So, does anyone know the answer? Was the FIFA World Cup in South Africa a success, or not?
The world, of course, is divided into optimists and pessimists. The former are either the saviours of the nation, driving forward progress, or naïve and hopelessly foolish Franks. The latter are either never-happy Harrys, or saviours of the nation.
For me, the World Cup, at least off the pitch (they say football is a game for gentlemen, played by thugs – too right!) was a great success. Perfect? Of course not, but there was no racial blood bath, no crime wave to herald the coming of Armageddon, no power cuts – it went well. It proved that, despite the naysayers’ best efforts, that an African nation can organise a world cup event.
As far as the hotel industry is concerned, the results are not unanimously positive, nor are they a disaster. No doubt there will be an inquest into the activities of Match, who certainly appear to have some serious questions to answer regarding the allocations and pricing policies they imposed. But STR Global data for June show that, at least for the hotels in their samples, June was a great month. Cape Town’s occupancy rose 15.9% to 57.8% for the month (compared to 2009), and average rates were up 123.9% to US$258.21. Room occupancies in Johannesburg increased 27.1% to 80.6%, and rates rose 101.9% to US$201.09. Remember, that June is the middle of winter in South Africa, so the World Cup brought an additional high season!
It’s the legacy of the event that needs to be looked at. The pessimists point to the fact that South Africa had other development needs, which were not fulfilled by building football stadia. Yes, probably, but would the money actually have been spent on other, more “socially-minded” projects, had the catalyst of the event not been there? Maybe, maybe not. Is South Africa better off for having hosted the World Cup. Absolutely.
The transport infrastructure has been improved substantially – roads, airports, the new Gautrain link in Johannesburg. The hotel industry has experienced an upgrading that would have taken many years to achieve –if ever - without the push they received. And when South Africa is competing for international tourist arrivals with other countries, the quality of product has to meet and exceed expectations.
Will there be a downturn in occupancies now that the World Cup is over? Yes. It is an experience shared by virtually every other city that has hosted a large sporting event, such as the World Cup and the Olympics. Every city, from Los Angeles and Atlanta to Athens and Madrid, experiences a spike in the supply of rooms, investors building in expectation of the increase in visitors for the event and ever afterwards. History shows that, in most host cities, there is a small reduction in occupancies just before the event (the lull before the storm), an increase in demand and in rates, during the event, and a reduction in occupancies immediately afterwards.
In 2006, when Germany hosted the World Cup, that was certainly the experience – May and August were down on 2005, June saw a major improvement. Data for 2007, the year after, recorded a 3.5% increase in international visitors to Germany, with an 8% increase in holiday trips. Officials use the number of visitors from Brazil as an example of the impact on “new” demand sources – the number of Brazilians visiting Germany was up 74% in 2006, and then down by only 9% in 2007, clearly a legacy of the event in June 2006.
In the run-up to the Beijing Olympics, visitor numbers were down 20 per cent on the previous year, and immediately after the event hotel occupancies crashed from 100 per cent to around 30 per cent. During the event, all but the five star hotels were disappointed by the levels of demand. Why? Because of bad publicity about security and human rights abuses, an “overkill” visa regime, restrictions on domestic travellers, who needed permits to visit Bejing, and a government-driven increase in the number of hotel rooms, accompanied by massive price hikes, resulting in huge oversupply. Not the same as South Africa.
According to the European Tour Operators’ Association “There is no evidence that, post Olympic Games, any city sees a surge in tourism arrivals”. Well, maybe not immediately, but in the long term, the signs are extremely positive. Beijing saw a 50% increase in rooms sold in September 2009, one year after the Olympics. How? By pricing themselves into a recovery. Reports of high prices (in the event, slashed considerably) during the Olympics harmed the industry, and the response was obvious – offer unbeatable prices to demonstrate to the world that Beijing is not as expensive as people thought.
And in Atlanta (Olympics 1996), the development of hospitality facilities was with a clear objective of maintaining and increasing demand levels after the event, by increasing the conference space the city had to offer. Alongside the promotion of Atlanta as a new leisure destination, this opened up new business opportunities for the city.
According to industry observers, the supply of hotel rooms in Cape Town has expanded by 20 per cent in the past 3 years, whilst the figures for Durban and Johannesburg are 36
per cent and 29 per cent respectively. Some will have been encouraged to develop by the forthcoming World Cup, but most will have had their economics based on the general upswing in the tourism industry in the country – which can, if handled properly, only continue once the last goal was scored.
So what’s the future position for South Africa? Well, it still remains to be seen. I have yet to see any follow-up advertisements on CNN or Sky Channel, extolling the virtues of South Africa as a holiday and conference destination. Perhaps they will be on there soon. Because the South African tourist authorities, working together with the private sector – all those people who invested in new and upgraded facilities and services - must get out there and sell, sell, sell. To old markets, new markets, all markets. With very few exceptions, the tourism industry in South Africa emerges from hosting the World Cup covered in glory.
Ride that wave.
W Hospitality Group, Lagos