Siseko Njobeni

Trade and Industry Correspondent

COMPANIES catering for foreign tourists are nervous about the increasing tendency of visitors to spend less money during their holidays in SA.

Last month SA Tourism released a report tracking last year’s trends in the international tourist market. It drives home the point about the tough conditions in the foreign tourism market, especially the European market.

According to the report, not only did foreign tourists spend less during their holidays, but they also stayed in SA for fewer days last year.

The reduction in tourist spend has hit Tourvest’s retail merchandise division, which comprises tourist curio and high-end jewellery shops. The outlets have had reduced volumes and margins.

Tourists also reduced their length of stay by a day, from an average 10 days to nine, SA Tourism said.

While the African, Middle Eastern, Asian, Australasian and American tourist markets grew, Europe, a very important market to Tourvest, sent 2,4% fewer tourists to SA.

Of the 6,7-million foreign tourists who visited SA last year, 4,6-million came from African countries such as Lesotho, Swaziland, Zimbabwe and Botswana.

"The proportion of high-spending Europeans has been decreasing while the number of package-tour Chinese on very tight budgets has been rising, and the subsequent impact on tourism revenues has been severe," Tourvest CEO Tommy Edmond said in a statement to shareholders earlier this year.

Edmond alluded to the need for new markets to reduce the overreliance on Europe, particularly Germany.

SA Tourism figures for last year show that the Americas have been a growing source of foreign tourists, albeit from a low base. The region last year saw a 10,7% increase in tourists to SA.

Tourvest has just completed a restructuring of its businesses that included the consolidation of its retail travel business and outbound and inbound tour operators into single, multibranded unit.

Edmond says the company is looking to achieve "real" earnings growth in the 2006 financial year.

He believes Tourvest can still grow its earnings at a R6 to the dollar exchange rate.

A Johannesburg-based analyst, who asks not to be named, says it is possible for Tourvest to continue growing its earnings at that exchange level, "provided the currency does not strengthen further".

He says Tourvest’s restructuring is, in the main, a cost-cutting exercise, and time will tell if it is a success. He says it is too early to say if it has achieved its primary goal.

While the outbound tourism business has been riding the crest of the strong rand because of increased volumes, there is no escaping that Tourvest is still very vulnerable to currency fluctuations.

About 75% of its trade is geared towards inbound tourism.

Edmond says while the company will remain "a currency-impacted business", the restructuring will enable the group to seek growth opportunities beyond its traditional European market.

Commenting on last year’s tourism figures, SA Tourism CEO Moeketsi Mosola says companies heavily invested in European markets have struggled with the decline in the number of tourists "because they cannot diversify their businesses fast enough for the changing global conditions".

Although Tourvest is still geared towards the inbound tourism market, the outbound tourism division contributes 18% to the company’s revenue, while inbound tourism’s contribution is 15%.

The airlines’ change to a zero-commission system in May will not affect Tourvest, as the company is already operates on a zero-commission basis.

The bulk of the company’s corporate business is done on a negotiated basis.

Tourvest’s outbound division MD, Jonathan Gerber, sees opportunities for growth by acquisitions as many smaller travel agents are likely to experience revenue and cash-flow problems because of the changes to the commission system.