SA downgrade plays havoc with disposable income

AGENTS can expect
to feel the pain of
renewed pressure on
South African travellers,
who are likely to reconsider
their holiday plans just
ahead of the festive
season, following the news
that South Africa has been
downgraded.
South Africa’s economy
was dealt another blow
when Fitch Ratings agency
downgraded South Africa’s
long-term debt to junk
status, with Standard
& Poor’s following suit.
Meanwhile, Moody’s has
placed the country on
review for a downgrade.
This effectively means that,
for the moment, South
Africa’s credit rating on
local currency debt remains
above investment grade.
However, this is not good
news for SA travellers.
Economist at Econometrix,
Laura Campbell, told TNW
the ongoing weak economic
growth would continue to
weigh down on household
incomes, and this in turn
would have an effect on
the ability of South Africans
to go on holiday.
Says Laura: “Under
current economic
conditions and on the
back of the credit rating
downgrades, South African
travellers may take fewer
holidays, rather opting to
save discretionary income.”
The instability of the rand
may also discourage
domestic tourists from
travelling overseas due to
increased costs.
Tour operators also warn
of the impact on future
bookings. Spokesperson
for Thompsons Holidays,
John Ridler, says the
downgrade raises a flag on
earnings and the strength
of the rand, which could
drive travellers to seek
shorter overseas holidays
and opt for local holidays
instead.
“Leisure travel abroad will
definitely take a hit, with
fewer people being able
to afford it,” says Rachael
Penaluna, business
manager of Sure Maritime
Travel. She adds that
corporate travel could also
be affected.
“Although corporate
travellers will always need
to travel, they may consider
downscaling to save
money.”
Theresa Szejwallo, md
of The Travel Corporation,
says people will be looking
for bargains and may
become more frugal with
their holiday spend. She
adds that this may result
in travellers doing more
research, looking for value
for money, and not rushing
to buy on face value.
People are also more
likely to stick with wellknown
brands, booking
with travel companies they
view as financially stable,
Theresa says.