Sector has been worst affected by lockdown and recovery depends on when domestic leisure travel can restart
The national lockdown has been devastating for the hospitality industry and the dire predicaments of these businesses and property owners will not simply be fixed by its long-awaited reopening.
The reopening of business travel at alert level 3 did provide some respite but the damage caused by the lockdown has been severe, says hospitality consultant and Fedhasa Cape chairman Jeff Rosenberg. Any great recovery over the next six months will depend first on when domestic leisure travel is allowed to resume and then when travel is opened to the international market.
“The Tourism Business Council of South Africa is trying to get the domestic market moving by September. This is critical to the market recovery as we approach the next ‘new normal’.” Even when the market does get going again, people will be doing things differently, Rosenberg explains.
“We saw it after 2009 crash as it took five years to get back to normal and we were helped by the 2010 Soccer World Cup. This time we are hoping it will not be that long but it will be a couple of years.”
FNB property economist John Loos said the hospitality industry has been hardest hit by the lockdown and the lack of travel confidence post-lockdown will not help. “People will perhaps not be as willing to jump on a plane.” The demand-side pressures could also be around for a while, he says.
“We have all been pushed into remote working, so this eliminates the need to travel to other provinces and stay in hotels. “A lot of business travel will also not come back after lockdown due to financial pressure on corporates.”
While Rosenberg agrees that business travel will be under pressure, he is hoping that the opening of local attractions will eventually get the domestic leisure travel market back up and running. However, this will take time. “Christmas will have a very different feel this year and (the travel industry) will have to come up with enticing packages.”
Companies at all levels of the industry have been forced to close and some will not have the cash flow to restart, says Brett Tungay, chairman of Fedhasa East Coast. “Most tourism properties are financially leveraged due to the high capital demands of the industry and are surviving on the grace of their lenders extending payment holidays on loans but most of these grace periods have been for only three months – April, May and June.”
His calculations show that most companies in the tourism sector will suffer a 60% to 70% reduction in turnover for the 2021 financial year. Although conferencing is now permitted to reopen, this will also carry a “whole new dynamic”, Rosenberg says, adding that this market will have to “think long and hard” about how it will manage the challenges arising from the expected short-term decline in international travel and conferencing.
“I do feel for those involved in conferencing. We have some very beautiful convention centres in South Africa but they need the volumes to go through them to make them viable.”