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.
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.
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
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.
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.”
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.
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.
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.
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.
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.
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.
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.
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.
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.
Franchise vs independent operators
In South Africa, the funeral industry operates through two channels – independent companies and franchises. The two franchise players are Martins Funerals and 21st Century Funerals, both members of the Franchise Association of South Africa (FASA).
A Martins Funerals franchise costs upwards of R485 000. This includes start-up stock. Royalties are paid on gross monthly turnover at 7%, working on a sliding scale. The franchise contract is renewable after ten years and full training and ongoing support is included.
There are independent operators in the market, but setting up a well run business that complies with the laws of the country is expensive. “The problem we face is that there are many fly-by-night funeral businesses in South Africa,” says Von Ronge.
Fly-by-night undertakers do not provide proper services and are in the business purely to make money. Fly-by-nights operate without a licence and do not comply with the industry’s rules. People are buried in the wrong graves and health requirements are not met.
Some smaller private funeral homes make use of government crematoriums and store bodies at private and government mortuaries until it is time for the burial or cremation.
It’s the responsibility of local municipalities to ensure the proper management of cemeteries, crematoria and funeral undertakers within their areas of jurisdiction.
The cost of running a fully functional private funeral home
“Most people think that the funeral business is an easy way to make money, but it isn’t,” says Theo Rix, MD of Independent Crematoriums of SA.
He says the cost to set up a fully functional crematorium in South Africa is around R7 million. A cremation furnace costs around R1,5 million and you need at least two to run a profitable business.
Other costs include smoke extractors and their installation, protective clothing for radiant heat and so on.
A typical start-up
Consider a typical existing upmarket funeral home based in Johannesburg:
- Sales revenue: R4 million
- Cash flow: R1,2 million
- Employees: 7
- Hearses: 3
- Leasehold rent: R108 000 per annum
- Size of the premises: 300 m2
It can take up to two years to get the necessary permits and permission to run a funeral home from local municipalities and government authorities.
“Because the paperwork is so extensive, we don’t attempt to do it ourselves. We employ attorneys to get the process going on our behalf,” says Rix.
Are you the right person for the job?
Starting a funeral home is not for everyone. Here are some points to consider:
- Because of the nature of the business funeral directors must be able to work at odd times of the day.
- A person who runs or owns a funeral home should be an excellent communicator and a good listener. People from various cultures and traditions will have to be managed with equal ease.
- An understanding and caring attitude is a must, while at the same time the funeral director has to be emotionally strong and not shaken by other people’s distress.
Usual tasks include:
- Speaking to the bereaved in order to make funeral arrangements.
- Liaise with others such as the clergy and cemetery workers, and even write obituaries.
- Keep records, such as lists of items that come with the body.
- Obtain all clearances and adhering to regulations associated with the event, he or she will need to be well versed in procedures and legal issues.
- Have extensive knowledge and respect for the religious sentiments and beliefs of various cultures and communities and will also need to know about different customs and rituals followed by various religious groups during the funeral service.
Study the art of funeral directing
Many funeral home owners seem to view training and personal development as more optional than essential; that is all set to change with the opening of the very first funeral director training school in Gauteng.
The Funeral Academy for Africa (FAfA) offers a Certificate in Funeral Service (NQF Level 3) which has been introduced for the first time in South Africa and Africa.
The course teaches students to prepare and present funeral services and manage funeral logistics and administration. FAfA also offers a variety of short courses and has opened campuses in Durban and Cape Town.
For more information, visit www.fafa.co.za
Regulation for burial societies on the cards
The burial society business in South Africa is largely unregulated. But this is set to change with the establishment of a new, overarching regulatory body – the Burial Society of South Africa. By Gill Abraham
What is a burial society?
A burial society is an informal self-insurance scheme. It absorbs the costs of social activities and cultural requirements of funerals. The total amount invested annually in burial societies is said to be around R6,4 billion
“Burial societies have massive potential for wealth creation within South Africa’s poor and vulnerable communities, given the right assistance. Research has shown that more than 20% of the South African adult population are members of a burial society – so the importance of this sector must not be underestimated. Burial societies also represent a significant spend with members prioritising 15% of their income for this financial product,” says Inseta’s CEO Sandra Dunn.
“The aim of the newly formed Burial Society of South Africa (BSSA) is to unite all the burial societies that operate in the informal sector under one umbrella,” says secretary general of the BSSA, Zulu Ratswana.
“Each burial society has about 30 members and each member contributes R50 a month. This money is then deposited into a bank account where it stays until it is needed.”
Banks and insurance companies need to change
Tradition and belief influences the decision-making of a burial fund member when arranging a funeral for a member of the family. “Banks offer policies, but they have never consulted with the burial societies and they do not appear to understand their needs,” explains Ratswana.
All causes of death are covered by burial societies with no questions asked, whereas formal insurers exclude (or at least make it difficult to claim on) certain deaths such as HIV/Aids or suicide. The banks do not include the needs of the extended family, whereas burial societies do.
“We also want to provide a free last will and testament to those who join the BSSA,” he says. The membership fee is R100 per year. The BSSA will also seek to mass produce coffins in order to keep costs down.
“We want to assist with pauper funerals and we believe ‘a human being is a human being’, meaning that even if someone is destitute, that person deserves a decent funeral. So we would adopt the corpse, and by giving that person a proper funeral; they will be able to rest in peace,” explains Ratswana.
Another aim is to allow members to borrow money at very low interest rates. Ratswana says the BSSA plans to include education and training for the industry as well, and will offer bursaries to deserving students.
A need to unite
Because the industry is unregulated, Ratswana explains that burial societies need to organise themselves, which is why the BSSA has been formed. Ratswana sees the insurance companies and banks as a possible threat because the burial societies lack the skills and resources to provide their growing market with the right products and services at the right price.
“If we organise the players in this industry we will be able to compete with the formal funeral insurance sector. We will be able to provide proper control and manage fraud as well as the many problems that HIV/Aids has created. Once we are united, it will be much easier.
“We intend to establish offices in all provinces of South Africa and we will impose standards. We will become the watchdog of the industry,” he says.
“As the informal market becomes more sophisticated, and companies include funeral insurance in salary packages, the market will change,” says Dr Chris Molynex, past president of the National Funeral Directors’ Association.
Registering burial societies as co-operatives
Inseta is pushing for burial societies to register as co-operatives in an endeavour to become more professional. Inseta has committed to provide capacity building workshops that will be held nationally.
Contact Inseta’s call centre on 0860 113 0013 for dates and venues for these workshops.
Pros and cons of funeral businesses
“R5 billion is spent on funerals annually in South Africa,” says Inseta’s CEO, Sandra Dunn.
Threats to the industry as a whole include the lack of burial land. At Avalon cemetery in Soweto, for example, it has been reported that over 200 funerals take place every weekend. This is Johannesburg’s biggest and busiest cemetery, accounting for 40% of burials.
Another threat to the sector is emissions caused by cremation. Cremation spews about 400 kg of carbon dioxide – a greenhouse gas blamed for global warming – into the air, along with other pollutants like dioxins and mercury vapour which are emitted if the deceased have silver tooth fillings.
But these threats to the industry also can and have created opportunities. Internationally, there are many new practices which are being used to deal with these problems. In Japan, most deceased people are cremated.
According to a recent BBC report, it has become extremely difficult for the Japanese to find places to store ashes, especially in big cities. The solution has been to save space and money by converting old warehouses into storage facilities for the ashes of family members.
Because Israel is such a small country and tradition dictates that the dead are buried, a simple solution has been devised where two family members are placed in a single grave that is dug deeper by an extra metre. Israel has also designed above-ground niche burials, in which the niches are pre-cast concrete units.
However, the most significant innovation is the multi-level cemetery. It allows for single and double conventional graves as well as niche burial, on at least two levels.
Sub-contracting is a good way to make money
“A funeral director is in fact an events manager, but one who doesn’t have as much time to organise an event,” says Dr Chris Molynex, past president, National Funeral Directors Association Southern Africa. Funeral directors sub-contract services such as catering, fresh flower arrangements, rental of tents and chairs, transport for mourners, tombstones, coffin name plates and wreaths.
A popular tribute at a funeral can be a dove or butterfly release at the graveside. Another appealing choice is a bagpiper or a ‘live’ jazz band to play at the end of the ceremony.
These services are all spin-off revenue earners. Other business opportunities include the manufacture of casket trimmings, linings and handles.
In some parts of the world, and especially in the United Kingdom, the increasingly popular green or natural burial movement is working hard to reform how the dead are returned to the earth. With natural burial, bodies are not embalmed; coffins are simple and made of easily decomposable, non-toxic materials.
Sonja Smith, CEO of Sonja Smith Funerals for Pretoria, has been awarded the franchise rights in South Africa for natural woven coffins. “I want to help the funeral industry in this country to become a friend of the environment,” says Smith. “I started my research two years ago when I read an article about natural woven coffins in a British publication called The Funeral Journal.
“I was convinced that this concept would work well in South Africa and started to liaise with the company in England. I was offered the sole mandate for South Africa and Africa. The range features coffins woven from natural fibres like seagrass and cocostick. They are bio-degradable and made from easily renewable resources that don’t pollute the atmosphere when they are burnt in crematoriums.”
Smith’s first consignment of adult woven coffins arrived in April and she was overwhelmed by the response from funeral directors across South Africa. More than 80 funeral homes took a keen interest and wanted more information.
In South Africa a coffin should be manufactured to SABS standards. Coffins are generally made from wood, while caskets are produced from wood or metal. Most importantly, a coffin must be sturdily constructed in order to protect the dead and safeguard the health of the living, which is why the SABS has set strict standards.
There is a growing demand for coffins and training centres where coffin making is taught. Courses are available throughout South Africa and they provide the necessary practical knowledge to start a coffin and casket manufacturing business. Online business coffins.co.za was formed eight years ago due to the huge demand for affordable funeral products.
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.
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.
In assessing a food business, the main advantages are typically considered to be:
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.
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.
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.
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!
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.
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.
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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