'Unparalleled' decline in tourism accommodation puts Covid-19 impact in perspective

  • April and May's data show a plunge in total income from accommodation of 98.7% y/y and 98.0% y/y, respectively.
  • All categories showed "unparalleled" declines. 
  • In June, the Department of Tourism saw its allocations drop from R2.4 billion to R1.4 billion, as funds were redirected to more urgent budget items.

Tourist accommodation numbers for April and May reflect the dire impact of the Covid-19 pandemic on the tourism industry, according to Investec economist Lara Hodes.

April and May's data show a plunge in total income from accommodation of 98.7% y/y and 98.0% y/y, respectively, according to Statistics SA. All accommodation categories experienced "unparalleled" declines.

Total income - which includes restaurant and bar sales - derived from the tourist accommodation industry and measured in nominal terms - fell by 33.6% y/y in March, following February's 6.4% y/y lift.

Minister of Finance Tito Mboweni tabled his supplementary budget in late June in response to the pandemic. This affected the Department of Tourism, which saw its allocations drop from R2.4 billion to R1.4 billion, as funds were redirected to more urgent budget items.

As a result of the budget cuts, there was less to go round for the Department of Tourism, whose allocations to SA Tourism decreased by over R800 million, contributing to a downward revision of the latter's revenue from R1.5 billion to under R500 million.

Hodes points out that the tourism and hospitality sector has been one of the biggest casualties of the Covid-19 pandemic.

"This essential sector of the economy has been largely shut down since the end of March, when government enforced its nationwide lockdown. However, even before South Africa's official lockdown, many countries, including those that are significant tourism markets for SA closed their borders, restricting international travel," she commented in a statement on Monday.

This had a marked bearing on March's accommodation figures.

Job losses, salary cuts

Furthermore, Hodes points out that many markets globally have started to ease their travel restrictions, subject to strict health protocols. However, in South Africa, while some domestic travel, primarily for business purposes has been permitted since 1 June, leisure travelers staying overnight in accommodation establishments remains prohibited.

"Job losses and salary cuts linked to the economic fallout from the pandemic, have served to intensify the strain many consumers were already under. As such, many households will have to reduce or eliminate their leisure travel budgets," says Hodes. "Furthermore, many individuals are likely to remain hesitant to resume many ordinary activities once the economy is fully opened."

According to a recent survey on tourism in South Africa by, among others, the Department of Tourism and the Tourism Business Council of SA, the most significant concern for businesses considering reopening is sufficient demand to break-even.

"Adverse long-term effects on the hospitality, tourism and accommodation industry is envisioned. The industry is an important growth area for SA's economy and a vital conduit for employment," says Hodes.

"Players in this sector will need to re-invent their offerings to adjust to the 'new normal', until a viable treatment or widespread vaccine is available."

The Tourism Business Council of South Africa (TBCSA) has repeatedly expressed concerns about the devastating impact of the lockdown on the industry. The organisation continues lobbying for ways in which more and more of the industry can safely be reopened.

Safari operator Hylton Langley, for example, recently opined that, if government officials had had 100% of their salaries cut, they would understand first-hand how deeply this crisis has affected the tourism industry, where many have been left without income. 

"I don't know where they think we're going to get the money to pay our staff," said Langley.

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