Can we afford to keep neglecting our domestic market?

Cape Town – The South African tourism industry is geared toward overseas leisure markets, which give us the biggest spenders and most profitable customers. But it’s the domestic traveller who will keep this industry afloat in lean times.

Sure, there is a tiny slice of the global elite who can afford to pay R8000 per night to see leopards while sipping French Champagne in the bush regardless of how the euro is holding up or the Dow fares. But most of SA Tourism’s primary target market segments from the priority geographies are upper middle-class people who save for their annual holiday overseas. If their jobs are at risk, they missed a bond payment, their retirement savings look bleak, or the credit card is too close to being maxed out, they’re going to delay or shorten their travel, book less luxury and more budget, or simply travel closer to home. Our industry is threatened in any case.

It’s going to be a challenge to address. Domestic travellers are often overlooked by the industry because most locals (69%) travel to visit friends and relatives (VFR) so don’t stay in hotels or eat out in restaurants like the foreign travellers do. They’re also more price sensitive – just look at the transfer of Gauteng holiday spend from KZN to affordable Mozambique in recent years. While domestic travellers do spend a lot as a group, it’s still less than half what the foreigners do, and what they do purchase is largely a different category of product and type of product than the foreigners (think self-catering, caravan parks, family friendly, etc.).

Our industry product that’s been developed to serve the lucrative foreign market is by and large a mismatch for the domestic market. And the branding and marketing of the high-end product isn’t always compatible either: it’s one thing to sell Africa to foreigners, another thing entirely to sell Africa to Africans. Leopard print fabric and masks on the wall won’t cut it, and certainly not with the Black Diamonds, who are the biggest spenders on domestic holidays.

Who will fill the abundant 600-count linen covered, eider down filled duvet-draped beds of our luxury product when foreign markets flag? Most South Africans are not able to afford the 4- and 5-star prices. Occupancy will fall and price pressures will increase on all but the most elite.

The SA Tourism Growth Strategy (2008 – 2010) does emphasize the need for more 3- and 2-star product, which is good news. However, their rationale is job creation and they still prioritise the international long-haul markets, and this bulk tourism market is even more likely to dry up during economic downturns than the high-end independent traveller. SAT’s domestic strategy is in its early stages (launched in mid-2004 but unavailable on their website) and travel patterns remain highly seasonal, tied to school holidays.

The upshot is that the industry may be in for a tough time. Tourism growth was projected to decline by half over the next decade even before the global economy took a knock these past few months. The FIFA World Cup^TM could be more of a distraction than a solution as attention is given to foreign visitors, new international markets and the category of sports tourism. With luck, it will provide a stimulus to get us through a rough patch of global recession and we can come out the other side in 2011 in good shape. But more likely it will make the foreign/domestic product mismatch worse as long haul travel drops after the event (as it usually does following World Cups and Olympic Games) and our core markets struggle up from the bottom of the economic cycle. The push for accommodation for the World Cup may also result in overcapacity generally, further undercutting the higher end of the market.

It wouldn’t surprise me to see a significant shakeout starting in the winter of 2011. Businesses that adapt now to diversify their customer base by serving the domestic market will be better placed to ride out the rough patch to come.

About Blogger
KURT ACKERMANN writes, researches and consults on strategy, business models and brands for organisations adapting to globalisation and technological change. He is the proprietor of the Afrikatourism blog for responsible travel at afrikatourism.blogspot.com.

Related Stories

• BITOU targets core German market
• SA’s slowed tourist growth in line with global trends
• Meetings Africa to showcase destination 2010 at European Incentive Business Travel Market
• Amarula adds glamour to domestic departure lounge at Cape Town International Airport
• Mossel Bay’s domestic marketing campaigns well received at Getaway Show

FREE  for 30 days

 Email This  Print This