Supplementary Budget 2020

VAT increase to impact tourism industry - CEO

Cape Town - Now is the time for the tourism industry to gather all of its resources and respond to the challenges posed in Budget 2018, according to Enver Duminy, CEO of Cape Town Tourism.

He said SA has enormous potential to develop the tourism industry, it just needs to adjust to short-term hiccups like currency fluctuations.

"We’d appeal to tourism businesses to ensure that their pricing is fair when it comes to international visitors, and that all messaging around water shortages is aligned and carefully considered," said Duminy.

"We don’t want to alienate source markets by sharing scare-tactic stories. Rather, we must continue to take practical steps to reduce water consumption and ensure that visitors are aware of their role in reducing their impact on our resources."

He pointed out that in Cape Town, the money tourists spend contributes significantly to economic growth. Tourists spend more than R15bn in Cape Town and the local industry supports almost 50 000 jobs.

"The water crisis should not, and does not have to, result in an economic downturn for the City," said Duminy.

VAT increase
The VAT increase is cause for some concern for him as it would raise business costs, which would, in turn, be passed onto visitors.

"There’s also an impact on international visitors claiming a VAT refund. Business systems industry-wide would have to be adjusted to deal with the change, again at a cost to those businesses," said Duminy.

"Tourism businesses will have to rethink their marketing and pricing strategies to compensate, as well as seek out other ways of increasing efficiency to compensate for a VAT increase, or else put some mechanism in place to recover the VAT input tax credit."

He said there is a wider impact when it comes to VAT increases such as the impact on restaurants, venues, transport and food industries – all part of the tourism economy. each of those industries has its own means of revenue and associated VAT management.

Tour packages may increase in price and domestic travellers may find affordability a challenge as a result.

"When flying, there are many surcharges from airport tax, excess baggage costs and other service fees which will also increase as airlines flying into Cape Town and South Africa will need to claim increased VAT input," said Duminy.

Threat to growth

Danny Bryer, area director of sales, marketing and revenue management at Protea Hotels by Marriott, said Budget 2018 reflects that hospitality businesses must strategise to prevent a decline in the sector that could hinder the industry and threaten what has been consistent growth.

In his view, the economy and water shortages across pose two challenges to ensuring that guests continue to see value in taking holidays around the country.

"Tourism is more than simply hotels and airlines. It involves everyone working in direct and indirect businesses who benefit from the cash injection the industry provides. This including builders and developers, the restaurant industry and all businesses through the supply chains," said Bryer.

Inter-industry collaboration is essential, in his view, along with private and public sector training that will ensure that hospitality professionals are able to deliver on visitor expectations.

"Price increases are inevitable across the board, but we’re committed to ensuring that value adds and special offers will keep tourism within reach to as wide a market as possible," he said.

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