November hotel revenue – strong year-over-year growth from a weak 2020 base, but still much weaker than 2019.
StatsSA’s release of preliminary monthly tourism statistics for November 2021 shows the hospitality sector is slowly working its way out of the ‘deep hole’ created by the Covid-19 related lockdowns and accompanying recessionary impact in 2020 .
Based on a year-over-year growth rate, total hospitality sector revenue reached a very high 95.4%, which is not surprising given that this revenue was starting from a very low base compared to 2020 “lockdown year” levels.
The extreme year-over-year growth rate is of little significance on its own, given the abnormally low base created by the harsh 2020 shutdowns. hotel outpaced revenue growth in the Guest House and Guest Farm category as well as in the Campsites and Caravan Parks category, with the former category under longer-term pressure while the latter category had already recovered. much earlier during the post-lockdown phase.
Given the anomalies created in growth rates by the weak 2020 lockdown base, it makes more sense to visualize the total revenue value and compare it to comparable months in 2019, the pre-COVID 19 year.
We then see a picture of a hotel sector whose revenues are still struggling to recover following the easing of lockdowns. Total hospitality industry revenue in November 2021 was still -37.7% lower than November 2019 revenue.
Going further to see occupancy rates, in November 2021 the national occupancy rate was 33.2%, still well below the November 2019 rate of 56.4%.
It’s not just lower occupancy that’s limiting hotel revenue. The financial environment for customers is also more constrained, and the average hotel revenue per night in November 2021 was still -16.7% lower than in November 2019.
These November hotel revenue figures continue to show a hotel sector that is far from “fully recovered” to 2019 levels, despite significant progress following the 2020 lockdown.
A few factors continue to limit the industry.
First, 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. 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, business travel has similar financial constraints, with many trips not a priority as companies relaunch their finances following the impact of the recession. Additionally, the corporate sector has managed to “zoom” much of its interaction during the enforced lockdowns. One of the great successes of the lockdown has been forcing late adopters to switch to faster and more cost-effective communication platforms, and partly away from less efficient physical travel. 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.
Finally, there were the severe restrictions imposed on foreign visitors during the Covid-19 period.
We expect hotel occupancy and revenue improvement to continue in 2022. The assumption is that overseas visitors will be freer to visit as the rollout of vaccines progresses, across the world as well as ‘in South Africa, and the virus threat is diminishing.
As the economy recovers, the finances of households and domestic businesses are also expected to change to some degree.
But we may not yet see 2019 hotel revenue levels, especially not in real (inflation-adjusted) terms, with not all foreigners happy to travel and not all business trips returning. at all.
These still very low revenue figures lead us to anticipate that the hotel real estate market will still underperform the 3 main sectors of commercial real estate in 2022, namely industrial, commercial and office real estate.