According to FCM GM Bonnie Smith, when it comes to business travel, South Africa’s business travel sector is facing numerous challenges but also exhibits resilience and remarkable potential for growth.
She said the nation is wrestling with economic pressures, rising inflation, an evolving aviation industry, and emerging trends that are drastically reshaping the landscape of business travel.
Smith shared some insights on how South Africa is stacking up against the rest of the world, based on data provided by the FCM Consulting quarterly report.
When it comes to inflation, South Africa has demonstrated remarkable resilience in the face of global economic pressures, and the country’s ability to keep inflation in check amidst global uncertainty has been commendable.
However, today, South Africa’ s economic equilibrium is precarious.
“The country grapples with currency depreciation and energy crises. The rand hit historic lows against the US dollar, reflecting the global sentiment of increasing risk aversion, while the severe power crisis continues to pose significant risks to the nation’s inflation outlook and economic growth.
“This has a direct impact on the business travel landscape,” said Smith.
According to Smith, the aviation industry in South Africa, like many African nations, is yet to fully embrace the New Distribution Capability (NDC).
“NDC, to clarify, is a communication standard developed by IATA to facilitate the direct transfer of data between airlines and travel agencies. This protocol aims to bring transparency, personalisation, and speed to the airline booking process.
“It intends to replace the traditional Global Distribution Systems (GDS) which act as intermediaries between airlines and travel agencies,” said Smith.
She said that the transition is proving to be a challenge and while airlines like American Airlines are leading this charge, the absence of African carriers, notably South African Airways, is conspicuous in this transition.
The GM also revealed that the country continues to display robust corporate travel demand in Q1-2023 despite mixed economic signals, however, South African Airways, which recently underwent business rescue, has only managed to provide 18% of the seats it offered in 2019, a stark contrast to LATAM Airlines Group and United Airlines’ forecast to surpass their 2019 seat offerings this year.
Smith also revealed that airfare trends paint an intriguing picture of South Africa’s business travel landscape.
“During the first two months of 2023, Africa saw a 24% increase in business class fares and an 18% increase in economy class fares.
“Yet, the Cape Town-Dubai route has witnessed a 2% decrease in economy class fare, an anomaly in the African and Middle Eastern region,” said Smith.
She said that fares on other significant business routes such as Frankfurt-Johannesburg and Johannesburg-London have increased by 17% and 15% for economy and 14% for both business class flights, respectively, and this oscillation in airfares hints at the complex dynamics affecting ticket prices in the region, which could significantly influence business travel decisions.
According to the FCM GM South Africa, particularly Cape Town, offers a beacon of hope in terms of hotel occupancy.
“With a 99% occupancy recovery rate compared to 2019, Cape Town ranks among the cities with the highest recovery globally.
“Simultaneously, Cape Town has seen their average corporate rates increase by 86%, one of the highest increases worldwide. Meanwhile, Johannesburg is more on par with global trends with corporate rate increases of just 8% in Q1-2023,” said Smith.
She said that one of the most successful traveller offerings in Q1 is the emergence of the lifestyle hotel, focused on travellers who want to experience something unique.
“The lifestyle hotels trend reflects the evolving preferences of today’s travellers. In South Africa, we’re seeing a surge in interest in hotels that offer not just a place to stay, but an immersive experience that aligns with the values and lifestyles of the guests,” said Smith.
Car rentals and micro mobility
And finally, the The rental car market is flourishing, with average daily rates increasing by 23% from Q1-2022 to $51.
“This trend is exacerbated in South Africa due to limited fleet availability resulting from supply chain constraints.
“On the other hand, the potential of micro mobility, encompassing short-distance travel using bikes, e-scooters, and e-mopeds, seems far off.
“Factors such as high crime rates, lengthy travel distances, and poor road conditions render this trend impractical in South Africa,” said Smith.