August update from the CEO
The state and prospects of the visitor industry in Cape Town
Cape Town’s visitor industry, like many cities and destinations the world over, faces significant challenges in dealing with subdued demand and declining interest. Cape Town Tourism has seen more than 118 businesses close in the past 24 months. Furthermore, across the sector, the lack of growth experienced since 2007 equates to a lost opportunity for some 18 000 potential new jobs. In this context, there have been many and varied opinions as to why there is depressed demand and what Cape Town must do about it.
Cape Town Tourism has for some time now investigated the situation thoroughly and the answer, in our view, rests on a combination of tried and tested actions and a few bold new interventions. These initiatives are to be placed within a new compelling destination brand that stretches beyond leisure tourism and our city’s natural beauty, and an execution programme that takes Cape Town to the world.
The most significant feature affecting demand was signalled with the advent of the global financial crisis; the consumer condition fundamentally shifted in a short period of time. More as a psychological than an income uncertainty phenomenon, the core drivers of consumer behaviour have shifted dramatically; this has left many businesses and industries scrambling to be relevant in the new environment.
Visitor behaviour, which includes leisure, business, academic, event and investment visitors, has similarly been impacted; we need to align our marketing, communication and destination offerings to meet the changed needs of our customers who, after all, are the central feature in igniting our industry. Once we do this, we can influence their travel choices.
Cape Town Tourism will continue to host product workshops in collaboration with the City of Cape Town and SA Tourism to assist tourism product owners with packaging experiences and developing products that speak to the altered market needs.
It is clear that the current depressed nature of arrivals has more to do with externalities and the consumer climate than with accommodation pricing.
While we do speak of Cape Town as having a high-end brand, much of the recent blame for lower demand has been levelled at five-star hotel prices, yet this represents a fraction of the total diverse accommodation pallet. Cape Town boasts some of the world’s best small hotels, B&Bs and guesthouses, which are competitively priced and offer excellent value for money. The fact that Cape Town has a luxury hotel offering that compares with, and in many instances exceeds, our competitors in terms of quality and setting is an asset to our destination.
It is not in anyone’s interest to undermine the strength of our destination brand by devaluing it or by reducing margins. Visitors to Cape Town leave the destination overwhelmingly impressed and willing to return. Post-World Cup figures showed that 92% of foreign visitors said they would recommend South Africa to others, and 96% said they would return. This does not suggest a fundamentally flawed product or pricing problem.
It is commonly recognised that destination price perceptions are driven more by travel time and distance (transportation costs) than by in-destination costs.
There is no evidence to suggest that Cape Town’s in-destination costs have detracted from its value proposition. If we can address the demand problem, flight costs should become more competitive.
Case studies show time and again that there are no silver bullets to solve visitor demand problems. Well-meaning suggestions, such as shifting market focus or changing industry-pricing regimes, are mere distractions with no proven long-term outcome.
It is clear the visitor industry can significantly contribute to the achievement of the socio-economic imperatives of the new economic development strategy for the region, and the establishment of an Economic Development Agency (EDA); the marketing strategy is designed to support the initiatives of that body.
For these imperatives to be realised, all evidence points to the necessity of the city having a sustained, comprehensive marketing campaign focused squarely on generating visitor demand and providing a platform for commercial entities and the industry to convert this into sustainable and profitable business.
This is not a new approach: destinations that have managed to orchestrate and sustain such campaigns outperform any that have not managed the task; note the robustness of sustained performance for New Zealand (100% Pure New Zealand), Malaysia (Malaysia Truly Asia), India (Incredible India) and Barcelona. In each of these cases, all destination sectors (not just tourism) have benefited from such campaigns.
The world’s cities are the new tourism battleground and Cape Town probably does not induce nor does it receive a quantum of visitors anywhere near its potential. In this regard, it is well-established that cities are not defined by their municipal boundaries but by an enlarged footprint that includes surrounding regions related to the city’s functional and economic catchment area.
Cape Town Tourism, with a number of partners, has developed a comprehensive strategy that fuses all elements of the visitor industry (business, conventions, meetings and events, students, and tourism) within a single brand position.
The strategy and its execution are focused solely on achieving economic growth and creating jobs for the citizens of the city and, as a result, the surrounding areas. Case studies from around the world emphasise that a growing tourism industry, in particular, can and does provide substantive opportunities, particularly for micro and small businesses. The strategy is designed specifically to meet these objectives.
Additionally, the strategy has been constructed to offer flexibility such that it may be adapted to environmental changes, opportunities and impediments as they arise.
We will continue to work with our partners in the City of Cape Town and South African Tourism to execute well-considered campaigns that are based on international best practice. We are currently discussing the brand and marketing strategy and its execution through campaigns with key stakeholders and funders. The strategy supplements the excellent platform already established by the industry, with real interventions in the areas of marketing communications, events and experiences. The fully integrated plan is designed to produce outcomes both in the short and long term and to align with the broader economic development strategy and EDA.
We need to stress that the strategy and intervention formulation process is in no way haphazard or undertaken without a deep concern for the visitor industry and its current predicament.
Rigorous analysis has been undertaken and significant input received from industry and global stakeholders over the last year post the 2010 FIFA World Cup. The intervention strategy is being developed in a most considered fashion and results from a seven-month in-depth study involving all our stakeholders, global and specific market research, analysis of the visitor industry, source market conditions, and assessment of global best practice and Cape Town-specific contexts. We have engaged international consultants and local experts in the development process, alongside seeking the views of all visitor industry constituents including business, business events, attractions, events and academia.
Appreciating the need to act expeditiously, and in line with its constitution and mandate as an industry association, Cape Town Tourism has commenced:
- The process of developing and executing a global demand-generating marketing communications campaign.
- Negotiations with substantial global media channels (like Discovery and National Geographic) with whom we will partner in taking Cape Town to the world.
- Engaging with relevant authorities to enhance Cape Town’s experience offering by making understated existing attractions visible and user-friendly for visitors. An example includes the Fan Walk developed for the 2010 FIFA World Cup and using it to link sites of significance across the city through a series of interactive walks. This will spread the tourism spend.
- Consolidating our events portfolio into a compelling and marketable year-round events calendar making Cape Town a must-see and -do destination. The focus will remain on winter to help address seasonality and grow both domestic and international tourism. This includes a significant new lifestyle/food and wine event to be developed between June and September 2012.
- In terms of domestic tourism, Cape Town Tourism will continue to position Cape Town as a unique, inspiring and great value year-round destination for local travellers, especially in off-peak periods. We are finalising a joint marketing agreement with one of the major low-cost airlines as we recognise that destination price perceptions also relate to travel time and distance (transportation) costs, as well as the in-destination costs. Part of our domestic strategy is to leverage events as part of a national marketing campaign. There are substantial plans in place to use established events like the Cape Town International Jazz Festival and the J&B Met, as well as new lifestyle events in winter, like 100 women, 100 wines (a wine competition aimed at the domestic market), to stimulate domestic tourism arrivals.
- We are consolidating and strengthening work in our key source markets in the following ways: building on strong media and trade relations in our European and US markets by proactively hosting selected media and trade in Cape Town in partnership with the industry.
- Sharing consumer insights from our key source markets through quarterly research reports from our international reps and hosting two major key source market workshops per year for our members, focusing on the UK and US (March 2012) and Germany and the Netherlands (June 2012).
- Partnering with South African Tourism and SAA to explore and tap into new markets, with the focus on targeting major TV channels and magazines from Brazil/Argentina, China, Japan, India and the Middle East with a media programme that builds PR awareness of Cape Town in these new developing markets.
- A joint marketing agreement has been concluded with Durban and Johannesburg Tourism, with a view to securing a larger percentage of the world’s urban travellers. The cities will partner with South African Tourism in a dynamic new urban tourism campaign. Cape Town is one of only three African cities that are included in a major international urban tourism case study by the United Nations World Tourism Organisation. Cape Town Tourism is working with the City of Cape Town on this case study.
- Community involvement programmes are being developed to ensure citizens participate in the promotion of Cape Town and the enhancement of visitor experiences.
- Continued investment in web and social media, exploring the most suitable mobile travel applications for Cape Town.
- A radical overhaul of Cape Town Tourism’s systems and technology is currently underway, with many key projects near completion. This includes a new centralised online booking system that will enable much-enhanced data management and online real-time booking facilities.
Work on the campaign and its underlying programmes has commenced. The entire campaign and its execution detail will be launched locally in October and globally in November this year.
The elements of the campaign include both long- and short-term initiatives. In the short term, focus is to be placed on solving immediate industry problems:
- Maximising visitor spend, while they are in the city, by revitalising their motivation to visit attractions through the development of interactive experiences.
- Spreading the visitor spend by introducing trails and points of interest.
- Conducting specific campaigns to induce domestic market visits during lower-demand months.
- Promoting and marketing the events calendar.
For the longer term the strategy focuses on demand generation in our established core markets, while exploring feasible opportunities with partners in appropriate new markets. This involves a significant communications package orchestrated with our media partners; given the lead times in developing and executing this, we will need to make decisions and commitments in the short term to ensure salient production deadlines and scheduling milestones are not missed. In the production of broadcast materials and collateral, content options and the key messages will be explored and co-developed with all key economic sectors.
We have no doubt that, with sustained commitment, we will realise demand increases, enhanced visitor expenditure and the provision of more sustainable jobs for Cape Town’s tourism industry.
Mariette du Toit-Helmbold
Cape Town Tourism CEO