Cape Town – While the weaker rand is good for inbound tourism this is vastly offset by the negative impact the S&P downgrade will have on the cost of local funding, inflation and restrictive economic growth.
This is the opinion expressed by Tsogo Sun CEO Marcel von Aulock on Tuesday. He added that the vast majority of the hotel infrastructure in SA survives off of domestic business and leisure travel.
“While the weaker rand is good for inbound tourism this is vastly offset by the negative impact this downgrade will have. It’s a bad thing for the tourism industry and South Africa as a whole,” he said.
South Africa’s ratings downgrade by S&P could simultaneously be good and challenging for the local tourism industry, according to Enver Duminy, CEO of Cape Town Tourism.
The ratings agency downgraded SA’s foreign currency essentially to junk status, mentioning last Friday’s Cabinet reshuffle as one if its concerns.
Duminy said the current fall in the value of the rand makes Cape Town even more affordable for foreign visitors, even for those with some of the weaker currencies.
“For instance, we are already a popular destination for Brazilians, despite the weakness of their currency against the strong international currencies. The latest drop in our currency’s strength will assist them to travel here. And the city becomes ever more affordable for those from countries with strong currencies,” explained Duminy.
“Last year, the Telegraph listed Cape Town as ‘…the best value long-haul destination…as a result of sterling striding ahead against the rand…’. Similar sentiment has been expressed regarding visitors from Europe and the US.”
As for the impact on local tourists, Duminy said it’s too early to tell what the impact of the downgrade will be on them.
“We may find that they have less disposable income available owing to the inflationary impact of the downgrade. However, we encourage them to do thorough research before they travel to Cape Town so that they can identify periods when there will be lower rates – such as during the winter months when many establishments advertise special rates – and to take advantage of special packages on offer,” said Duminy.
“We will encourage tourism operators to bear in mind the constraints on the domestic market, and to look at ways of making a stay in Cape Town more affordable for them.”
In the opinion of Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, the country’s tourism sector will benefit from a weakening rand as travel to South Africa becomes cheaper for those with foreign currency.
This article was first published by Fin24 on 4 April 2017.