Let’s face it, the current fuel price and the looming possibility of yet another fuel price increase is causing absolute havoc with both holidaymakers and holiday accommodation owners alike. We all know that an increase in the fuel price is like throwing a stone in a pond. It’s effect ripples through every sector in the economy, leading to an increase in mostly everything. Apart from the increase in living costs, going on long distance holidays will now become a luxury which most of us will not be able to afford.
If you are going to visit family you only have to deal with the extremely expensive fuel price and the wear and tear of your vehicle. However, if you still have to pay the balance of your holiday accommodation which you booked earlier this year, the fuel price increase can cause massive disruptions with your holiday plans. Let’s face it, not everyone earns a few million rands per annum.
It is not only the holidaymaker who is affected by the astronomical fuel price increase, but also those who are in the hospitality industry. Holiday resort owners, guesthouse owners, BnB owners, etc., now find themselves without their major source of income, their holiday guests.
According to the newest release of Stats SA’s annual Tourism Satellite Account for South Africa report, the tourism sector directly contributed 2,9% to the South African gross domestic product (GDP) in 2017. This makes tourism a larger contributor than agriculture, but smaller than other industries. The World Travel and Tourism Council (WTTC) projects this will rise by 2.4% in 2018 and by 3.6% per year between 2018 to 2028. However, this will be severely affected by the current climate of continual fuel price hikes.
In 2016 the tourism sector’s 686 596 employees outnumbered the respective workforces of utilities (118 000 employees) and mining (444 000 employees). Employment figures for tourism are expected to be well over 700 000 in 2018. According to the WTTC, travel, and tourism sustained 1.5 million jobs in SA in 2017 – 9.5% of total employment in the country. The WTTC predicts that by 2028 almost 2.1 million jobs in SA will depend on travel and tourism. This also will be harshly affected by increasing fuel prices, as owners of holiday establishments will have to lay-off some of their personnel.
Tourism is a petrol-price sensitive product that sells a commodity with high spoilage rates. To explain, once an airplane has left the gate, the proceeds from unsold seats can never be retrieved. The same is true of unsold hotel rooms, or attraction tickets. There is a clear defined association between the price of fuel and the cost of travel and accommodation and other related tourism services.
According to Stats SA, “The latest Domestic Tourism Survey findings reflect a general pattern of decline in domestic tourism over the past two years as associated with economic stagnation and re-prioritization of consumer spending that has taken place in the country during that time.”
South African tourism entities need to start thinking strategically about the relationship between the cost of oil and the tourism industry as fewer people are expected to travel due to the cost of petrol and flight tickets.
If we assume that the cost of fuel will continue on average every year, then the tourism sector needs to plan accordingly, and be creative in their collective response to this exploding crisis.
Campaigns and incentives to encourage domestic tourists to get out more will go a long way in cushioning the blow for many in the South African tourism industry. Rewards and loyalty programmes could be used to attract new and keep regular customers. Promoting packages which include group transport would also cut spending on fuel dramatically, especially for the vehicle hire businesses.
If your business relies on visitors traveling a long distance to get to you, then you will be most affected by any fuel price hike. One method of staving off the impact is to start focusing on potential markets closer to your business, where people don’t have to travel great distances.
The positive impacts of this strategy on local communities can be gigantic. More than that, we as an industry and a society, need to push back against fuel increases by interrogating the inputs into the price of fuel. While doing that, we must explore alternative and sustainable sources of fuel that have proven themselves to be efficient and economical.
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