Despite showing signs of recovery, SA’s hotel industry remains under severe income pressure, and occupancies below pre-Covid-19 levels and economic challenges are not helping.
FNB’s property sector strategist John Loos said the May 2022 preliminary monthly tourism figures from Stats SA show the hotel sector is on a slow recovery path.
“But it is far from ‘fully recovered’ from the harsh Covid-19-related lockdown shock back in 2020. This is despite year-on-year growth remaining impressive and even accelerating in May.
“The expectation of gradual improvement in 2022 to continue is on the back of Covid-19 seemingly having receded as a threat and lockdown regulations gone.”
Stats SA said measured in nominal terms (current prices), total income for the tourist accommodation industry increased by 86.6% in May compared with May 2021.
Income from accommodation increased by 61.6% year-on-year in May, the result of a 31.9% increase in the number of stay unit nights sold and a 22.5% increase in the average income per stay unit night sold.
Loos believes more recent economic headwinds may prevent hotel income from reaching 2019 levels during the course of this year.
“These headwinds include the recent sharp rise in fuel prices, making tourism-related transport far more expensive of late.
In addition, more recently, KwaZulu-Natal has been hit by severe flooding, and this may have had an impact on hotel income in that region in recent months due to damage and disruption.
— John Loos, FNB’s property sector strategist
“This, along with signs of a weakening global and domestic economy, which has implications for aspirant tourists’ disposable incomes, could constrain the pace of further recovery in the hotel property sector.
“These recent economic headwinds are on top of a number of other factors that may continue to constrain the industry, slowing its ‘full recovery’.
“We have long argued that business travel not only battles from similar financial constraints after the 2020 recession impact on businesses, but the business sector has also successfully ‘Zoomified’ much of its interaction during forced lockdowns.
“This modern communication likely pushes it partially away from less efficient physical travel.”
Loos said a portion of that costly physical business travel may therefore never return.
“Many hotels may have to be less dependent on domestic business travel on a more permanent basis, therefore.
“In addition, more recently, KwaZulu-Natal has been hit by severe flooding, and this may have had an impact on hotel income in that region in recent months due to damage and disruption the floods may have caused.”
However, hotel income growth does continue to outpace that of the guest house and guestfarm category, as well as camp sites and caravan parks.
“Going further to view occupancy rates, in the typically quiet month of May 2022, the national hotel occupancy rate was 34.7%, still wellbelow the 44.7% rate for May 2019.
“It isn’t only a low occupancy rate that still constrains hotel income.
“It is a more constrained client financial environment too, and the average hotel income per stay night in May 2022, despite significant post-lockdown recovery, was still -2.33% down on the May 2019 level.”
Tourism minister Lindiwe Sisulu said she was pleased with the data on tourist accommodation for May.
The tourism ministry said this meant total income from accommodation increased from R2.9bn in March to May 2021 to close to R4.6bn for the same period in 2022.
Sisulu said while the figures are still below pre-Covid-19 levels, she was encouraged by the steady recovery.
But she is concerned about flight shortages between Cape Town and Johannesburg, saying stakeholders must seek solutions.
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