Estructura Financiera

Eldelman (2014) argued that the 21^st century airport no longer exists for the sole purpose of providing essential services, they are perceived as sources of economic growth and prosperity for neighbouring countries. It is said that the 21^st century process of globalisation is manifested and accelerated by aviation linked urban form and functions (Kasarda, 2016).

Airports around the world face the challenges of dealing with an increasing number of travellers and establishing innovative ways of ensuring that the process of consumption is one that is satisfying for tourists (Simjee, 2015). The challenge is not only to increase capacity and satisfy consumer needs but also to diversify the revenue streams of the airport. Airports are becoming even more commercialised to increase their profitability and to satisfy the needs of discerning consumers. The changing role of the airport stems from the fact that there has been a shift in the way in which distribution and logistics takes place. Instead of using sea, rail and road as means of transporting goods and passengers, air transportation nowadays is the mode of choice (Charles et al., 2007). Air transportation is rapidly becoming a

20 profitable means of transporting goods because speed and time reduction are vital in today’s fast-paced world. In the light of the above airports are now perceived as significant gateways for both human travel and trade.

Airports are now being designed with the traveller in mind and making their experiences enjoyable; they have larger spaces which are allocated to retail and facilitate easy flow of passengers (Belardini, 2013). Airports that pride themselves with convenience are critical in this modern era because people’s lives are fast paced therefore their busy schedules need to be balanced with convenience (Charles et al., 2007).

Kasarda (2013) state that the addition of other businesses that are not aviation related within and around the airport, contributes to the diversification strategies adopted by airports. It is estimated that on average a single traveller visits a specific airport three to four times a year.

This fosters the argument that for modern tourists their satisfaction with the airport is perceived as a Key Performance Indicator (KPI) with the overall experience of the destination (Belardini, 2013: 225). Another way to make airports interesting for tourists are to run events such as product launches for key brands (Belardini, 2013).

The importance of conducting an airport demand and capacity analysis should not be underestimated because it plays a vital role in determining the level of airport use and consequently its performance (Airports Commission, 2013). This said, analysis should not be done by studying peak period demand but instead it should be conducted under normal daily circumstances to prevent excess supply (O’Reilly, 1986). It is also essential to conduct the said airport analysis over an extended period of time (year) to establish consistency. The analysis of demand and capacity should be done in a scientific manner especially for mega projects such as airports.

McNeill (2014) proposed that twenty first century airports are selling more than just transportation; they are selling an experience, the ‘Airport Experience’. Real estate development and tourism in the areas neighbouring the airport is a big part of this airport experience. Airports are in constant need of commercial revenues so that they can expand in order to fit into the description of the twenty first century airport that is why selling experiences is essentials. Airport development is cited to be one of the most significant urban phenomena of the twenty first century (Appold & Kasarda, 2010).

21 2.6 Airport City

The concept of an airport city and that of an aerotropolis are synonymous and both terms were coined by Kasarda as a result of his perception that the airport has gained new significance in the modern economy (Charles et al., 2007). The airport city is also referred to in some literature as an ‘aviopolis’ because airports are transforming into a dominant part of urban life (McNeill, 2014). Stevens et al., (2010) argued that cities that have the largest airports pose as points of exchange in the global economy as the majority of air travellers are business tourists and make use of such airports.

Building an airport city consists of restructuring an urban area into an aviation-centred business hub while integrating existing infrastructure, businesses and human capital to maximise the potential of the airport area (Stevens et al., 2010; O’Connor, 1996). An airport city therefore is an improvement of an airport; its essence is based on an ideal that airports are the main proponents of metropolitan restructuring. This restructuring consists of hotel and conference facilities, light industrial parks, retail spaces, residential areas and distribution centres, all of which are linked to the regional hinterland by means of efficient rapid road and rail links (Stevens et al., 2010). A large airport increases the area’s global connectivity and economic integration. It is essential because it allows for the handling, take-off and landing of variety of larger aircraft of all shapes and sizes from different airlines (Robbins et al., 2011).

Airport development and expansion is a strategy to increase the carrying capacity of the destination which is essential if a country wants to increase its tourist numbers (O’Reilly, 1986). An airport should be supported by an efficient public transportation system that links the airport to the main tourism, recreational and business facilities (Dray et al., 2006). The size and location of the airport matters but what is most important is goods and services which are in the airport and physical connectivity to other areas. All these factors enhance its regional accessibility with one of the key indicators of this being the ability to travel to the capital city and back in one day (Lian et al., 2005). ORTIA is linked to Johannesburg and Pretoria through various modes of ground transportation such as the Gautrain and bus/ coach shuttles. Overall it is evident that airports can have an impact on the geographical shape of the region; airport expansion in a sense contributes massively to the region’s transformation strategy.

22 2.7 Aerotropolis: Concept and Evolution

Several definitions have been associated with the concept of the aerotropolis and some of these possess similar characteristics. Most definitions and literature utilised in this research study on aerotropolis are derived from the works of Kasarda (2008a, 2008b, 2013). John D.

Kasarda is the director in the Centre for Air Commerce at the University of North Carolina’s Kenan-Flagler Business School (Kasarda, 2016). He has published more than 100 articles and 10 books on airport cities, urban economic development and, competitiveness (Kasarda, 2016). Arguably, Kasarda is the leading international scholar on the development of the aerotropolis and asserts that due to the commercial and supply chain focus of airports they serve the needs of both consumers and businesses. He further states that most existing aerotropolis are in the United States of America, which is actually where they came into existence.

An aerotropolis can be defined as an urban complex that consists of appropriate airport layout, infrastructure, and economy that is centred on the airport. Furthermore, it is described as a physical manifestation that links a particular metropolis to the entire global economy (Balasubramaniam, 2013). Kasarda & Appold (2014) defined an aerotropolis as an airport-centric economic development; it is a sub-region within the urban area that has infrastructure, land use and an economy that is centred upon the airport. In addition to aviation-linked businesses, cargo, logistics, commercial facilities and millions of air travellers who make use of the airport an aerotropolis is also highly dominated by tourism facilities such as hotels, recreational features and exhibition and conference facilities. It is said that an aerotropolis should have a pulling power to attract tourists (Alkaabi et al., 2013). Once an airport is extended into an aerotropolis it should not only focus on spatial growth but also on addressing economic needs such as employment creation and the available infrastructure should be utilised in a way in which maximises efficiency (Kasarda, 2008a).

2.8 The Nature of the Aerotropolis

It is argued that the modern ‘Aerotropolis’ is similar to the traditional ‘Metropolis’ as it consists of the core and outlying areas. In the case of the metropolis there is a central city core that is supported by commuter-linked suburbs, and the aerotropolis is made up of the airport city core, outlying areas of aviation-linked businesses, and their interrelated mixed land use and residential development (Kasarda, 2008b). Figure 2.1 below is an illustration of what a typical aerotropolis might look like. However, this is not the exact way in which

23 every aerotropolis around the world would look, albeit there will be certain similarities in the characteristics of aerotropolis development around the globe. The structure of each aerotropolis would depend on the amount of available land that can be developed. If there is more land, then most commercial development will take place within the airport. But, if there is not enough land then this development will take place in surrounding areas that are outside the airport. The question of available land is a significant one as many airports were constructed many years or even decades ago and urban planners might not have had the idea of developing an aerotropolis back then.

Figure 2.1 Model of a Typical Aerotropolis

Source: Kasarda (2013).

The development of an aerotropolis is not only confined to within the airport as it also spills over to the neighbouring areas as is illustrated in Figure 2.1. This is evident from the establishment of office and retail spaces, hospitality and leisure facilities as well as conference and exhibition venues within close proximity of the airport (Kasarda, 2008b).

Conference and exhibition centres can contribute to the growth of tourism in the region in

24 which the aerotropolis is located. This growth of tourism in such regions derives from the increase in the number of air passengers which contributes to the region’s revenue and economic growth.

An aerotropolis that is not developed to resemble the exact model illustrated above should not be perceived as being less of an aerotropolis. They may bear some similarities but each one of them should be developed by taking into consideration the unique needs and capacity of the region. It is essential therefore to conduct research prior to developing an aerotropolis and in that way it can be ensured that its development is suitable for that particular area (Balasubramaniam, 2013). The developers must also keep in mind that an aerotropolis may evolve overtime depending, on changing circumstances.

Despite the nature and structure of different aerotropolis each one of them should consist of three generic interdependent elements. These elements are; spatial elements, functional elements and connectivity elements. Spatial elements refer to the physical and tangible elements in and around the airport stretching up to 20 miles (Kasarda, 2016). In Ekurhuleni the development of Destiny Hotel and Conference Centre may be considered as a spatial element of the ORTIA aerotropolis development. Connectivity elements refer to the internal and externally oriented transport infrastructure which links the spatial and functional forms of the aerotropolis (Kasarda, 2016). In Ekurhuleni these include highways (which connect the airport to major cities such as Johannesburg and Tshwane) and rail arteries (the Gautrain infrastructure). Functional elements refer to the non-spatial defined aspects of the aerotropolis such as frequent air travellers (Kasarda, 2016).These three elements form the backbone of the aerotropolis, they have a symbiotic relationship and all contribute to its functionality and success.

It is argued that an aerotropolis should not be static; instead, it should evolve over time in order to meet the changing demands of consumers; changing technology should play a role in this adaptation. As the majority of air passengers tend to occupy the higher socio-economic strata of the hierarchy, they are technological savvy and represent members of online social community networks (Ucler & Martin-Domingo, 2015). It is said that as the aerotropolis matures, consumers become more discerning (Appold & Kasarda, 2010). To satisfy their discerning tastes and constant hunger for information the airport and its surrounds therefore information needs to be accessible to consumers online.

25 2.9The State of Tourism in Ekurhuleni

In a speech Ekurhuleni Mayor Mondli Gungubele distinguished 21^st century airports as centres of economic activity which are fuelled by trade, investment, and most importantly, tourism (EMM, 2015b). In terms of tourism in Ekurhuleni the challenge is to make it an attractive destination so that it ceases to be a mere ‘transit zone’ but instead attracts staying tourists (business) and hence increase local tourism revenue. The municipality of Ekurhuleni states that the Albertina Sisulu Corridor in Kempton Park has been earmarked for investment and development for eco-tourism and conservation (EMM, 2013a). In addition, the fact that Ekurhuleni water quality is one of the best in the world is viewed as advantagous for tourism development; indeed, the municipality received the Blue Drop Platinum Award for three years in succesion (EMM, 2012). This is an advantage with regards to tourism development as it means that the water is safe to drink for tourists.

Charles et al., (2007) have argued that the relationship between tourism and airports has led to an increase in the number of hotels around airport metropolis. These developments are aimed at attracting the large numbers of people who make use of the airport, especially business travellers. As part of investing and tapping into the potential benefits of the aerotropolis and growing tourism in recent years the Peermont Group has spent R300 million for the extension of its Emperors Palace Casino and Resort (Mail & Guardian, 2015).

The international experience is that airport surrounds have become preferred locations for hotel developments with major hotel chains constructing and refurbishing existing hotels along airport corridors (McNeill, 2009). Despite this prevailing pattern of hotel development there has been a lack of scholarly inquiry on their relationship with the airport. It is for this reason that one of the objectives of this study is to look into the characteristics and contribution of small accommodation establishments such as Bed and Breakfasts and Guesthouses located near the airport.

In 2012 a study was conducted on the state of tourism in Ekurhuleni and data regarding tourism accommodation revealed that there were total of 313 accommodation establishments.

Of these 106 were in Kempton Park, 49 in Benoni, 40 in Edenvale and the rest spread in other areas of Ekurhuleni. In terms of the type of accommodation 36% of the accommodation establishments were guesthouses; the remainder were bed and breakfasts (24%), lodges (21%), hotels (12%), Self-Catering (6%) and Caravan Parks (1%) (https://advertising.expedia.com/insights/research/). Most of the accommodation

26 establishments and hotels are situated in the aerotropolis core of Kempton Park. Most of the accommodation establishments are 4 star graded and there is only 4% of 5 Star graded establishments. Overall, it is estimated that business tourism makes up to 72% of the total tourist receipts (https://advertising.expedia.com/insights/research/). There are also several natural and heritage attractions in Ekurhuleni. Table 1 shows detailed statistics that make-up the tourism economy of Ekurhuleni.

Performance Indicator

Destination of Total tourism trips 2012 2 858 661 Proportion of trips to South African

metropolitan areas, 2012

13.5 percent; 4^th ranked metropolitan area

Tourism Spend (R 1000 Current Prices) 2012 R 10 229769 Proportion of tourism spend of South African

Metropolitan areas, 2012

11.5 percent; 5^th ranked metropolitan area

Total bed nights 11 715 423

Proportion of bed nights to South African Metropolitan areas, 2012

12.9 percent; 5^th ranked metropolitan area

Destination of Total domestic trips 1 137 146 Proportion of domestic trips to South African

metropolitan areas, 2012

12.1 percent; 5^th ranked metropolitan area

Destination of International Tourism Trips 692 813 Proportion of International tourism trips to

South African metropolitan areas, 2012

16.7 percent; 3^rd ranked metropolitan area

Destination of Total Leisure tourism trips 365 489 Proportion of leisure tourism trips to South

African metropolitan areas, 2012

11.0 percent; 5^th ranked metropolitan area

Destination of Total VFR tourism trips 1 004 336 Proportion of VFR tourism trips to South

African metropolitan areas, 2012

14.5 percent; 3^rd ranked metropolitan area

Table 2.1. The Tourism Economy of Ekurhuleni

Source: Global Insight Data.

27 2.10 An Aerotropolis: The Ekurhuleni O.R Tambo International Airport

Between 2010 and 2029 the number of air travellers globally is estimated to rise from 4.6 billion to 11 billion a year (EMM, 2013a). The transportation of air cargo is also expected to grow during the similar period. Approximately 4 million passengers make use of O R Tambo International Airport anually. This growth of air travel forms the backdrop for airport-centred development . The development of an Aerotropolis in Ekurhuleni is also motivated by this growth phenomenon. The process of developing a 30 year Aerotropolis master plan was initiated by EMM and the provincial government; after initiation of the project, a project steering committee was established (EMM, 2013b). In addition, an external service provider was appointed to consolidate and finalise the master plan. Some of the key elements that form the contents of the master plan include: The assessment of land uses around ORTIA to determine compatibility with the aerotropolis model and the development of zoning and incentives to encourage aviation-oriented and industry to locate within close proximity of the airport (EMM, 2012).

To be perceived as an aerotropolis the airport must have the abilty and capacity to connect national and global markets. It could also promote tourism through aviation themed architecture. O R Tambo International Airport is the busiest airport on the African continent and it is the second biggest airport after Dubai considering airports in Africa and the Midde East. It is contended that commercial development will transform ORTIA into a front runner in urban growth, shopping, employment, trading centres and business destination (EMM, 2012). It is said that developing an aerotropolis in Ekurhuleni will propel commercial and industrial development both within and outside the airport. Strengthening the ORTIA aerotropolis brand is essential and this will be achieved by establishing constant branding that is readily identifiable for consumers and investors alike (EMM, 2013b).

An aerotropolis was defined by Airports Company of South Africa (ACSA) CEO as a city in which the layout, infrastructure and the local economy is centred around the airport (Radebe, 2013). ACSA’s goal for the aerotropolis is to develop a mixed use precinct where work, living and entertainment converge. This mixed use development would consist of commercial, residential and hotel properties. The Ekurhuleni aerotropolis is perceived as a key proponent for potential economic activity and employment creation (Mail & Guardian.

2015). The aerotropolis model was adopted by the Mayor of Ekurhuleni in 2011 and was incorporated into the municipality’s 2025 Growth and Development Strategy (Radebe, 2013).

The logic behind incorporating it into the 2025 Growth and Development strategy is that

28 development of an aerotropolis is an ongoing process and therefore should be included in the long-term development goals of the city. The overall development plan of the aerotropolis in Ekurhuleni is envisaged to be implemented over a period of 30 years. In its planning Ekurhuleni draws insipiration from successes in North America, Middle East, Asia and Europe (EMM, 2015a). Airports such as Dubai World Centre, Amsterdam Airport Schiphol and Malaysia International Airport have adopted the aerotropolis as the model of development (Kasarda, 2008b).

The municipality has developed a five year strategic implementation plan for the development of the aerotropolis. The lack of space in the areas surrounding O R Tambo International Airport is a major challenge for further commercial development of the ORTIA aerotropolis (EMM, 2012). This lack of available land for continued development may be the consequence of previous spontaneous development and lack of planning that existed in the past. In the past an aerotropolis emerged organically and did not conform to any planning

The municipality has developed a five year strategic implementation plan for the development of the aerotropolis. The lack of space in the areas surrounding O R Tambo International Airport is a major challenge for further commercial development of the ORTIA aerotropolis (EMM, 2012). This lack of available land for continued development may be the consequence of previous spontaneous development and lack of planning that existed in the past. In the past an aerotropolis emerged organically and did not conform to any planning