Good news for hotels and restaurants in South Africa
The Bureau for Economic Research (BER) has published its Other Services survey results for the third quarter of 2022, showing that the hospitality sector in South Africa continues to show positive growth.
Hospitality – including hotels and restaurants – transport, real estate, and business services make up the other services sector – distinguished from the retail, wholesale and motor trade sectors, which are included in the RMB/BER business confidence index (BCI).
Out of the four sub-sectors that comprise the other services sector, hospitality showed the highest growth year-on-year, the BER noted.
This growth is due to the continued benefit from the removal of all Covid-19 restrictions, with the number of patrons continuing to rise from the previous quarter, it said.
However, while the rate at which the number of patrons has increased has tempered compared to the second quarter records, pre-lockdown levels have not been reached. But the upcoming summer peak season and the gradual return of business travellers bode well in the short term for both hotels and restaurants, the economists said.
The BER flagged some points of concern for the sector, namely high menu price increases and an adverse real income shock to South Africa’s main tourist source markets. These are likely to hinder the sustainability of the sector’s recovery as it commences with the off-peak season in 2023, it said.
Ups and downs
Among the other sectors, the BER survey showed that growth in the business services and real estate sectors subsided in the third quarter, with transport – in contrast – showing a rebound.
“Although the growth in activity in business services lost some momentum relative to the second quarter, it remained in good stead compared to its long-term average,” it said.
Over the past year, real estate saw a surge in activity thanks to the unwinding of the backlog due to the lockdown. However, this surge has started to subside as this unwinding ran its course, interest rates began to rise, and flooding put the KZN market temporarily on hold, it said.
More positively, a revival in demand in the residential rental market is expected to boost the sector in the near term.
Regarding transport, BER’s survey indicated that activity in road freight transport bounced back after the KwaZulu Natal floods disrupted the second quarter. However, High fuel costs and excess supply suppressed freight hauliers’ profitability.
More good news for tourism is that passenger transport is expected to recover more meaningfully with the return of international tour groups from the Far East – China in particular.
Prospects
Overall, BER’s survey expects South Africa’s GDP growth in the third quarter to benefit positively from the continued recovery of the other services sector.
The other services sector’s contribution to GDP is likely to persist into 2023, as consumer spending keeps on shifting to services, international visitor numbers recover further, and the utilisation of business services deepens.
However, its support to the GDP thereafter may weaken as its delayed recovery will have run its course by then, the BER said.
Given that a large part of the demand for the other services sector comes from the non-services sectors of the economy, the performance of the other services sector should start to normalise in 2023.
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