A number of new hotels are opening in SA this year — which seems to defy logic, given that the hospitality industry has been crippled by lockdowns, international travel restrictions and lingering uncertainty of how the pandemic will play out.
However, some industry players believe adding new room capacity in certain nodes is justified on the back of what they believe could be a faster recovery to pre-Covid trading levels than widely expected.
The latest data from global hospitality analytics company STR supports the notion, with SA hotels recording a relatively robust set of trading metrics in January. Occupancy as well as revenue per available room (revpar) practically doubled year on year — from 20.7% to 40.4% and R232.05 to R540.25 (see graph).
Yes, that’s still some way off the average SA occupancy of 56.5% and revpar of R823.21 reached in January 2020. But it points to an encouraging uptick in demand, especially as foreign tourists haven’t yet returned to SA in large numbers.
"February has been an even better month than January," says Gary Koetser, joint CEO of Century City Conference Centre and Hotels, which opened its new 98-room Bridgewater Hotel at the mixed-use precinct near Milnerton, Cape Town, in December. The hotel overlooks a 6ha parkland of islands and waterways. It primarily targets business travellers and brings Century City’s hospitality offering to five hotels with a total room tally of 650. All this is within walking distance of Century City’s 800-seater conference centre.
Koetser notes that Bridgewater reached an occupancy of 78% in February, mostly due to a strong recovery in the meetings, incentives, conferences and exhibitions market. He ascribes the "rapid rate" at which the precinct’s conferencing business has rebounded in recent weeks to pent-up demand among local companies that are desperate to get staff together again in person. That’s especially true for industries with a large component of sales representatives.
"You can’t network, build corporate culture or motivate salespeople on a PC screen," he says. "So local corporates that put conferences on hold that were planned pre-Covid are now starting to pull the trigger."
He also expects international business and leisure tourism to pick up in the next few months, depending on how a potential fifth wave of Covid will disrupt the world.
He refers to US carrier United Airlines recently announcing plans to resume direct flights between New York and Cape Town in June. In addition, Delta Airlines is looking to introduce direct flights between Atlanta and Cape Town in November.
Other industry players seem equally bullish about the recovery of SA’s hospitality industry. Radisson Hotel Group, for example, will open two new hotels this year: Radisson Safari Hotel Hoedspruit near Kruger National Park, the group’s first safari-inspired hotel in SA; and Radisson Blu Oceans Umhlanga Hotel, its first hotel in Durban.
That will expand Radisson’s SA footprint to 15 properties.
Tim Cordon, Radisson’s senior area vice-president for the Middle East & Africa, says the expansion of its SA operations underscores the group’s positive growth expectations for 2022. The group plans to add 400 new hotels across Europe, the Middle East, Africa and Asia this year to its portfolio, which spans more than 1,600 hotels in 120 countries.
However, FNB property strategist John Loos says while there’s no doubt that SA’s hotel sector is starting to claw its way out of the "deep hole" created by Covid lockdowns, hotel revenues are unlikely to return to 2019 levels just yet, especially not in real (inflation-adjusted) terms.
He cites a number of reasons for this, among others that many people may not yet be willing to resume international travel this year. He adds that domestic leisure tourism may also remain constrained for now as South Africans are under pressure financially, due to the effect of the 2020 recession on employment and incomes. "With holiday tourism being nonessential in nature, this expenditure category may get put on the back burner for many households while they nurse their finances back to health," he says.
And while it’s picking up, local business travel is also unlikely to recover to pre-Covid levels this year, given how many companies have "zoomified" interaction with employees and clients.
Loos says much of the costly physical business travel may never return. "Many hotels may have to be less dependent on domestic business travel on a more permanent basis."
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