Big travel shift expected to hit South Africa: FNB

 ·21 Jun 2022

Statistics South Africa’s preliminary monthly tourism statistics show the hotel sector is still battling to fully recover from the harsh Covid-19-related lockdown shock back in 2020, with year-on-year growth still strong but slowing.

However, the data also shows that some forms of travel are simply not coming back – most notably in the business sector, says FNB.

While some post-Covid recovery was expected in the tourism sector in 2022, the industry has experienced some new pressures in recent months, says John Loos, property sector strategist at FNB Commercial Property Finance.

“The KZN Province has been hit by severe flooding twice, the first flooding having been in April. This may have had an impact hotel occupancy over the Easter period and possibly beyond, a typically reasonably busy time for hoteliers that may have been less busy due to the floods and the damage they have caused,” he said.

“In addition, transport cost inflation has skyrocketed due to a surge in global oil prices driving up domestic petrol prices. The fuel price inflation has been relentless over the past year, and this is likely to dampen domestic tourist travel demand by road, while the cost of air travel is also influenced.”

These issues have been compounded by the demise of Comair, which has restricted the availability of air travel in recent weeks, and may be having a negative impact on air travel and thus on hotel demand too.

And then there are the factors that we have identified as constraints on tourism and hotel demand for a considerable time already, said Loos.

“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, not to mention recently rising CPI inflation and interest rates. 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, we have argued for a while that business travel not only battles from similar financial constraints following the 2020 recession impact on businesses, but the Business Sector has also successfully ‘Zoomified’ much of its interaction during forced lockdowns. ”

This modern communication likely pushes it partially away from less efficient physical travel. Much of that costly physical business travel may therefore never return, he said.

Loos added that many hotels may have to be less dependent on domestic business travel on a more permanent basis.

“In short, we would expect hotel occupancy and income improvements to continue in 2022, on the assumption that everyone remains freer to move around as vaccine rollouts progress, across the world as well as in SA, and the virus threat recedes.

“But the financial impact from the 2020 recession on households and businesses alike lingers, with more recent pressure being added by higher fuel and overall price inflation, and resultant interest rate hiking. These factors are seen as a drag on the pace of recovery in what is a non-essential spending category for many. So, progress back to pre-Covid-19 income levels for this property class may not yet happen in 2022.”

Read: South Africa looking to lift Covid restrictions – including an end to face masks

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