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Sector Focus

Travel and Tourism: An Industry on the Rise

One of the fastest growing sectors in the world, tourism is unpredictable and volatile. Understanding the trends and looking at forward projections will help future business owners make the right decisions.

Chana Boucher

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Considered to be the world’s largest sector, with annual revenues of almost $500 billion, tourism appeals to entrepreneurs worldwide who may consider the sector to be bursting with business opportunities. But, insiders say it takes passion and hard work to be successful in this sector which is influenced by most internal or external forces. Tourism comprises numerous players ranging from micro enterprises to larger dominating businesses.

Global context

According to the Department of Trade and Industry (dti), tourism accounts for roughly 35% of exports of services and over 8% of exports of goods, globally. Around

340 million people are directly and indirectly employed in tourism around the world. By 2004 international foreign tourist arrivals reached 760 million, predicted to grow to 1,56 billion in 2020. The World Tourism Organisation’s (UNWTO) latest World Tourism Barometer states that last year, international tourist arrivals were up by almost 7% from 2009 to 935 million.

The dti assigns the strong growth of the tourism sector over the past 50 years to economic globalisation, including innovations in transport, information and communications technologies, as they have made travel cheaper and more readily accessible.

Other factors leading to the exponential growth include increasing leisure time and disposable income.

Local focus

While following the growth trend of the rest of the world in terms of increasing tourist arrivals, Africa was less affected by the economic downturn in 2009. Africa was the only region to show growth in 2009, and it maintained this trend in 2010. No doubt, hosting the FIFA World Cup in South Africa boosted the figures. According to the UNWTO, North and Sub-Saharan Africa were not impacted by the global crisis.

In South Africa, tourism has been referred to as the ‘new gold’ of the economy as the total foreign direct spend of tourists has overtaken gold foreign exchange earnings. In its Marketing Tourism Growth Strategy for SA, SA Tourism states that the contribution of tourism to South Africa’s GDP is around R190 billion. It has outperformed all other sectors in terms of GDP and job creation. Yet the tourism body believes opportunities remain to extract further value; when compared to global competitors, the country’s tourism industry appears to be underperforming.

Statistics published by Statistics South Africa show that there have been remarkable increases in the number of travellers (both foreign and South African residents) who passed through South African ports of entry in the last twenty years. In 1990 about three million travellers were recorded and at the end of 2009, this number grew to around 27 million.

The South African tourism sector continues to grow and the current growth phase is characterised by a large number of new entrants in the market and excess capacity in some parts of the sector, particularly accommodation. Tourism is characterised by the high number of small, medium and micro players. It is relatively easy for an entrepreneur to open a bed & breakfast or start a tour operating company.

South Africa’s travel and tourism sector can be divided into eight sub-sectors, each offering business opportunities for entrepreneurs. The sub-sectors are:

  • Transport sector comprising airlines, shuttles, trains, buses, ships, taxis, etc
  • Travel agents
  • Tour operators
  • Tour guides
  • Hospitality (accommodation, food and beverages)
  • Meetings, Incentives, Conferences and Events (MICE)
  • Tourist attractions

International travellers

The tourism trade plays a critical role in connecting the consumer with destination products. Because South Africa is a less established destination for international tourists, little international travel planning or booking takes place outside the travel channel, in which travel agents and tour operators play a key role. Statistics South Africa’s annual Tourism publication shows that just under 90% of overseas tourists flew into South Africa, compared to those who came in by road. Visitors from overseas spent, on average, five to seven days in South Africa, and less time was spent in the country during the winter months of May and June.

Domestic travellers

While a lot of emphasis is placed on foreign or international tourism, domestic tourism remains the engine room of many tourism economies, and is more resilient than international tourism. According to Statistics South Africa’s latest Domestic Tourism Survey the most popular province for domestic travellers on general overnight trips in 2009 was KwaZulu Natal. Visiting friends and family was the main reason for both day and overnight trips. The two most frequently used modes of transport for domestic tourism were taxis and cars. The most popular activity was eating out at restaurants and cafes, while most travellers also engaged in shopping at malls and flea markets. For leisure or holiday purposes, the Western Cape was the preferred destination. Most overnight trips lasted between one and three nights. The dti says tourism is labour intensive and presents comparatively low barriers to entry for entrepreneurs with regard to skills. Tourism generates employment and income in supporting industries, including financial services, construction, cleaning, security, laundry, arts and crafts, beach vendors and food and beverages.

Study the trends

Some of the trends highlighted by the dti include increasing domestic and short-haul travel and less long-haul travel due to global safety and security concerns and cost; increasing independent travel, decreasing organised tours as travellers want customised experiences; later bookings and more self-planning for trips; growth of the low-cost airline industry; and the growing maturity of tourists who are increasingly seeking a differentiated tourism experience such as cultural tourism, eco-tourism and adventure tourism.

Gillian Saunders, head of advisory services for Grant Thornton, says that tourism will see overall growth but that tough times remain. “Currently there is an oversupply as too much capacity was brought on based on 2005 – 2007 trends and the World Cup,” she says.

Hotels, including large global brands are offering smaller, distinctively designed properties that offer a personalised service for sophisticated travellers. There has also been an increase in alternatives to large, branded hotels like bed & breakfasts, guesthouses and backpacking lodges.

As far as the outbound travel sector is concerned, Robyn Christie, CEO of the Association of SA Travel Agents (Asata), says the current trend is for companies to streamline efficiencies in an effort to counteract the effects of the downturn. “Businesses need to work out where they are losing money.”

She adds that customers are well informed at the moment as they have access to a lot of information, so agents need to offer a service that proves why their business is right for the client. “What people underestimate is that clients invest heavily and even though only a small portion of that investment goes to the travel agent, customers hold them responsible for fulfilling the full  investment.”

Get connected

The Internet has become one of the most important marketing channels in tourism and offers travel business a cheaper way to distribute content to a large audience. Globally, tourism is said to be the largest selling commodity on the Internet. More than 70% of travellers start their travel plans on the Internet.

Technology changes often so it is almost impossible to expect to keep up, says Christie. She says that companies need to invest well across the board with the right people using good technology.

Facing challenges

Travel, particularly involving international tourists is vulnerable to perceptions and global events. According to the dti, between 2001 and 2003 the global tourism economy suffered a number of setbacks including the terrorist attacks of September 11, 2001. This event brought on a sudden decrease in travel and changed travel patterns forever. Other global events that have affected tourist demand include the economic recession, the outbreak of SARS and later Swine Flu, ongoing terrorist attacks, volcanic ash and extreme weather conditions.

Saunders also points out internal factors to be aware of when thinking of entering the tourism sector. These, she says, include a lack of marketing, poor management and poor service.

Looking ahead

According to the UNWTO, growth is expected to continue for the tourism sector in 2011, but at a slower pace. UNWTO forecasts international tourist arrivals to grow at between 4% and 5% this year.

Statistics from the dti project that there will be 77,3 million international arrivals to Africa in 2020, which shows an average growth rate of 5,5%. Intra-regional travel within Africa is expected to increase much faster than long-haul travel. As economic development in Africa increases, South Africa will benefit from an associated increase in tourist arrivals.

Chana Boucher is a Freelance writer.

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Sector Focus

3 Tech Trends Your Franchise Should To Keep Up With During The 2018 Restaurant Revolution

For the first time in history, the majority of consumers are – arguably – more interested in how they buy instead of what they buy, according to research. Catch up quickly by responding to this in three ways.

Diana Albertyn

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How many ways can you customers choose an item, order it and pay for it in your restaurant? Mike’s Kitchen, Spur, The Baron, and other sit-down restaurant franchises across South Africa have widely started accepting mobile payments using the Zapper app. If you have too, you’re on the right track, because convenience reigns in the restaurant industry, especially where trends are concerned, for your current and future customers.

“In the last two years, there’s been a 50% increase in restaurants using technology. Almost 80% of guests say restaurant tech improves their guest experience, especially when it makes service faster,” according to a recent study focusing on diners and technology.

Here are three of the top trends influenced by consumers’ mounting affinity for experience over your menu items, décor or prices:

1. Self-service via touchscreen kiosks

Who wouldn’t appreciate skipping the queue and enjoying a consistent enhanced ordering experience? Add rich imagery and food customisation capabilities and you can see why self-service is poised to make a huge impact on the QSR industry in 2018.

Related: How Your Fast Food Franchise Can Attract Quality-Conscious Consumers

While kiosk aren’t a new form of technology, combined with loyalty programmes, touchscreens for mobile order pick-up and – in the near future – facial recognition to identify and service customers accordingly, they’re about to become a mainstream addition.

What’s in it for you though? Well, besides happy repeat customers, your order accuracy will improve and staff will be free to attend to more strategic activities within the business.

2. App-enabled ordering and pick-up

Research by QSR Web found that digital restaurant ordering is growing 300% faster than dine-in traffic.

Because “restaurant consumers are aggressively gravitating toward concepts that offer the greatest level of convenience and control across ordering, payment and distribution,” according to analysts from Wells Fargo, mobile ordering technology requires your franchise to go a level higher than its current system.

Consider implementing features such as dedicated drive-thru lanes to for app orders. Or what about outdoor locker systems activated by a mobile phone, enabling a customers to receive their order without interacting with restaurant staff?

3. Analytics aiding personalisation

Even better than mobile ordering though, is using AI to leverage apps including Facebook Messenger or simple SMS to take customers’ orders, for a personal touch. Not only does the chatbot record orders, but based on individual customer data, it’s able to predict what they may choose to eat based on various factors including age, gender and even mood.

Related: The Only How-To You’ll Need To Start A Restaurant

If you’re wondering how the mood is detected, fried chicken giant and search engine firm Baidu have established the answer: Facial recognition technology piloted in Beijing that predicts customer orders based on their face displayed in the kiosk screen.

“Restaurant technologies that capture data, such as customer orders and preference will businesses better understand their target audience. Hence, they will be used extensively in 2018,” according to Indiez, the company that developed Domino’s pizza’s app.

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Sector Focus

How To Start A Funeral Business

Running a funeral business can be lucrative, but you must determine whether it’s the right venture for you.

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In South Africa, burial remains the most popular end-of-life choice.

“Just how many burials take place is difficult to measure because there is a formal and an informal funeral industry in South Africa,” says Rey von Ronge, secretary of the National Funeral Directors’ Association, an industry watchdog organisation specialising in resolving disputes between undertakers and the public.

This following guide explains how you can open your own funeral home in South Africa and covers these topics:

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Sector Focus

The Pros & Cons Of Owning A Restaurant Franchise

Do you have what it takes to be a successful restaurateur? Our franchise expert offers some words of wisdom.

Jeff Elgin

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There are many different types of business format franchises, but when most people think of a franchise business, their first thought is of food. The success and growth of the many big brand-name fast-food franchises makes this a logical first stop in the thinking process.

When evaluating restaurant franchises, you must focus on the characteristics of the business from a franchisee’s perspective to determine whether this industry is the right one for you.

There are some wonderful advantages to having a food business, but there are also some challenges you need to be aware of before proceeding in this industry.

The advantages

restaurant-layout

In assessing a food business, the main advantages are typically considered to be:

Built-in Demand

Consumers have been trained to look for franchise food outlets, which can represent a big advantage for a start-up. You need to make sure the product offering of the food franchise has “staying power” in the marketplace rather than being a fad or fringe product.

Related: The Only How-To You’ll Need To Start A Restaurant

Ease in Financing

Traditional lending sources are very familiar with the real estate and equipment needs of a prepared food operation, which may ease the challenge of obtaining start-up financing. These sources also like the relatively high revenue production of a typical food franchise.

Track Record of Success

Many food franchises have multiple units and have been operating for a while, making it fairly simple to determine and verify their track record of success. That can help you make an informed decision about the business prior to getting involved.

Prestige

Whether valid or not, many people associate a high degree of glamour with a person who owns a food franchise business. The fairly high degree of status associated with this occupation is important to many prospective franchisees.

The disadvantages

restaurant-plating

In assessing a food business, the main disadvantages typically include:

High Initial Investment

Most food franchises require a significant investment to get started. Food preparation stations, sinks, stoves and ovens, grease disposal systems, venting requirements, customer seating and bathroom areas – the list goes on.

Zoning and Code Compliance

The government tries to ensure that any food business meets numerous codes and guidelines so the food product is safe for the public to consume. Complying with these regulations can initially can be time consuming.

Virtually any food franchisor will provide extensive assistance to a new franchisee in terms of dealing with zoning, permits, code compliance and all other site-related issues, because the new franchisee probably doesn’t have a clue how to do this whereas the franchisor has lots of experience on these matters.

If a food franchisor doesn’t offer extensive support on these matters (you can determine this during your conversations with existing franchisees), pick a different one.

Related: 10 Business Ideas Ready To Launch!

Labour Challenges

Most food businesses require the services of a significant number of low paid employees to conduct their business. Turnover of these employee positions is normally very high, and recruiting and retaining a sufficient number of acceptable quality employees is typically listed as the number-one challenge in any food franchise.

Relatively Low Margins

In food operations, the franchisee has both the cost of goods sold and Labour costs to contend with in an environment that is very price sensitive, especially in fast-food outlets. The net margins of most food businesses are not nearly as high as other (particularly service-related) franchises, and you’re also dealing with spoilage, theft and other issues that you don’t find in many other types of franchise businesses.

Quality of Life

As mentioned above, many people associate a high level of status with owning a food business, at least until they understand the facts of a typical food franchisee’s life. The hours can be very long, as you’re often the first to arrive and the last to go home. The Labour challenges can be very frustrating and are the main reason owners cite for wanting to leave this industry. Then there’s also the issue of what a person smells like after spending long hours each day in a food franchise.

In conclusion

south-african-restaurant

The obvious question, assuming you don’t have previous experience running a food business, is “how do you know whether you have these skills and aptitudes?” The best answer, and one that is actually required by a few of the most successful food franchises, is to go to work in an existing unit and shadow the present owner until you’ve gained enough experience to know for sure.

This isn’t going to be a process involving an hour or two – more likely it’ll take at least a few weeks to know for sure. The time commitment involved may seem high, but it is infinitely better for you to find out early (and without risking your life savings) if this business is not for you.

A final consideration related to food franchises is this: Some food franchises run very simplified operations and can provide a business model that avoids a number of the disadvantages listed above. These are typically businesses that don’t involve cooking a product, at least not on site. They may use a commissary system to deliver ready-to-serve products, or products that only have to be assembled in order to serve, to the franchise outlet. These types of businesses, like a Subway outlet, can avoid many issues but almost always still have to deal with the employee issues discussed above.

Give some serious thought to the franchisee role in terms of the tasks required in a typical day or week, the hours worked, the investment and the possible returns. Make sure you know what it takes to succeed and that you possess those qualities. Then you’ll know whether being a restaurateur is right for you.

Evaluation Tip

The secret to success in evaluating any food franchise (or any franchise for that matter) is to clearly identify the skills necessary to succeed, then make sure you either have them or go do something else. The food business can be very rewarding to a person who has the special blend of skills and aptitude to make the business work, and these operators are among the most respected in all of franchising because of their success.

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