eBusiness Weekly
It comes as no surprise that Statistics SA’s survey of tourism accommodation covering April and May found that the number of bed nights sold fell to just about zero: tourism has effectively been outlawed since the last week of March.
However, the monetary value of lost revenue is astounding. According to the report, income generated by hotels, guest houses and B&B establishments fell by nearly 99 percent. Nearly R3,8 billion in revenue was lost in only two months.
The report shows that in April revenue from bed nights sold fell from R1,99 billion a year ago to just R37,9 million. In May it fell from R1,75 billion last year to R26,8 million this year.
Stats SA comes to the obvious conclusion in its report that: “The Covid-19 pandemic and lockdown regulations since March 27 have had an extensive impact on economic activity. Measured in nominal terms, total income for the tourist accommodation industry decreased by 98 percent in May 2020 compared with May 2019.
“Income from accommodation decreased by 98,5 percent year-on-year in May 2020, the result of a 98 percent decrease in the number of stay unit nights sold and a 24,2 percent decrease in the average income per stay unit night sold,” say the researchers.
Foreigners first
Problems had already begun in March, probably due to a decline in the number of foreign tourists visiting SA. Figures show that bookings declined some 39 percent as measured by bed nights sold and income from accommodation was already nearly 42 percent lower than in March 2019. Occupancy rates in any conceivable type of accommodation, from hotels to guest houses, fell to only 1 percent.
The total loss of revenue in the three months from March to May exceeds R4,6 billion compared with the same three months last year. It does not take a doctorate in mathematics or statistics to forecast that income for June and July will probably also be close to 100 percent lower than usual.
A quick calculation shows that the tourism industry is set to lose out on more than R7,5 billion on accommodation alone from March to July, with little indication that the next few months will be much better.
The decline in revenue has and will continue to have an impact on tax revenues too. Value-added tax payments are set to be down more than R1,1 billion in the period March to July compared with 2019, while income tax on profits and employees’ salaries will evaporate as well.
Distressing impact on jobs
The impact of the decline in tourism on employment is equally distressing.
Tourism is regarded as one of the most important industries in SA for growing the economy and reducing unemployment, as it involves a lot of small businesses and independent operators.
The Department of Tourism states that tourism has an important role to play in placing the economy on a sustainable inclusive growth trajectory, describing it as the “new gold” for SA.
“It is a sector that is thriving and that has tremendous potential for further growth and for the creation of much-needed jobs.
“The National Development Plan recognises tourism as one of the main drivers of employment and economic growth,” said the department only 12 months ago.
It then estimated that the direct and indirect contribution of the tourism sector to the economy’s GDP exceeded 8 percent in 2018 which, it said, is an indication of the strong economic links to the demand and supply side the sector has with other sectors of the economy.
The department indicates that the tourism industry employed at least 700 000 people in 2018 and that more than 9 percent of all jobs in SA can be linked to the tourism industry.
That was before the pandemic struck. How many are still employed is anybody’s guess.
Little sign of reprieve
There is no indication of when the tourism sector will be allowed to open. And that critical factor will be only part of the battle; whether people will be willing to travel, and have the money to do so, remains to be seen.
Government has indicated that hotels will only be allowed to reopen during Alert Level 1 of the lockdown. Most of the large hotels groups have been shut since the end of March.
City Lodge, popular among business travellers, announced at the beginning of June that it has opened a few of its hotels to offer accommodation for essential service travellers and that two have been opened to serve as quarantine centres.
Another 21 hotels have been opened to accommodate stranded travellers. More than 60 percent of City Lodge’s hotels are currently still closed. The share price has dropped from R72 at the beginning of January to the current R18.
Sun International was also forced to close its hotels in SA — all of them, from March 26 — and has closed most of its operations around the world at different dates and for different periods. Most hotels in SA are still closed, but limited gambling operations have been allowed.
Sun International was struggling to show decent returns before Covid-19 and had to approach shareholders for new capital.
It announced a rights issue to raise R1,2 billion at R9,44 per share, compared with a share price of R40 at the beginning of the year. — Moneyweb.
