South African Tourism

1. South African Tourism Bi-Annual Report April 2013 – September 2013 Presentation to the Portfolio Committee 29 October 2013 Presentation by: Thulani Nzima CEO: South African Tourism Portfolio Committee 29 October 2013

2. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

3. Background • Global tourism arrivals topped a record 1 billion tourists in 2012. • Increasing demand for shorter trips instead of long haul travel. • Average length of stay reduced across the board • Spend increased across the board except Africa land markets • On-going concerns regarding the future of the Euro-Zone and unstable economies. • European countries continually seek austerity measures to boost their economies. • Continuing decline in disposable income • The US economy is showing recovery signs and travel slowly rebounding • Small agility better than big, cumbersome entities • Direct tourism contribution to the country’s GDP grew by 5% to R84.3 billion in 2011. • Tourism directly or indirectly sustained 9% of employment

4. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND HUB STRATEGY DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

5. Overall Performance – Quarter 1 (April – September 2013)

6. Overall Performance – Quarter 1 (April – September 2013)

7. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

8. Tourist arrivals to South Africa grew by 8.6% in Jan to March 2013 compared to the global growth of 7.0% for the same period in 2012. Year-on-Year Change in Tourist Arrivals to each region % Change Note: UNWTO estimates incorporate provisional data for some regions Source: Statssa Tourism & Migration release March 2013, SAT analysis; UNWTO World Tourism Barometer June 2013

9. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

10. Tourist arrivals to South Africa for January to March 2013 grew by 8.6% over 2012 to reach 2,461,999.All regions showed positive growth , Asia showed highest growth of 27.1% in tourist arrivals. # 3 Europe Europe • 430,910 arrivals • 9.2% up from 2012 North America # 4 Americas • 92,727 arrivals • 5.2% up from 2012 Middle East • 16,194 arrivals • 11.4% up from 2012 # 2 Africa Air Asia # 1 Asia & Australia • 108,272 arrivals • 27.1% up from 2012 Central & South America # 5 Africa Land • 35,535 arrivals • 15.2% up from 2012 Australasia • 30,816 arrivals • 3.4% up from 2012 AFRICA • 1,736,166 arrivals • 7.6% up from 2012 GRAND TOTAL • 2,461,999 arrivals • 8.6% up from 2012 Indian Ocean Islands • 5,704 arrivals • 10.3% up from 2012 Note : Tourist Arrivals figures shown above for Jan. - Mar. 2013 Source: Table A Tourist Arrivals Jan. - Mar. 2013

12. Total foreign direct spend generated from tourist arrivals decreased by -5.4% between Q1 2012 and Q1 2013. Africa - land and Africa - air were the only regions that posted a decrease in revenue from Q1 2012 to Q1 2013 Total Foreign Direct Spend (excluding capital expenditure), 2011 to 2013 Revenue (R - Billion) Average spend per tourist in SA Source: SAT Departure Surveys

13. Asia remains buoyant and Europe SA’s main source of tourist arrivals • The source of this tourist performance of 8.6% came from the following markets:. • Asia remains buoyant with the highest growth, recording 27.1% increase in foreign tourist arrivals to reach 108 272 tourists. • This growth was led by China, including Hong-Kong which grew by 37.4%, reaching a total of 42 441 tourists in March 2013 relative to 30 883 in the same period in 2012. • Growth in China was also influenced by the following factors, among others; • South African Airways’ direct flight to Beijing since January 2012. • Two new visa application centres which opened in Beijing and Shanghai in 2011 – making travelling to South Africa more appealing for Chinese tourists. • Europe remains the main source of foreign tourist arrivals to South Africa, with 430 910 tourist arrivals - a 9.3% growth from 2012 figures. • This growth is led by the UK’s tourist arrival figures of 137 358 ( 2.7% growth from 2012). • Germany grew 17.6% • France grew 7.3% • the Netherlands down with -2.9% and • Italy grew 17.1% reaching 14 242 tourist arrivals. • The US leads the charts of North America performance, growing at 5.8% to reach 74 166 tourists in March 2013.

14. Regional Africa’s Growing supported by the Africa Growth Plan • Central and South America recorded a growth of 15.2%, attracting 35 555 foreign tourist arrivals to South Africa, led by Brazil. • The Middle East Markets brought in 16 194 foreign tourists in 2013, up by 11.4 % from 2012. • Regional Africa reported 1.73 million tourist at 7.2% growth .

15. There has been a decrease in the number of provinces visited by all tourists Average Number of Provinces Visited by All Tourists, Q1 2012 vs. Q1 2013 Source: SAT Departure Surveys

16. Gauteng and Western Cape are by Far the Most Visited Provinces. Provincial Distribution Q1 2012 vs. Q2 2012 Note: Unpaid accommodation refers to staying with friends or family. “Other” accommodation refers to staying at schools, churches, universities, etc. Source: SAT Departure Surveys

17. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

18. Markets Driving Tourist Arrival Growth in Q1 and Beyond – 4th Portfolio 01/04/2011 to 30/03/2014 2011 – 2013/4 Country Manager Regional Director Stakeholder Manager Global Channel Manager

19. Markets that will drive Future Tourist Arrival Growth - 01/04/2014 to 30/03/2017 Responsibility Country Manager Regional Director Stakeholder Manager TRM: Global

20. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE

21. The Hub Strategy for Global Markets to increase market penetration, footprint and efficient resource utilisation. AMERICAS ASIA & AUSTRALASIA EUROPE LATIN AMERICAS ASIA PACIFIC CENTRAL Europe NORTH AMERICAS UNITED KINGDOM AFRICA WEST AFRICA EAST AFRICA BENELUX & SCANDINAVIA AUSTRALASIA FRANCE (OFFICE) INDIA CENTRAL AFRICA ITALY (OFFICE) ASIA Air LINK HUB SADC Notes: * Planned SA Tourism Offices (2013/2014) ** 1 Trade Relations Manager will be appointed – approved by Board (2014/2015) (Shanghai, South Korea, Russia, Scandinavia as well as Tanzania and Uganda) *** Future Plans (2015/16 and Beyond)

22. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

23. Domestic Performance

24. Reasons for a Decline in Domestic Performance Total spend has increased by 4% from R5.0 billion in Q2 of 2012 to R5.2 billion in Q2 in 2013. • Average spend per trip has also increased from R760 in Q2 of 2012 to R930 in Q2 of 2013. • Average length of stay has increased from 3.9 nights in 2012 to 4.0 nights in 2013. • The 21% drop in domestic trips from 7.0 million in Q2 of 2012 to 5.5 million in Q2 of 2013 emanates from the following: • Growing : Visiting Friends and Relatives (VFR) from 71% to 74% while holiday trips have decreased by 9% • Affordability is still a major challenge due to • unemployment recorded at 25.6% in Q2 of 2013 • Lower consumer spending recorded in Q1 of 2013 was 2.3% - down from 2.4% (Q4 of 2012), 2.7 (Q3 of 2012) and 3.2% (Q2 of 2012). • In addition to this, South Africans do not associate value and meaning to domestic travel experiences and therefore do not invest. • There is need for a culture adjustment in the five market segments, causing consumers to re-prioritise travel. The new campaign addresses this requirement by igniting a spark that culminates in a ‘movement’ that identifies with domestic travel benefits.

25. Revamped Domestic Campaign • A comprehensive campaign audit was performed on the last three Domestic campaigns. • The new revamped Domestic Tourism campaign extracts all the key learning’s from the previous campaigns. • In reviewing the challenge with the Shot’ Left campaign it was recognized that the shortfall of the target market did not address the large potential of the market. • In the case of the Vaya Mzansi campaign, it was apparent that it evoked national pride amongst South Africans, using magnificent imagery that covered all corners of the country. • Although it was a beautifully produced campaign, the call to action was minimal. • In the revamped Domestic Tourism revamped campaign, the market segmentation has been aligned to the Vaya Mzansi (from LSM 1 to 10) with the inclusion of the “Young at Heart” - who are over 50 plus, with greater disposable income. • This Domestic Tourism campaign also focuses on shifting behaviour to create a culture of travel that has not previously been achieved.

27. 1st Phase - Inter-City and Provincial Rivalry (3 months) • The new Domestic Tourism initiates a spark of engagement, generating ‘healthy banter’ between the cities and provinces by creating a competitive interaction that challenges the rest of South Africa with the statement “Nothings More Fun than a Shot’ Left from ….” • This is a fully integrated, sustainable, unconventional, unexpected, entertaining and delightful campaign. It focuses on improving short-term trips like a weekend away. • Leveraging of the equity built on Shot’Left, the creative device is “Nothing is more Fun than …” The new campaign brings to life the innate benefits of short breaks, road trips with friends or quick get-away trips from the city, a Shot’Left. • The campaign uses travel ambassadors that personify fun. • The look and feel will be colourful, energetic and dynamic. • A 360-degree, through-the-line media campaign will broadcast targeted messaging such as “THERE IS NOTHING MORE FUN THAN A SHOT’ LEFT from JOZI”.

28. 2nd Phase – Post Rivalry • This phase is characterised by a fully integrated campaign on television commercials, radio, digital media and print (e.g. catalogues into newspapers). This will be deal driven campaign with flexibility pricing and offering. Collateral will also be distributed around events such as Fashion Week. • Provincial Alignment - SPARK will promote intra-Provincial travel. • Concurrently to the rivalry phase that is sparked, the Provinces are assisted with ‘templates’ of the marketing collateral to add their own creative statement. SPARK will promote intra-Provincial travel. • Chapters of the campaign will focus on promoting attributes that are unique for each Province. The Provincial campaign will provoke that “Nothing is More Fun than a Shot’Left in Limpopo” (for example). • A road trip is being used to showcase various modes of transportation across the country (bus, train, taxi, etc). • Alignment of strategies to this campaign e.g. aligning the Gauteng Tourism Authority’s GP to the JOZI’s campaign. • Most Province and Cities are already having strategy around trade partners – but alignment will add impetus to the campaign • Use of DJs with a regional appeal was suggested.

29. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

30. Number of Graded Establishments as at end September 2013 The grand total of 5675 is the total number live establishments

31. Number of Graded Rooms as at end September 2013 This slide DOES NOT include cancellations

32. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

33. Number of Bids Secured for South Africa 2013 - 2017 Bids 2013 - 2017 Bids Submitted Q1 and Q2 dated 22/10/2013

34. Number of Bids Secured for South Africa 2013 - 2017 Bids 2013 Bids 2014

35. TABLE OF CONTENTS GLOBAL ENVIRONMENT OVERALL PERFORMANCE - KPIs GLOBAL Q1 PERFORMANCE SOUTH AFRICA’S Q1 PERFORMANCE MARKETS DRIVING TOURIST ARRIVAL GROWTH IN Q1 AND BEYOND MARKETS THAT WILL DRIVE FUTURE GROWTH DOMESTIC TOURISM RESULTS TGCSA UPDATE NCB UPDATE FINANCIAL PERFORMANCE

36. Highlights of SA Tourism’s Financial Performance for the 6 Months that ended on 30 September 2013 • SA TOURISM ON TRACK TO SPEND ITS FULL 2013/14 BUDGET • During the first 6 months of the 2013/14 financial year, SA Tourism spent R 604.7 million which represents: • 89% of its year-to-date expense budget of R 682.6 million (this means that SAT was R 77.9 million behind on its year-to-date budget as at 30 September 2013); • 62% of its total 2013/14 operational budget of R 968.6 million.

37. Highlights of SA Tourism’s Financial Performance (cont.) • EXPENDITURE BY COUNTRY OFFICES AND BUSINESS UNITS • Nine of South African Tourism Country offices spent 90% or more of their year-to-date budgets, two Country offices were slightly below budget (Amsterdam & Nigeria) and three Country offices were significantly below budget (Brazil, Angola & Kenya). • Of South African Tourism’s seventeen Business Units, twelve spent 90% or more of their 2013/14 year-to-date budgets, three were slightly behind on their budgets (Africa Portfolio, TGCSA & Watch-list Business Unit) and two Business units were significantly below budget (National Conventions Bureau & HR). • Relevant actions have been taken by management to address the under-expenditure within these Country offices and Business Units.

38. Highlights of SA Tourism’s Financial Performance (cont.) • CAPITAL EXPENDITURE • During the first 6 months of the 2013/14 financial year, SA Tourism only managed to spend R 1 279 916 or 7% of its total 2013/14 CAPEX budget of R 18, 7 million. The main reasons for this were the fact that: • three planned overseas offices have not been opened yet (Angola, Brazil and Nigeria) while the 4th new office (in Kenya) is only planned for the end of the 2013/14 financial year • approval for phase 1 of the planned Head Office extension have not been received from the relevant local authority yet.

39. THANK YOU