‘The November 2024 hotel sector data confirms that the industry has not yet fully recovered to pre-COVID-19 strength.’
The hotel sector has recorded growth in its income levels for November 2024, which could suggest South Africans have recovered financially.
While income levels are above those recorded before the Covid-19 lockdowns, it is worth noting that when adjusting for inflation, the “real picture” is the sector still has not fully recovered.
The hotel sector revenues grew by 9.5% year-on-year, up from 6.8% in October.
John Loos, FNB’s Property Strategist, says the higher single-digit growth, outpacing general inflation, is encouraging.
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Hotel sector’s recovery
He says it marks a significant recovery from earlier slowdown in 2024, which saw year-on-year revenue decline by 3% in July.
“The recent acceleration suggests a turnaround, supported by declining interest rates and improving financial conditions for households and businesses.”
Staying at hotels is a luxury
For many households and businesses, tourism remains a discretionary expense, often reduced during economic downturns.
Loos says while financial conditions have improved since the lockdown period, GDP growth slowed to just 0.6% in 2023, and early indications suggest a similar trend for 2024.
“Additionally, from late 2021 to mid-2023, interest rates remained elevated, only decreasing by 50 basis points since September 2023.”
He adds that Stats SA’s November 2024 total hotel income data suggests that the sector has recovered, with revenues estimated to be 3.65% higher than in November 2019, just before the Covid-19 shock.
However, when adjusted for inflation using the Consumer Price Index (CPI) for Hotels and Restaurants, real (inflation-adjusted) hotel income in November 2024 was still 17.74% below November 2019.
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Hotel occupancy rates
“Further analysis of occupancy rates supports this picture of an incomplete recovery. The national hotel occupancy rate in November 2024 was 46.9%, significantly below the 54.7% recorded in November 2019.”
He says this decline stems from a 14.25% drop in stay nights sold compared to five years ago.
However, spending patterns have evolved. Loos adds that the average income per stay night sold in November 2024 was 26.9% higher than in November 2019.
“Adjusted for inflation, this figure is only 0.7% higher than five years ago, suggesting that while fewer people stay in hotels, those who do are spending roughly the same in real terms as before the pandemic.
“The November 2024 hotel sector data confirms that the industry has not yet fully recovered to pre-COVID-19 strength.”
At face value
“The post-lockdown period presented additional challenges, including inflationary pressures, interest rate hikes (475 basis points between late 2021 and May 2023), and a slowdown in economic growth,” says Loos.
While revenue per stay night sold has recovered realistically, lower occupancy rates mean total revenues remain well below pre-pandemic levels when adjusted for inflation.
“2025 is expected to be a stronger year for the sector. Declining interest rates and improving economic conditions should support higher tourism and accommodation demand.
“Notably, the 9.5% year-on-year revenue growth in November 2024, significantly outpacing the 3% CPI inflation rate, reinforces expectations of a stronger revenue performance in the coming year.”
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