Du Plessis concedes that the benefits of hosting the tournament should not be calculated only in Rands and cents, South Africans and international visitors enjoyed the tournament immensely, a benefit that is no less real because it is hard to quantify in monetary terms,he says.And there are potential longer-run benefits, mainly because of the improved image of a vibrant economy where institutions function smoothly and which offers attractive scope for trade and investment.These less material benefits, if they raise the long-term growth trajectory of the economy, will be more valuable in time than the unsatisfactory benefits calculated by Venter and Du Plessis.
Its econometric models demonstrate that US guests to SA are price-insensitive, while the German market is quite price-sensitive.Though this is surely good for the top end of the market, it does imply that the vast majority of normal Americans do not currently consider SA a viable holiday destination,states Venter.
By using their estimations of arrivals and price data from hotels, Du Plessis and Venter made a rough estimate of the expected expenditure by tourists in SA throughout the World Cup, based on the following assumptions:
In totality, international visitors spent R24310 on average per trip and African visitors R11000. Combining this data with the number of arrivals yields expenditure of R4.2bn (or 0.16% of GDP) by visitors to the tournament. In order to calculate the net input of the event, however, tourism income that would normally have been achieved in June should be subtracted. Thereafter, Venter and Du Plessis calculate that the net gain from World Cup expenditure was R2.5bn (or 0.09% of GDP). Since most tournament tickets were bought by South Africans and this money accrued to Fifa, ticket sales to South Africans (roughly R1,3bn) also needs to be deducted.
Using their estimates of arrivals and price data from hotels, Du Plessis and Venter made a rough estimate of the likely expenditure by tourists in SA during the World Cup, based on the following assumptions:
Two-thirds of international tourists used high-end hotels (spending R1400/day on accommodation and R1230 on sundries). African guests visited low-end hotels (spending R1000/day on accommodation and sundries).
In US dollar terms, the actual cost of a South African hotel room has more than doubled over the past 20 years. Prices rose by more than 20% from the beginning of the economic recession to the end of 2009,Rand appreciation through 2009 and into 2010 served as a turbocharger, lifting rates higher during the recession, when logic would have dictated dropping them, describes Venter. These towering prices may explain why the numbers of World Cup visitors were considerably less than official predictions. Econex believes that high hotel cost in South Africa not only puts boundaries on volume growth, but also eliminates entire market segments that seek reasonably priced destinations.
International tourists spent R8000/trip on domestic transportation and African tourists spent R4000.
Though comparable data is not available for transport services and restaurants, these businesses are likely to have expanded considerably during June, the study concludes. The crisis, according to a separate Econex study, is that most of the financial gains made by the accommodation sector were derived from higher rates rather than higher occupancies with occupancies up no more than 40% in Gauteng and 30% in Cape Town. This development is undesirable for an industry that has experienced 20% growth in new hotel rooms since 2007. It suggests that rates and/or occupancies could now decrease, given the possible oversupply, Venter advises.
Econex has produced a price index for South African accommodation founded on data from the Portfolio Collection, which stands for about 400 establishments in the three- to five-star market. The results, adjusted for inflation, indicate that there was a vast increase in the average price per hotel room, from R480 in 1990 to over R1200 in 2009. This exceeds the rise in consumer inflation over the same period by far. Venter says that SAs tourism sector experienced positive changes during this period and the value of many establishments improved extensively.
To estimate arrivals, the researchers combined data on air arrivals with hotel occupancy rates in the major cities during June. Based on these reliable indicators, their initial estimate is that SA had 150000 international arrivals and 50000 visitors from elsewhere in the region only 70000 more than in June 2009, a 30% increase. Du Plessis and Venter blame the low numbers on the recession and SAs elevated hotel prices,The accommodation sector in South Africa generally did very well for the World Cup, especially in Johannesburg,says Venter.But a legacy of high and rising room rates, compounded by recent rand strength, has priced SA out of the league of entire market segments that seek reasonably priced destinations.
Hoteliers enjoyed strong pricing power during the World Cup, with room rates rising by as much as 185% compared with June 2009 in Gauteng, 173% in Cape Town, and 115% in Durban (see table). Revenue per room was sharply higher in all three cities, with hoteliers being unambiguous beneficiaries during the event.
As SA enjoys the honour of productively hosting the 2010 soccer World Cup, preliminary estimates of its economic benefits are falling short of official projections. The most saddening analysis is by Professor Stan du Plessis of Stellenbosch University and Cobus Venter of Stellenbosch based economics consultancy Econex. Almost 400000 global visitors were expected to be present at the World Cup. Du Plessis and Venter calculate that only 200000 tourists came, who added 0.1% to GDP this year only a portion of the projection of the national treasury, which is 0.4% of GDP.
To estimate arrivals, the researchers merged data on air arrivals with hotel occupancy rates in the main cities during June. Based on these trustworthy indicators, their initial estimate is that SA had 150000 international arrivals and 50000 guests from elsewhere in the region only 70000 more than in June 2009, a 30% raise. Du Plessis and Venter blame the low numbers on the economic decline and elevated hotel prices in South Africa,The accommodation sector in South Africa in general did very well for the World Cup, especially in Johannesburg,says Venter.But a legacy of high and rising room rates, compounded by recent rand strength, has priced SA beyond entire market segments that seek reasonably priced destinations.
The net gain from the soccer tournament is, as a result, R1.2bn (R2.5bn minus R1.3bn), which is 0.05% of GDP. By including a conservative multiplier in order to consider the way this spending would have influenced the economy, the economists arrive at a concluding figure of 0.1% of GDP. This figure does not try to capture the total impact on economic activity that World Cup planning has had over the last five years, which audit and advisory firm Grant Thornton puts at R93bn.
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