects, the government has been keen to talk up the “intangible benefits” of the event. Bernhard Meyer, chief director of research and knowledge management at the Department of Tourism, told OBG, “The big benefit of the World Cup was the brand recognition and the ability it gave us to open new markets in South America, China and Eastern Europe.” Grant Thorton’s “FIFA World Cup 2010 Country Report” bears this out, noting that 92% of visitors said they would recommend South Africa to friends and relatives.

Following Up

The challenge now for the authorities is to build on this positive perception. While it will be impossible to replicate the exposure and volumes that the World Cup brought in terms of sheer numbers and revenues, international events remain an important generator of business for the hospitality and tourism industry. “I think growth will mainly come from business and special events. Meetings, incentives, conferences and exhibitions (MICE) business is a big revenue generator and is sustainable. It is important to keep continuous events going,” Eddy Khosa, chairman of the Federated Hospitality Association of Southern Africa, told OBG.

The latest large-scale event on the roster was the 2013 Africa Cup of Nations (AFCON), which ran from January 19 to February 10. South Africa stepped in to host the event following the withdrawal of Libya, which was experiencing post-Arab Spring turmoil. Phumi Dhlomo, South Africa Tourism’s regional director for African markets, told the local press at the time, “The fact that South Africa built stadiums for the FIFA 2010 World Cup makes hosting AFCON that bit easier.” The government budgeted $53.3m for the event, significantly below the $7.3bn allocated to the 2010 World Cup. With the infrastructure already in place, the majority of the budget went towards operational costs, such as security, protocol and migration services.

Afcon

The cup of nations has a much lower profile than the premier global football event, but the government estimates that it will see a strong return on its investment. South Africa Tourism estimates that it generated $154m for the local economy. This is a decent return on the $53.3m budget, but it is also an additional payback on the money spent on the World Cup. Over 40,000 football fans are estimated to have come to the country from Africa for the event. During the tournament, and despite banks of empty seats in the stadia, Dhlomo told the local press that “the arrivals numbers look impressive.” As well as increasing regional tourists, the tournament has once again given South Africa extensive exposure to a global audience. According to the Confederation of African Football, the cumulative viewing figures for the tournament reached 6.6bn.

African Demand Rising

Whether the true impact of the tournament can be measured is up for debate as well. Given the strong growth trend in regional arrivals, a bump in figures may not be attributable to the football event. Indeed, regional visitors accounted for 73% of total tourist volume in 2011 and more than R50bn ($6.1bn) in revenues, according to South Africa Tourism. Regional visitor figures growing by 8.5% in the first seven months of 2012. For the third quarter alone, African land market volumes were up 9.5%, while African air markets were up 12.2%. Angola represented the highest growth markets, rising 10.6%, followed by the Democratic Foreign travellers by purpose of visit, 2012 Republic of Congo (9.6%) and Nigeria (8.2%). The last of these, Nigeria, remains the biggest air market on the continent for South Africa, with 19,244 tourists in the third quarter of 2012.

As part of South African Tourism’s hub strategy for the continent, marketing and branding offices have been opened across the continent: in Ghana and Nigeria for West Africa, Kenya for East Africa and the Democratic Republic of Congo for Central Africa. As such, the AFCON tournament was a good opportunity to consolidate the reputation and position of South Africa in the regional tourism market.

This was especially important considering that the revenue generated from continental source markets slipped in 2012. Revenue decreased by 11% reaching R800m ($97.5m) in the third quarter, compared to the same period of 2011, according to South Africa Tourism. This dip was driven by a shorter average length of stay and a lower average spend. The latter fell by 17.7% to R10,200 ($1243) per person in the quarter. The authorities hope AFCON will have built on this and enticed more higher-spending visitors from the continent to the country.

Events

The government is not only focusing on sporting events to attract visitors. There are efforts to expand the general events calendar, targeting international and domestic visitors in both the leisure and business segments. The country already benefits greatly from business travellers. Indeed, as Meyer told OBG, “There is an increasing understanding [within government] that we can build tourism on the back of trade and vice versa.”

In 2011, some 392,000 people visited South Africa, of which 140,000 entered the country for the purposes of MICE tourism. In July 2012, the tourism minister, Marthinus van Schalkwyk, told delegates at the annual congress of the Southern African Association of the Conference Industry that the country had secured more than 200 international conferences over the next five years.

Together, these events are expected to attract more than 300,000 delegates and generate R1.6bn ($195m) in revenue. The establishment of the South African Convention Bureau by the tourist ministry, which opened in April 2012, is expected to provide support for 81,500 annual convention delegates and 130 association meetings by 2020, a target that represents 5.3% annual growth.

Business Is Key

The MICE and business segment has started to become a key engine of growth for South African tourism, particularly in the five-star segment. Brian Davidson, group sales and marketing director of Legacy Hotels and Resorts, told OBG. “There is growing confidence in the South African corporate market and we have also seen an increased interest in incentives. Events have also done rather well in Cape Town and Durban.” The bureau and the Ministry of Tourism hope to achieve their ambitions by drawing on the country’s now-established track record for successfully hosting large-scale international events, and they seem well poised to do so.