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Global economic downturn restricts international travel
JOHANNESBURG — With all her guests gone and no bookings until the end of the month, Thuto’s Bed and Breakfast owner Anastacia Makgato decided to close shop and go on vacation. Business is drying up for her Soweto guesthouse.
“The whole of last year and this year are far different,” said Makgato, 62. “Last year I had a lot of people.”
Magkato is not alone in her predicament. In September — the most recent month for which statistics are available — the number of overseas travelers to South Africa decreased by 12.9 percent compared with the same month last year — the largest monthly decrease since the aftermath of the Sept. 11, 2001 terrorist attacks. Including a drop in August, arrivals from overseas declined for the past two months, which hadn’t happened for more than four years.
Initially South Africa’s economy – the continent’s largest and the thirtieth largest in the world at $283 billion – fared better than most in the global financial crisis thanks to its conservative fiscal policy and strict banking regulations. But cracks have started to appear. Falling demand for precious metals and finished goods have caused layoffs in the mining and manufacturing sectors, two pillars of the country’s economy. Now the country’s economic growth has ground to a halt after years of sustained expansion.
Now tourism is weakening as financially-strained tourists from North America, Europe and Asia find it expensive to visit the southern-most tip of Africa.
South Africa has experienced a tourism boom since the end of apartheid, with visitors attracted to wildlife parks and scenic geography. The number of international tourists visiting the country has soared from 3.4 million in 1994 to 9 million in 2007, according to the South African department of tourism.
Tourism numbers grew by 7.6 percent in the first half of 2008, leading officials to optimistically declare that South Africa would attract 10 million visitors per year in 2009. But tourism dropped off dramatically in the second half of 2008, according to businesses, although officials figures have not been released.
The tourism downturn is ominous as South Africa is counting on an influx in visitors to the 2010 FIFA World Cup. South Africa has spent more than $1 billion to host the largest sporting event ever held on African soil and it hopes to attract 450,000 visitors over the month-long competition.
The performance of tourism is important to South Africa's economy as it accounts for 8 percent of South Africa’s gross domestic product and was expected to reach a 12-percent share by 2010. Tourism employs 7 percent of the country’s workers.
Nowhere are the worrying signs clearer than in the Cape Town area, one of the country’s prime attractions with its splendid vistas of two oceans, its Mediterranean climate and renowned winelands.
Peter Koblmiller, a Cape Town-based travel agent who focuses on German tourists, said he has had a lot of cancellations as economic uncertainty prompts people to save money rather than spend it on a big-ticket item like a trip to South Africa. In September, the number of German tourists to South Africa decreased by 20.3 percent, according to Statistics South Africa.
“This year, because of the credit crunch, it’s very slow,” Koblmiller said. “Guesthouses, hotels, tour operators, golf operators — everybody actually is complaining about the loss of business.”
Koblmiller said that one of his biggest lodging clients, a guesthouse with 10 rooms, had been empty for three days straight. He says he expects business to pick up next year and increase by the time the World Cup starts in mid-2010, but admits there is no certainty.
“We can only hope that all this crisis is over by then,” he said.
Lyndsay Jackson, who runs a guest house association, said that well-established inns have been able to maintain their occupancy rates but that slower demand has led some of her members to drop their prices. Jackson said so many rooms are availabile that she will wait till the last minute to book a room on the Garden Route, a popular coastal area East of Cape Town – something she would never have done in the past.
To be sure, there are some bright spots in South Africa’s tourism industry. Peter Myles, a tourism analyst based in the Eastern Cape region, said that South Africa’s tourism industry has weathered previous global slowdowns well. He added that the recent fall in value of the local currency, the rand, has forced South Africans to travel domestically while making South Africa a cheaper destination for overseas tourists.
“The weaker rand makes South Africa more competitive as a long-haul destination,” he said.
Myles added that the aftermath of the World Cup should prove a boon to the tourism industry as he said more than a third of first-time visitors to a country during an international event return later as tourists.
Cape Town’s tourism industry is very seasonal, said Cape Rainbow Tours operator Alvin Kushner, with brisk business in summer making up for lean times during the winter. He said the occasional conference may create an artificial bounce for some tour operators, but that business is “quite well down” compared with the same period last year.
“It’s a matter of holding out until 2010,” he said. “There are some that might not last until then."
The World's Top 5 Tourist Destinations
1. France - 89 million visitors
2. Spain - 60 million
3. United States - 56 million
4. China - 55 million
5. Italy - 44 million
(World Tourism Organization - 2007)