Industry analysis | Bed and breakfast business plan
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2.2 INDUSTRY ANALYSIS
The entity forms part of the Tourism and Hospitality industry. The Tourism industry is considered to be one of the key earners of foreign exchange in South Africa. The country is diversifying its economic base as traditionally, economic activities such as Mining and Agriculture have been dominating sectors. This is resulting in major developments in other sectors such as the Hospitality Industry. As part of the numerous diversification efforts, the government has implemented strategic policies which allow Small, Micro and Medium Enterprises to compete favorably with established businesses. Major attention is being given to the tourism and hospitality industry.
The provincial distribution of Overseas Tourists shows Gauteng as the mostly visited province followed by Western Cape, KwaZulu Natal, Mpumalanga Eastern Cape and the North West Province.
2.2.2 SIZE OF THE INDUSTRY
The Tourism sector is relatively small as compared to Mining and Agriculture which are the economic main stay of the economy. The industry is estimated to be valued at over R10 billion per annum. The proportions with regard to foreign tourists is R5 billion and that from R2 billion from local tourists and lastly R3 billion from corporate clients.
2.2.3 PROFITABILITY OF THE INDUSTRY
The profitability of the tourism sector is high. Most businesses in the industry achieve an average contribution margin of about 65%. This margin applies to the conference and accommodation factions of businesses because of the moderate costs. However, the contribution margin for catering facilities is relatively low at about 30% as compared to the provision of accommodation and conference facilities. Therefore, a well-balanced sales mix will be managed by the business in order to achieve lucrative returns.