Press / Media | Cadiz News
World Cup no golden goose
28 January 2010
EXORBITANT prices, a strong rand and fewer-than-expected foreign visitors could scupper local retailers' hopes of significant sales boosts during the World Cup this year.
With Match, Fifa's official accommodation agent, relinquishing its rights to about 450 000 of the bed-nights it reserved at local hotels, a more sobering picture of this international event is emerging.
A poll released by Fifa yesterday showed public opinion towards staging the soccer tournament remains positive. But a study released by Cadiz Securities yesterday showed that retail spend would grow by only 0.2 percent during the event. Shamil Ismail and Jasmine Lin, research analysts from Cadiz, predict that even if SA Tourism's target of 10 million visitors is achieved this year, the higher visitor numbers would contribute no more than an additional R 803 million to retail spend in 2010.
Economists are equally concerned that expectations of a surge in retail spend are too optimistic, though some have indicated that more spending will take place in particular areas.
“Hotels, restaurants and alcohol sales will be boosted more specifically," said Kevin Lings, an economist from Stanlib. Lings said expectations were “probably too high" as there were a number of factors, including negative media reports about South Africa, to consider. “Our estimates are that the World Cup could add 0.4 percent to gross domestic product (GDP), which is quite significant," Sanlam Investment Management economist Arthur Kamp pointed to a number of conditions that suggested a retail upswing, including a decline in debt servicing costs. “But retail spend will not be as big as anticipated," Kamp said.
Ismail and Lin offered a reality check on ticket sales to date: “To reach the target of
10 million visitors this year, inbound tourism volumes will have to grow by 8.3 percent, or
764 000 visitors". Fifa revealed yesterday that two thirds (or 2 million) of the available tickets have already been sold.
But Cadiz's research showed tourist arrivals declined during the 2002 World Cup in Japan and South Korea due to fewer intra-Asia visitors, which was not offset by increased tourism from non-Asian countries. They believe this trend could be repeated in South Africa. “The bulk of tourists in South Africa originate from Africa and there is a fear that some tourists from Africa may avoid South Africa at the time of the World Cup," they said.
“The 2002 World Cup did not provide a substantial boost to retail sales in South Korea. Looking at local market conditions, we predict that consumer spend may grow by about 3 percent this year, taking into account such factors as the employment situation, changes, in electricity prices and taxes," the analysts said.
Their projections indicate that job losses are far from over and that even with some economic recovery during the second quarter, the net effect will still be average job losses of 334000 for 2010, eroding R 3.5 billion from the national consumer wallet. Ismail and Lin found that Massmart and Shoprite were likely to have stronger underlying growth due to the extent of their exposure to the lower income segments, while Foschini and Clicks may experience weaker market growth.
Barry Knichel, the general merchandise director at Pick n Pay, said he was positive about the World Cup period. “We have a whole new range planned, including toys, novelties and clothing for men, women and children," he said.
The Shoprite Group expected the sales of outdoor merchandise like camping chairs to increase compared with other winter seasons due to the high number of overseas visitors, said marketing director Brian Weyers.
