The StatsSA release of November 2021 preliminary monthly tourism statistics show the Hotel Sector to be slowly clawing its way out of the “deep hole” created by Covid-19-related lockdowns and the accompanying recessionary impact back in 2020.

On a year-on-year growth rate basis, total Hotel Sector income was a very strong 95.4%, not surprising given that this income was coming off a very low base compared with 2020 “lockdown year” levels.

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 as well as “Camp Sites and Caravan Parks”, with the former category under longer term pressure while the latter category had already recovered far earlier during the post-lockdown phase.

Given the abnormalities created in growth rates by the 2020 low lockdown base, it makes more sense to view total revenue value, and compare it to comparable months back in 2019, the pre-COVID 19 year.

We then see a picture of a Hotel Sector whose income is still battling to recover following the easing of lockdowns. Total Hotel Industry Income in November 2021 was still -37.7% below the income for November 2019.

Going further to view occupancy rates, as at November 2021, the national occupancy rate was 33.2%, still well-below the 56.4% rate for November 2019.

It isn’t only a lower occupancy rate that constrains hotel income. It is a more constrained client financial environment too, and the average hotel income per stay night in November 2021 was still -16.7% down on November 2019 level.

These November hotel income numbers continue to show a Hotel Sector that is far from “fully-recovered” back to 2019 levels, despite having made significant progress out of 2020’s hard lockdown.

A few factors continue to constrain the industry.

Firstly, domestic holiday tourists as a group are more financially pressured than prior to Covid-19, due to the impact of the 2020 recession on employment and incomes. With much holiday tourism being non-essential in nature, this expenditure category gets put on the backburner for many households while they nurse their finances back to health.

Secondly, business travel has similar financial constraints, much travel not being a priority while businesses revive their finances following the recession impact. In addition, the Business Sector has successfully “Zoomified” much of its interaction during forced lockdowns. One great success of the forced lockdown has been in forcing late adopters to move onto more time and cost-effective communication platforms, and partially away from less efficient physical travel. Much 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.

Finally, there have been the severe restrictions on foreign visitors during the Covid-19 period.

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 rollouts progress, across the world as well as in SA, and the virus threat recedes.

As the economy recovers, so too should domestic households’ and businesses finances somewhat.

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

These still very weak revenue figures lead us to the expectation that the Hotel Property Market will still underperform the major 3 Commercial Property Sectors in 2022, i.e., Industrial, Retail and Office Property.