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Hotel sector doing well – until coronavirus hit

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Before Covid-19, South Africa’s hotel sector was performing better than other major property sectors, says FNB’s John Loos.

Citing MSCI data, he says this sector’s half-yearly total return in the first half of last year was 6.2%, which was stronger than the retail, office and industrial property. Its half-yearly capital growth of 1.8% was also stronger.

“So, although the hotel property sector must have been feeling some pressure from a gradually stagnating economy, it was moderately outperforming the other major property sectors.” The 2019/2020 season was particularly strong in the Cape hospitality space, says the President Hotel’s Jeremy Clayton. 

“Across-the-board growth was nearly double digit and, as a whole, the tourism sector was making a strong comeback post the water crisis. International arrivals at Cape Town International were up by more than 10%. “Covid-19 has forced many hotels and restaurants to close. I am aware of over 50 hotels that have closed in the five days (up to March 22) and hundreds of millions of rands wiped off the hotels’ revenue streams.”

He says occupancies had declined by more than 80% since the first case of Covid-19 here. While Loos believes that this year would have eventually seen a gradual slowing owing to a decline in corporate and leisure travel thanks to household financial pressures, reports following the virus outbreak show “extremely sharp drops” bordering on empty for hotels.

Corporates have scaled back and a myriad events are cancelled or postponed. “The voluntary travel cutbacks among the public seem to be significant too. “The virus has created a certain amount of fear.”

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