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Hotel sector in the country improving, but still some way off from pre-Covid levels of trading

The hotel sector is clawing its way back out of the 2020 lockdown ’hole’, but trading in the sector is still far weaker than pre-Covid-19 days, according to John Loos, Property Sector Strategist at FNB Commercial Property Finance. Photo: File

The hotel sector is clawing its way back out of the 2020 lockdown ’hole’, but trading in the sector is still far weaker than pre-Covid-19 days, according to John Loos, Property Sector Strategist at FNB Commercial Property Finance. Photo: File

Published Jan 26, 2022

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THE hotel sector is clawing its way back out of the 2020 lockdown “hole”, but trading in the sector is still far weaker than pre-Covid-19 days, according to John Loos, property sector strategist at FNB Commercial Property Finance.

Writing in an FNB Property Insights note, Loos said Statistics SA’s November 2021 preliminary monthly tourism statistics showed the hotel sector to be slowly clawing its way out of the “deep hole” created by Covid-19related lockdowns and the accompanying recessionary impact back in 2020.

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On a year-on-year basis, hotel sector income grew a strong 95.4 percent in November 2021, which was not surprising as this income was coming off a very low base compared with 2020 “lockdown year” levels, said Loos.

“The extreme year-on-year growth rate is of little significance on its own, given the abnormally low base created by 2020 hard lockdowns.

“Interesting, though, is that hotel income outpaced the growth in income in both the ‘Guest House and Guest Farm’ category and ‘Camp Sites and Caravan Parks’, with the former category under longer term pressure, while the latter category had recovered far earlier during the post-lockdown phase,” he said.

Hotel industry income in November 2021 was still -37.7 percent below the income for November 2019.

In terms of occupancy, as at November 2021, the national hotel occupancy rate was 33.2 percent, well-below the 56.4 percent rate for November 2019.

Loos said it wasn’t only lower occupancy that constrained hotel income.

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“It is a more constrained client financial environment too, as the average hotel income per stay night in November 2021 was -16.7percent lower than the November 2019 level.”

He said domestic holiday tourists were more financially pressured than before Covid-19, due to the impact of the 2020 recession on employment and incomes. Business travel faced similar financial constraints, with travel not being a priority, while businesses revived their finances following the recession impact. In addition, the business sector had successfully “Zoomified” much of its interaction during forced lockdowns. Much physical business travel may never return, said Loos.

Also, there had been severe restrictions on foreign visitors during the pandemic. “We would expect hotel occupancy and income improvements to continue in 2022. The assumption is that foreign visitors will be freer to visit as vaccine roll-outs progress, across the world as well as in South Africa, and the virus threat recedes.

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“But we may not see 2019 levels of hotel revenues returning just yet, especially not in real terms, with not all foreigners happy to travel, and not all business travel coming back at all.”

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BUSINESS REPORT ONLINE

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