StatsSA’s release of preliminary monthly tourism statistics for April 2022 shows the hospitality sector is still struggling to fully recover from the harsh Covid-19 lockdown shock in 2020, with year-on-year growth still strong but slowing down.
Based on a year-over-year growth rate, total hospitality sector revenue was very strong at 68.4% in April, but slower than the 122.8% rate recorded in March , the third consecutive quarter of slowdown. But these still high growth rates have limited significance given that these revenues were starting from a very low base compared to the “lockdown” levels of 2020/early 2021.
Given the anomalies created in growth rates by the low lockdown base, it makes more sense to show the total revenue value and compare it to the corresponding month in 2019, a pre-COVID 19 month. We then have a a clearer picture of a hotel sector whose revenues are still under severe pressure.
Total hospitality industry revenue in April 2022 was still -34.11% lower than revenue in April 2019, the year before the 2020 lockdown.
Hotel revenue growth continues to outpace revenue growth in both the Guest House and Guest Farm category as well as in Campsites and Caravan Parks, with the former category under longer-term pressure while the last category has already recovered much earlier. during the post-lockdown phase.
Going further to see occupancy rates, in April 2022, the national hotel occupancy rate was 33.8%, still well below the April 2019 rate of 48.9%.
It’s not just low occupancy that has limited hotel revenues. The financial environment for customers is also more constrained and the average hotel revenue per night in April 2022, despite a significant recovery after the confinement, was still down -4.37% compared to the level of April 2019.
The hospitality sector remains under severe revenue pressure, despite a significant recovery from the near-zero base created at some point in 2020 by hard lockdowns.
These still very weak turnover figures, even if they should continue to gradually improve during the year, lead us to remain in expectation that the hotel real estate market will remain under pressure.
These April hotel revenue figures continue to show a hotel sector that is far from “fully recovered” to 2019/early 2020 levels.
We expected gradual improvement in 2022 on the back of Covid-19 having apparently receded as a threat, and lockdown regulations eased even further from late 2021.
A stronger economy since the 2020 low has led to some improvement in pricing power for the hotel and restaurant sector, as evidenced by the sector’s CPI (consumer price index) . From deflation of -0.5% year-on-year in February 2021, the inflation rate for this index rose to 6.7% in March 2022 and remained high at 5.6% in April.
This has supported a significant increase in average income per night of stay after a major drop in lockdown in 2020, but not yet back to pre-Covid 19 levels.
However, some increases in input costs may be reflected in this rise in inflation, as the general inflation environment has deteriorated recently, so the cost pressure for the hotel sector may also have increased.
But the industry has come under new pressure in recent months.
KZN province has been hit by severe flooding twice, with the first flood occurring in April. This may have impacted hotel occupancy over the Easter period and possibly beyond, a generally reasonably busy period for hoteliers who may have been less busy due to flooding and damage than they caused.
In addition, transportation cost inflation has skyrocketed due to soaring global oil prices which have pushed up domestic gasoline prices. Fuel price inflation has been unrelenting over the past year, which is expected to dampen the demand for domestic tourist travel by road, while the cost of air travel is also influenced.
Additionally, the demise of Comair has restricted the availability of air travel in recent weeks, which may negatively impact air travel and therefore hotel demand as well.
And then there are the factors that we have long identified as constraints to tourism and hotel demand.
Firstly, domestic holiday tourists as a group are under more financial pressure than before Covid-19, due to the impact of the 2020 recession on jobs and incomes, not to mention the recent increase in l CPI inflation and interest rates. With much of holiday tourism being non-essential in nature, this category of spending is put on the back burner for many households while they take care of their finances.
Second, we have argued for some time that business travel not only faces similar financial strains as a result of the impact of the 2020 recession on business, but that the corporate sector has also managed to “ zoom” much of his interaction during hard closes. This modern communication probably partially distances it from less efficient physical movement. Much of that expensive physical business travel may therefore never return. Many hotels will therefore need to be less dependent on domestic business travel on a more permanent basis.
In short, we expect hotel occupancy and revenue improvement to continue in 2022, assuming everyone remains freer to move around as vaccine deployments progress, across the globe. as well as in South Africa, and the virus threat recedes.
But the financial impact of the 2020 recession on households and businesses persists, with more recent pressure added by rising fuel and headline price inflation, and the resulting rise in interest rates. These factors are seen as holding back the pace of recovery in what is a non-essential spending category for many. Thus, the return to pre-Covid-19 income levels for this property class may not yet occur in 2022.