Economic Thoughts: SA Tourism: up, up & away?

SA tourism has not had a good decade, marked by global economic crisis & falloff in travel, reinforced by own goals on the visa front. A steadily weaker domestic economy and hash-tag protest marches upsetting potential foreign visitors completes the misery.


But could there be a turn for the better in prospects? A surprisingly Big One?


Not necessarily on the domestic front, if anything, economically worse than anything seen so far. But even there we may identify light points?


The (partial) change of governmental heart on new visa regulations may have undone some of the disincentive that was created last year. But these tweakings may get lost in translation as much bigger forces make themselves felt: terror in Europe and a drastically weaker Rand.


Not every well-off SA resident insisting on their annual European skiing and galavanting holiday is going to be put off. But the bitching about the euro cost of a beer is steadily escalating. Like the universal MacDonald’s hamburger fair exchange rate index, this beer misery offers its own SA measure of when enough is enough.


On this front we face a bit of a fork in the road right away. The Fed rate liftoff on 16 December & Draghi’s apparent intent on 3 December to step up ECB liquidity support (more European bond buying for longer, doing whatever it takes), will primarily have a currency effect: Dollar stronger, Euro weaker.


With commodity & EM currencies generally pinpointed as immediate victims of Fed liftoff, and SARB strongly reinforcing this Rand impression with its every public utterance (again ever so richly last week when the MPC lifted rates by 0.25%), the main expectation is one of more Rand weakness ahead in 2016.


Heavily against the Dollar, but probably also still against Euro & Sterling.


Long story short: the SA Euro Beer Misery Index is set to worsen further. And there may well be a lot more terror, seeing the way things are going in the Middle East, and this spilling over into Europe, by way of a growing refugee flood and possibly increasingly as a genuine war environment, prominently advertised this week by leading European politicians. Fear stalks that continent now in what appears to be an unprecedented degree in modern times.


Brussels this weekend was a city under siege, with tourist facilities, infrastructure, retail shops and eating establishments in the city closed, apparently on account of a single loose terrorist on the run from the Paris massacres, thought to be laying low in Brussels and seen capable of more havoc.


Earlier in the week, the German city of Hanover apparently was the target of Paris-like attacks that were averted. Most of Europe is on unprecedented high alert, given the many possible extremist sleepers in its midst, with its security establishments fully mobilised.


The deepening fears so engendered, inside and outside Europe, may also keep growing numbers of potential SA tourists at home for a season or two, instead opting to spend their time sampling home delights, and spending their beer money at home.


Possibly far more significant is what American, European & Chinese tourists are going to do in 2016. With the developed economies steadily improving, their tourist income means are on the up. How & where will they spend it? 


France draws 60 million tourists annually. UK & the rest of Europe, especially its Mediterranean south, are major summer destinations. But will terror cause a major hiccup? Remembering Tunisia this past summer? Egypt last month? Paris & Mali this past week?


The French bombing a week ago has had immediate effects, such as attendance at large sport stadiums falling off throughout Europe but will this only be a temporary phenomenon? Financial markets certainly think so, taking all this in stride, electing to read it as they did New York 2001, Madrid 2004 & London 2005, and moving on.


The nature of this type of warfare certainly warrants such interpretation. Small scale & sporadic. But what if there were to be escalation? The audacity on offer is certainly ambitious, and the naked fear of many European politicians and their security establishments tells its own story. They are seeing this coming, given past laxity in protecting their borders, their open societies making them deeply vulnerable and their willingness to participate in Middle Eastern wars inviting retribution of the worst kind. It is experienced as reaping whirlwinds.


Even though we don’t know what 2016 will bring, anxiety levels have hugely increased. A reason for (many) global tourists to reconsider 2016 destinations?


Although SA gets only a sliver of global long-distance travel, we may well be unintended beneficiaries of this very scary development. For SA is certainly faraway from these troubles and on that score a “safe” tourist destination (though we have our own crime problems deflecting from this, and more of those hash-tag protest marches next year would definitely lower our attractiveness as tourist destination, especially for Germans & Americans).


Add the mightily weakened Rand, especially from American & European tourists point of view, and our magnificent tourist infrastructure, and be ready to receive many more visitors next year, from all three northern continents?


In 2010, many a SA tourist operator was sadly caught out when the soccer World Cup bonanza turned out to be deeply disappointing for many. So don’t get carried away by these possibly encouraging 2016 prospects.


But that there could be an unexpected change in good fortune for us, with as much an economic underpinning (a bombed Rand) as a political one (terror anxiety in important overseas tourist markets) is one of those things difficult to foresee until they happen.


Certainly, SA tourism prospects for 2016 aren’t turning down. They are turning up. How much so will be dependent on events playing out, and people globally basing their holiday decisions thereon. Watch those bookings….