Budget Travelers Boost SA Coffers

25 May 2013

Immigration News

The tourist accommodation market in South Africa appears to have recovered from both the harsh blow it was dealt by the recession that began in 2008 and the 2010 World Cup hangover, but it is no longer all about five-star suites and lobster ­dinners, thanks to the growing demand for budget accommodation.

According to a recent statement from Statistics South Africa, total income for the tourist accommodation industry increased by 15.9% in March compared with the same period last year, and the types of accommodation that recorded the highest year-on-year growth rates in income were caravan parks and camping sites at 35.8%, and "other" accommodation at 16%.

"More and more people are looking for budget accommodation," said Eddy Khosa, who chairs the Federated Hospitality Association of Southern Africa. "Based on our domestic growth strategy, we are trying to encourage South Africans to travel mainly in our own country. We talk about bringing a new culture of South African travelling – and for that we need an economic option."

Geoff Heald, owner of Coast to Coast, a backpacker's guide to Southern Africa, said the global financial crisis has seen most travellers move down a level. "People that were perhaps five-starring it have moved on to four stars and many people have moved into backpackers [lodges]."

According to StatsSA data, these cheaper tastes in accommodation have not had a negative impact on the income from tourism, which rose from R14.4-billion in 2008 to R15.4-billion last year after hitting a low of R13.6-billion in 2009.

Income from accommodation increased by 11.6% in the first quarter of this year compared with the first quarter of 2012, although the main contributors to this increase were hotels, adding 7.7 percentage points, and "other" accommodation, which contributed 3.1 percentage points.

Other accommodation includes bed-and-breakfasts, backpackers' lodges, self-catering establishments and those not classified elsewhere.

Reason for the large growth

Alaric Smith, a survey statistician for the tourist accommodation survey at Stats SA, said it was important to note that the large growth in March this year was driven by the fact that the Easter holiday fell in that month – last year it was in April. He also said caravan parks and camping sites are most affected by seasonality in the industry and business activity at these sites peaks during the Easter and December holidays.

Heald said a lot of South African families and university students were moving toward staying at backpackers' lodges. Sales reps and road-construction contractors were also providing a great deal of business to the lodges. But international travellers are being frightened off by crime and the fact that South Africa is no longer a cheap destination.

According to's hotel price index, average prices in Johannesburg and Cape Town have increased in line with the global market and remain more or less on par with other big centres such as London, Oslo and Abu Dhabi. Heald said it was a worrying factor that – an online travel guide to South Africa – does not recognise the budget market, even though the rest of the world is waking up to the opportunity it represents.

This month, online booking website HostelWorld announced its intention to take over HotelBookers for an undisclosed amount. In a report on the takeover on, co-founder and chief executive of WeHostels, Diego Saez-Gil, said the deal validated "the huge opportunity that exists in the budget ­accommodation market … there is a huge blue-ocean market [among] budget travellers who search for value accommodation and travel services".

 However, budget travel may not remain in vogue, according to the Visa Global Travel Intentions study, released last month. It showed budgets no longer top the concerns of those choosing a holiday destination and that average budgets for travellers will increase by at least 5%, and travellers from Asian markets are expected to increase their budgets by an average of 46%. But a diversified income stream for South Africa's budget establishments may just be the key to their sustainability.

"While a few struggle, especially [those] in one-horse towns, it is a very lucrative business for many," Heald said. "I have watched places grow over the years and where they differ from the mainstream is that accommodation is often the smallest part of their income."

An establishment will normally get a 10% to 20% booking commission for referring guests to services ranging from shark-cage diving to car hire, and meals and bar services are another big revenue source, he said.



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