Down and out confidence levels for hotels, restaurants and business services in Q4

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Most respondents in the BER's services survey wre disatisfied with prevailing conditions in hotls, restaurant, transport and businesses services industries (Supplied)
Most respondents in the BER's services survey wre disatisfied with prevailing conditions in hotls, restaurant, transport and businesses services industries (Supplied)
  • Confidence levels among other services - hotels, restaurants, transport, real estate and business services - climbed 10 spots but it still shows respondents are unsatisfied with prevailing conditions.
  • Compared to a year ago activity in hotels and guest house was down across the board- despite the reopening of international travel and inter-provincial travel during the fourth quarter.
  • The poor performance of hotels, restaurants and business services support the view that fourth quarter GDP surprises on the downside.

The poor performance of hotels, restaurants and business services has contributed to expectations that fourth quarter GDP will disappoint, following a massive recovery in the third quarter.

According to the Other Services Survey, conducted by the Bureau for Economic Research (BER) between 28 October and 16 November – before lockdown Level 3 restrictions were reinstated due to a resurgence of Covid-19 cases - confidence levels increased 10 points to 27 for the fourth quarter.

Other services subsectors surveyed include restaurants, hotels, real estate, transport and business services. On a scale of 0 to 100; figures below 50 indicate the majority of respondents are unsatisfied with prevailing conditions.

"The fourth quarter finding of 27 indicates that more than 7 out of 10 participants were unsatisfied," the report read.

This was also below the 34 recorded a year before and below the business confidence index (which takes into account manufacturing, construction, retail, wholesale and motor trade) reading of 40.

Alert level 1 was applied at the time the fourth quarter survey was conducted. This meant that restaurants could be occupied by up to 50% of their capacity, alcohol sales were allowed, leisure travel across provincial borders, hotel stays and international travel was allowed.

"Conditions were still far from favourable in the other services sector," the report read.

Confidence levels of the other services sector. Ph

"Despite the step-up in confidence, the poor performance of especially hotels, restaurants and business services provide further support for the view that the fourth quarter GDP growth rate will most likely subside after it soared in the third quarter," the report read.

Activity among hotels and guest houses during the fourth quarter was down across the board, compared to a year ago – despite the lifting of restrictions on inter-provincial travel and the reopening of international travel.

"A return of business travel and a more meaningful resumption of international tourism are needed for a more substantial improvement," the report indicated.

Restaurants also followed the same route of the tourism accommodation sector. The alcohol sales ban introduced on 28 December and the extended curfew between 9pm and 5am forced restaurants to close by 8pm and would certainly impact their performance, the report noted.

Transport services recovered in the fourth quarter. "Road freight, storage, warehousing and freight forwarding probably rose materially, while passenger transport, travel agencies and tour operators remained in the doldrums," the report read.

As for real estate, the low interest rate and easier bank lending and weak property prices continued to drive activity.

Business services faced challenges in terms of demand. "To survive or improve their financial performance, other businesses cut back their expenditure on legal services, accounting and management consultancy or put huge pressure on these providers to keep their fees the same or lower than invoiced previously," the report read.

The survey also highlighted that there had been a decline in employment in hotels and restaurants and the business service subsectors during the quarter.

Hotels and restaurants only contribute 1% of GDP and account for 3.4% of employment. "In 2019, hotels and restaurants employed 557 thousand people," the report read.

Business services account for 7.8% of GDP and 13.9% of employment. It is considered the second largest employer after personal services such as domestic workers.

"In 2019, 2.3 million people were employed in business services, stretching from professionals (such as lawyers, accountants, consultants and engineers) on the one side to security guards and temporary workers on the other side," the report read.

The BER said that it is the "prolonged" reduction in employment at hotels, restaurants and business services is "most worrisome".

The Other Services sector accounted for 22% of GDP in 2019.

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