AGENDA The Marketing Tourism Growth Strategy of South Africa Overview of the Domestic Tourism Market Domestic Market Challenges The Domestic Marketing Strategy 2 Copyright 28 South African Tourism
The Tourism Growth Strategy has two areas of focus: The outward looking Marketing Strategy and the internal Global Competitiveness Programme ategy owth Stra ourism Gro To keting ism Mark Strategy Touri al eness mme Globa ompetitive Program Co Choose and Understand Target Markets and Consumers RECRUITMENT Get them here Build the Brand Marketing Strategy Channel Strategy DELIVER THE EXPERIENCE Develop the Products Deliver the Service UPGRADE THE BUSINESS ENVIRONMENT LEVERAGE Repeat and Recommend Loyalty and CRM Generate word-of of-mouth 3 Copyright 28 South African Tourism
The core business of South African Tourism is the international marketing of South Africa which forms part of a broader tourism strategy for South Africa: The Tourism Growth Strategy (TGS) Domestic Tourism International Tourism Strategy Investment Domes stic Touris sm Base- -load Product Development Who do we organise against to win, and how? Access - Visas - Flights Products Marketing Channels - Who? - Where? Consumers - What? - When? - How? - Channels 4 Copyright 28 South African Tourism
Critical questions in developing the Tourism Growth Strategy What are our goals and aspirations? Where will we play? What are the broader goals of tourism? How will we win in chosen markets? What role does SAT play in the tourism value chain? What countries should SAT focus on? What are the segments within these countries that SAT needs to target for growth? What are the segments that SAT needs to defend its share in? What are the marketing, facilitation, product and channel levers that must be addressed for growth to take place? How we will build our brand? What capabilities must be in place to win? What implications does this have for SAT s capability set? What management systems are required? 5 Copyright 28 South African Tourism
Mandate and Key Strategic Objectives for Tourism The Tourism Act s mandate to SA Tourism is... Sustainable GDP Growth Sustainable job creation Redistribution and transformation... through six key objectives... Increase in tourist volume Improve geographic spread Increase in tourist spend Improve seasonality patterns Increase length of stay Promote transformation... by acting in a focused way to... Understand the market Facilitate the removal of obstacles Choose the attractive segments Facilitate the product platform Market the Destination Monitor and learn from tourist experience 6 Copyright 28 South African Tourism
AGENDA The Marketing Tourism Growth Strategy of South Africa Overview of the Domestic Tourism Market Domestic Market Challenges The Domestic Marketing Strategy 7 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Key metrics In 25, just over half of South African adults traveled within the country, resulting in some 36 million domestic trips Percentage of Adult Population That Has Taken A Domestic Trip Over Past Year: 25 1 4 35 Number of Domestic Trips and Travelers: 25 36.2 3 Did Not Travel In Past Year 47.2% Traveled In Past Year 52.8% 25 (MM) 2 15 Avg. # of Annual Trips per Traveler : 2.5 14.3 1 5 Total Number of Domestic Trips Total Number of Domestic Travelers Note: 1 Based on the question How many domestic trips have you yourself taken in the past 12 months? asked in each of the 25 monthly surveys; therefore, incidence does not correspond to an exact Jan.-Dec. 25 time frame, but rather is an average for any point in time over the course of 25 8 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Key metrics The vast majority of domestic trips - some 25 million - were taken for the purpose of visiting friends and relatives At 12% and 3%, respectively, the incidence of annual holiday and business travel remains low 6% 5% 4% 53% Incidence of Annual Domestic Travel by Purpose: 25 4% 4 35 3 25 25. Number of Domestic Trips by Purpose: 25 4.5 3.7 2.3.7 36.2 % of Adult Population 3% Trips (MM) 2 2% 15 12% 1 1% 5% 3% 2% 5 % Total Holiday Business VFR Religious Medical VFR Religious Medical Holiday Business Total Share of Total Trips 69% 12% 1% 6% 2% 9 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Key metrics In total, spending on domestic tourism amounted to approximately 21.1 billion Rand in 25 Holiday travelers produced nearly a third of all domestic tourism revenues, despite accounting for just 12% of all domestic trips 25 Spending on Domestic Trips by Purpose: 25 2 2. 1.4 15 2.5 Rand (Bn) 1 6.8 21.1 5 8.5 Share of Total Spend VFR Holiday Business Religious Medical Total 4% 32% 12% 9% 6% 1% 1 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Key metrics Domestic tourism activities resulted in a total of 157 million nights away from home, and the average trip lasted 4 nights 18 Total Nights by Trip Purpose: 25 7 Average Nights by Trip Purpose: 25 16 14 26.4 1.1 9.5 3.8 157.3 6 5.9 5.3 Nights (MM) 12 1 8 17.5 Nights 5 4 3 4.3 4.3 4.1 2.7 6 2 4 2 1 VFR Religious Medical Holiday All Trips Business Holiday Business Total Medical VFR Religious Share of Total Nights 68% 17% 6% 6% 2% 1% 11 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Key metrics Nearly a third of all trips were taken to (or within) KwaZulu-Natal; Gauteng was the second most popular destination 15 Number of Annual Trips TO Each Province: 25 12 11.6 Trips (MM) 9 6 7.1 3.5 3.3 3.1 3. 3 2.1 1.9.7 KZN Gauteng N. West E. Cape Limpopo W. Cape Free State Mpum. N. Cape Share of Total Trips 32% 2% 1% 9% 9% 8% 6% 5% 2% 12 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Key metrics Domestic travel is highly seasonal; In 25, the number of trips jumped in the holiday months of March, July, and December Conversely, the number of trips plummeted in non-holiday months, and particularly in months lying immediately before holiday periods (i.e. February and November) 16% Seasonality of Domestic Travel: 25 1 14% 13.6% % of Trips 12% 1% 8% 6% 8.1% 1.% 8.3% In 25, Easter fell in March 8.6% 7.3% 11.2% 7.6% 8.9% 7.% 4% 4.9% 4.5% 2% % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ; SAT Arrival Stats, 24 13 Copyright 28 South African Tourism
AGENDA The Marketing Tourism Growth Strategy of South Africa Overview of the Domestic Tourism Market Domestic Market Challenges The Domestic Marketing Strategy 14 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges The revenue generation and transformation potential of the domestic tourism market is currently constrained by four interrelated challenges: Extreme Seasonality Domestic Holiday Market Immaturity Domestic Tourism Market Limited Geographic Spread Competitiveness Challenge 15 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges The greatest challenge facing domestic tourism in South Africa is the immaturity of the domestic holiday travel market This is characterized by a low incidence of holiday travel relative to VFR travel 6% Incidence of Annual Domestic Travel by Purpose: 25 1 52.8% 5% 4% 39.9% % of Adult Population 3% 2% 12.4% 1% 5.2% 3.1% 2.1% % All Trips VFR Holiday Religious Business Medical Note: ¹Based on the question How many domestic trips have you yourself taken in the past 12 months? asked in each of the 25 monthly surveys; therefore, incidence does not correspond to an exact Jan.-Dec. 25 time frame, but rather is an average for any point in time over the course of 25 16 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges The vast majority of domestic trips, nearly 7%, are for the purpose of VFR, while holiday travel accounts for just 12% of all trips 3 Number of Domestic Trips by Trip Purpose: 25 18 Total Nights by Trip Purpose: 25 25 25. 16 1.1 9.5 3.8 157.3 14 26.4 2 12 17.5 Trips (MM) 15 Nights (MM) 1 8 1 6 5 4.5 3.7 2.3.7 4 2 VFR Holiday Religious Business Medical VFR Religious Medical Holiday Business Total Share of Total Trips 69% 12% 1% 6% 2% Share of Total Nights 68% 17% 6% 6% 2% 1% 17 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges However, the relative value of a holiday trip far outweighs a VFR trip On a per trip basis, VFR trips generate nearly 5 times less revenue than holiday trips - when trip length is accounted for, VFR trips are still 3 times less valuable than holiday trips 2,5 Average Spend Per Trip by Purpose: 25 5 Average Spend per Day by Purpose: 25 2, 1,96 4 359 Rand 1,5 1, 1,525 1,83 Rand 3 2 263 258 197 5 583 531 339 1 134 79 Medical Business Religious Medical Holiday All Trips Holiday All Trips VFR Business Religious VFR 18 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges Furthermore, holiday trips are, on average, longer than all other trip types 7 Average Nights by Trip Purpose: 25 6 5.9 5.3 Nights 5 4 3 4.3 4.3 4.1 2.7 2 1 Holiday Medical All Trips VFR Business Religious 19 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges As a result, holiday spending accounts for a far greater share of total spending than its relative trip volume would imply 25 Spend on Domestic Trips by Purpose: 25 8% Share of Trips by Purpose vs. Share of Spend by Purpose: 25 2 2.5 2. 1.4 21.1 7% 6% 69% Share of Spend Share of Trips Rand (Bn) 15 1 8.5 6.8 Share (%) 5% 4% 3% 4% 32% 5 2% 1% 12% 12% 6% 9% 1% 6% 2% VFR Business Medical Holiday Religious Total % VFR Holiday Business Religious Medical 2 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges The majority of total domestic tourist spending goes towards transportation costs Higher value activities like accommodation, shopping, and entertainment attract a relatively small share of total expenditures 7 6 6.5 Breakdown of Total Domestic Spending by Product / Service: 25 1 5 Rand (Bn) 4 3 3.7 3.1 2.7 2 1.9 1.7 1.2 Transportation Food & Beverage Accomdation Shopping Entertainment Medical Capital and Other Share of Total Spend 33% 19% 16% 14% 1% 9% 1% Note: ¹Spend by product / service figures do not sum exactly to total spend. This is because the survey allowed people who reported a total spend amount to answer don t know when asked how much they spent by product / service. 21 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges This is despite the fact that the vast majority of domestic trips are facilitated by low-cost minibus transport and private vehicles Forms of transport that generate greater levels of employment and income - tour buses, trains, planes, and rental cars all receive little use by domestic tourists 5% 45% 4% Mode of Transportation Used To Arrive and Return From Destination: 25 46% 46% Arrival Transport Return Transport % of Travelers 35% 3% 25% 2% 15% Private Vehicle Transport: 37% 19% 19% 18% 18% 1% 5% % Minibus Taxi Someone Else's Vehicle 6% 6% 4% 4% 2% 2% 2% 1% 2% 1% 1% 1% 1% 1% 1% % Own Commercial Foot / Tour Bus Train Plane Rental Car Metered Ambulance Vehicle Bus Bike Taxi 22 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges The accommodation industry, in particular, has yet to benefit from the true potential of domestic tourism Three-quarters of all domestic bed nights are spent in unpaid accommodation 14 Nights by Accommodation Type: 25 12 118.4 1 Nights (MM) 8 6 Income-generating accommodation draws just 26% of all domestic bed-nights 4 2 9.1 7. 5.4 4.3 4.2 4.1 3.9 1.9 1. Friends & Hotel Self Cater Other Hospital Camp Site B&B Guest Game Family House Lodge Backpackers Share of Total Nights 74% 6% 4% 3% 3% 3% 3% 2% 1% 1% 23 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges Furthermore, the majority of domestic tourists do not engage in high-value tourist activities Social Shopping Activities Undertaken on Domestic Trips: 25 17.4% 51.% None Nightlife Beach Business 7.3% 5.5% 3.% 12.7% Conversations neither stimulate job creation nor generate income! Medical 2.6% Casino Natural Attractions Wildlife Cultural Theme Parks 2.% 2.% 1.5% 1.5% 1.1% Very few domestic tourists currently engage in the kind of activities that stimulate employment Sporting 1.1% % 1% 2% 3% 4% 5% 6% % of All Domestic Trips 24 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges Recent market research confirms that economic constraints remain the greatest barrier to increasing domestic travel in South Africa A combination of unemployment and affordability stand out as major barriers to domestic travel 3% 26.2% Top Five Reasons For Not Having Taken a Domestic Trip: 25 1 25% 23.5% Economic Constraints: 49.7% % of Adults Who Have Not Taken a Domestic Trip in Past Year 2% 15% 1% 14.2% 8.3% 6.8% 5% % Unemployed / Too Expensive / Work / Study / No Income Not Affordable Other Time Constraints Poor Health / Old Age Dislike Travelling Note: ¹Respondents could give more than one reason for not taking a trip 25 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges and clearly supports the hypothesis that maturation of the domestic holiday market is linked to personal income Annual holiday travel incidence jumps from just 8% in the lowest income category, to 35% and 48%, respectively, among middle and high income groups; Business travel incidence follows the same pattern, while VFR travel incidence is consistently high at all income levels 25 2 Number of Trips by Purpose and Personal Income Category: 25 22. Holiday Business VFR Religious 6 5 Annual Travel Incidence by Purpose and Personal Income Category: 25 Holiday Business VFR 48% Religious 15 4 4% 35% 4% 36% Trips (MM) % of Adults 3 1 23% 2 5 2.6 3.5 2.9 1.5 1.6.6.3.3.2.2. R-R3, R3,1-R15, R15,1+ 1 8% 8% 6% 4% 2% 1% R-R3, R3,1-R15, R15,1+ 26 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges The trigger point for domestic holiday travel seems to exist around the 3,-5, Rand monthly personal income mark Holiday travel continues to escalate with income up to a peak at the R15,-2, mark 1% Distribution of Traveler Type by Personal Monthly Income Category: 25 1 Religious Within Each In ncome Categor ry 8% 6% 4% Business VFR % of Travelers 2% Holiday % No Income R1-R5 R51- R75 R751- R1 R11- R15 R151- R2 R21- R3 R31- R5 R51- R75 R751- R1 R11- R15 R151- R2 R21- R3 R3+ VFR and Religious travelers disproportionately outweigh other Around the R3,-R5, personal After seeing another traveler types among lower personal income brackets income mark, VFR and religious spike in the R15,- travelers begin to trail off, while the R2, range, holiday proportion of holiday and business travel remains prominent Note: ¹Based on respondent s travel purpose as of their first recalled trip travelers rises dramatically in the highest income groups 27 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges Among these higher income earners, time constraints are the major impediments to domestic holiday travel However, affordability is still a major constraint on domestic holiday travel among the middleincome bracket 5% 45% 4% Main Reasons For Not Having Taken a Domestic Trip by Income Bracket: 25 1 37% 47% Personal Monthly Income R-R3, R3,1-R15, R15,1+ % of Adults Who Have Not Taken a Domestic Trip in Past Year 35% 3% 25% 2% 27% 23% 32% 15% 1% 5% % 1% Work / Study / Other Time Constraints 13% Too Expensive / Not Affordable 8% 7% 4% 4% 5% 2% 2% % No Need to Travel Dislike Travelling Unemployed / No Income Note: ¹Respondents could give more than one reason for not taking a trip 28 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges Seasonality presents a second major challenge to both managing capacity / cash flow and extracting value from domestic tourists Domestic travel volume jumps by as much as 1% and 2% in the month of Easter and in December, respectively, and dips sharply in non-holiday months Number of Domestic Trips by Month: 25 6 3% 5 Number of Trips (MM) Spend (Bn) % Monthly Change in Trips Avg. # of Monthly Trips: 3. MM Monthly Standard Deviation: 3% 4.9 25% Trips (MM) / Spend (Bn) 4 3 2.9 3.2 In 25, Easter fell in March 4. 3.6 3. 3.1 2.6 2.6 2.3 2.8 3.2 2.6 4.3 2% 15% 1% Monthly Change in # of Trips (%) 2 1.8 1.8 1.5 1.6 5% 1.3 1.2 1.1 1.5.5.8 % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -5% 29 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges At various times throughout the year, monthly domestic travel incidence can be as high as 14% of the population, or as low as 5% 35 Number of Domestic Tourists by Month: 25 3 Non-Travelers Travelers 25 Total Adult Population (MM) 2 15 24.7 25.4 23.6 24.8 24.9 25.3 24. 25.2 24.9 25.6 26.2 23.2 1 5 Travelers as a % of Adult Population 2.7 3.5 1.7 2.7 2.8 2.5 3.8 4.6 2.6 2.8 2.2 1.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average 8.1% 4.9% 1.% 8.3% 8.6% 7.3% 11.2% 7.6% 8.9% 7.% 4.5% 13.6% 1.1% 3 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges Finally, a third major challenge concerns the fact that only pockets of the country are benefiting from domestic tourism 6 5 4 5.7 Total Domestic Tourism Spending in Each Province: 25 1 5. Amount Spent in Each Province Number of Trips to Each Province 14 12 1 Rand (Bn) 3 2.8 2.3 8 6 Trips (MM) 2 1.6 1.2 1.2 1.1 4 1.6 2 KZN Gauteng W. Cape E. Cape N. West Limpopo Mpum. Free State N. Cape % of Total Spend 26% 24% 13% 11% 8% 6% 5% 5% 3% Avg. Revenue / Trip 488 79 934 677 459 389 619 528 775 Note 1 Provincial spending figures sum to 21.5Bn, which is slightly greater than the 21.1Bn total spend figure. This is because the survey asks for spend per trip, but one trip may include several provinces 31 Copyright 28 South African Tourism
Overview of the Domestic Tourism Market: Domestic market challenges This is due, in part, to the relatively low prevalence of interprovincial travel, which accounts for under 4% of all trips Intra-provincial travel outweighs inter-provincial travel in all provinces except for Gauteng, the North West, and the Northern Cape 12 Inter vs. Intra-Provincial Trips by Province of Origin: 25 1 Inter-Provincial Intra-Provincial Trips (MM) 8 6 Share of All Domestic Trips: Inter-Provincial: 38% Intra-Provincial: 62% 4 2 KZN Gauteng N. West Limpopo E. Cape W. Cape Free State Mpum. N. Cape Inter-Provincial (MM) 1.47 5.9 2.22 1.21.49.38.99.57.5 Intra-Provincial (MM) 9.7 3.6 1.72 1.87 2.13 2.3 1.11.77.7 32 Copyright 28 South African Tourism
AGENDA The Marketing Tourism Growth Strategy of South Africa Overview of the Domestic Tourism Market Domestic Market Challenges The Domestic Marketing Strategy 33 Copyright 28 South African Tourism
There are many segments in the domestic market but SA Tourism focuses on the emerging young market in order to develop a culture of travel Consumer segments are categorised based on their current holiday travel status and differentiating between established, emerging and untapped markets Category Definition Segments Approach Established High average spend Majority of the segment travel for holiday purposes Little room for growth Independent young couples and families Golden active couples Defend and extract value Emerging Medium average spend Only small proportions of the segment travel for holiday purposes Non-travellers represent opportunities to grow these segments Well-off homely couples Young and up-coming Striving families Grow and defend Untapped Low average spend Few if any of these segments travel for holiday purposes Opportunity for growth exists however a dedicated education process will be required Home based low income couples Basic needs older families Develop 34 Copyright 28 South African Tourism
Six segment specific strategies have been developed to grow domestic tourism 1 2 3 4 5 6 Match product to segments Extract greater levels of value from established and emerging holiday segments Convert emerging and untapped non-holiday segments into holiday travellers Encourage year round travel by promoting more trips outside of school holidays Encourage greater levels of inter-provincial travel Utilise events to encourage year round travel Young and Upcoming Independent Young Couples & Families Striving Families Well Off Homely Couples Home Based Low Income Couples Basic Needs Older Families Golden Active Couples Grow this emerging segment Defend this established segment Grow this emerging segment Grow this emerging segment Develop this untapped segment Develop this untapped segment Defend this established segment 35 Copyright 28 South African Tourism
In addition, six destination marketing strategies have (or will be) implemented on a national level to support the growth of the domestic tourism industry 1 Roll out a South African domestic destination brand at a national level Repeat Visitation Build awareness 2 3 Develop and promote set of South African experiences related to target consumers Distribute appropriate information in specific places Build word of mouth Loyalty programs & CRM Brand image & proof of brand promise Establish interest 4 5 Facilitate co-operative product packaging and promotion programmes at national and provincial levels Develop marketing and distribution channels Ensure conversion/ purchase Product marketing & influencing channels Detailed info & product packaging Create desire 6 Encourage repeat visitation Identify consumer benefit Continuous Research, Strategic Planning, Partnerships & Public Relations Source: SAT / KPMG Domestic Market Segmentation 36 Copyright 28 South African Tourism
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