In the dynamic world of business travel, South Africa stands as a compelling case study. 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.
Bonnie Smith, GM FCM, shares 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.
Inflation: A Balancing Act
The weight of inflation has been felt globally, with rates anticipated to drop from 8.8% in 2022 to 6.6% in 2023 and further to 4.3% in 2024. Despite this global trend, South Africa held its ground for a long time. In 2022, South Africa stood out, alongside China, Indonesia, and Vietnam, as one of the few nations where inflation remained aligned with official targets. At that time, despite near-record grain and oil prices, South Africa’s inflation rate didn’t breached the 6% upper target limit, primarily owing to the fuel levy reprieve. In comparison, the US, eurozone, and the UK all saw inflation rates exceed 8%.
Smith explains that 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. Says Smith: “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.”
Navigating the skies
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. However, the transition is proving to be a challenge. While airlines like American Airlines are leading this charge, the absence of African carriers, notably South African Airways, is conspicuous in this transition.
Seat Availability: An Uphill Battle
South Africa 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.
Airfares: A Mixed Bag
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.
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. This oscillation in airfares hints at the complex dynamics affecting ticket prices in the region, which could significantly influence business travel decisions.
Hotel Occupancy: A Ray of Hope
In terms of accommodation, South Africa, particularly Cape Town, offers a beacon of hope. 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.
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. Ingredients of a lifestyle hotel include lobbies that encourage interaction, offering green initiatives, having slick technology, and offering well-being choices. Newer hotels such as Lyf Collingwood, Melbourne, or The Hoxton, New York are challenging legacy hotels. South Africa is also seeing the emergence of lifestyle hotels, which are becoming popular among business travellers seeking a blend of work and leisure.
Bonnie Smith comments, “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.”
Car Rentals and Micro Mobility: A Distant Dream?
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.
South Africa’s business travel sector is facing numerous challenges but also exhibits resilience and remarkable potential for growth. Smith concludes: “South Africa has a diverse business travel sector that is adapting to the challenges of our reality. The nation’s approach to managing inflation, embracing digitalisation in aviation, and adapting to emerging trends such as lifestyle hotels, will be critical in shaping its future in the business travel landscape.”
**ends**
For more information about FCM Travel, or to interview FCM Travel General Manager South Africa, Bonnie Smith, call Dorine Reinstein on 083 278 8994 or email dorine@bigambitions.co.za.
About FCM Travel:
FCM Travel, the flagship corporate travel brand at Flight Centre Travel Group (FCTG), is the business travel partner of choice for large national, multinational and global corporations. We are an award-winning global corporate travel management company ranking as one of the top five by size around the world. We operate a global network which spans more than 100 countries, employing over 6000 people.
FCM are transforming the business of travel through our empowered and accountable people who deliver 24/7 service and are available either online or offline. Leveraging FCM’s negotiating strength and supplier relationships in conjunction with our tailored business travel programs, our expertise delivers more for our clients where it matters most to them.
Visit us at www.fcmtravel.co.za
Issued by: Big Ambitions
Contact: Dorine Reinstein
Tel: +27 83 278 8994
Email: Dorine@bigambitions.co.za
