Trouble for hotels and restaurants in South Africa
Business confidence in the hotel and restaurant sector in South Africa has fallen below its long-term averages, implying fewer tourists and more strained trading conditions.
However, this was the only real dark spot in an otherwise more optimistic fourth-quarter (Q4) 2024 survey by the Bureau for Economic Research (BER).
The BER’s ‘other services’ index for Q4 revealed a broadly positive outlook for sectors not covered in main-line business confidence indices, despite a slight dip by one point in overall business confidence to 57.
The sector remains in positive territory.
While confidence varied across subsectors—rising in transport and real estate but falling in hotels, restaurants, and business services—most remained above long-term averages, with hotels and restaurants being the exception this quarter.
“Current confidence levels are still above the long-term average [and] confidence in other services for the entire year of 2024 is 8 points higher than in 2023,” said the BER.
“In the fourth quarter, total business volumes improved, while business conditions remained stable, both staying above their long-term averages,” added the BER.
Looking at the performance of each subsector measured within the “Other Services” sector, findings saw:
- Hotels and Restaurants:
This subsector experienced a decline in confidence in Q4 2024, falling below its long-term average. Despite increased business volumes, business conditions worsened, nearing the long-term average.
The BER said that this is likely due to issues with air traffic, leading to fewer tourist arrivals in September and October compared to the previous year.
Although the hospitality sector is performing well overall, its growth is slowing compared to the post-pandemic recovery.
- Transport:
This subsector saw a resurgence in Q4, with confidence, business volumes, and conditions all improving.
This positive trend is potentially linked to anticipated higher delivery volumes during the festive season and increased Black Friday orders.
- Real Estate:
Confidence significantly increased in this subsector. While business volumes dipped slightly, they remain high historically.
Notably, expectations for future business volumes and conditions in real estate are optimistic, suggesting an expected upswing.
- Business Services:
Confidence in this subsector decreased from its peak in the previous quarter but remains historically high. Business volumes and conditions also declined in Q4 but are still relatively strong compared to past performance.
A notable increase in financial concerns was reported, with high interest rates cited as a barrier to growth, despite a strong overall performance.
Going forward
Overall, the BER said that the Other Services sector remains robust.
“Business confidence and business conditions have held steady, while business volumes have seen a modest uptick relative to 2023,” said the BER.
To put this in perspective, the BER said that both the Other Services Confidence and the RMB/BER Business Confidence Index (BCI) have significantly improved compared to last year.
The BCI increased to 45 points in Q4 2024, marking its third consecutive rise and nearly 20 points above the recent low of 27 in Q2 2023.
“The economy has benefitted from no load-shedding, political stability under the Government of National Unity (GNU), a relatively stronger rand, lower international oil prices, and two repo rate cuts since September,” said the BER.
“Going forward, a lot still hinges on expectations of even lower interest rates and continued governmental stability,” it added.
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