It’s game on for
the tourism sector

With majority of the industry operators closing completely for extended periods during Covid-19 lockdowns and South Africa being placed on the red list by the United Kingdom (UK) in 2021, it’s safe to say companies operating in the South African hospitality and tourism industry have endured a challenging few years.

Since the Covid-19 restrictions were completely lifted off early in 2022, trading within the sector is returning to normality; the sector is no longer in survival mode but in strong recovery. Key players in the sector have been reporting positive financial performance in terms of losses turning into profits and the ability to service their long term debt obligations comfortably. Stats SA reports that South African gross domestic product (GDP) is returning to pre-Covid-19 levels and with all systems go, this could be the sector to watch in 2023/4.

South Africa is a beautiful country with world-class attractions, but we often forget just how strategically important the hospitality sector is to the economy. Pre-Covid-19 lockdowns, 10,3 million tourists visited South Africa annually while the sector contributed 7% to South Africa’s GDP and created 2.8m jobs.

For context, the agriculture sector contributes 2.4% to GDP and creates about 800 000 jobs while construction accounts for only 2.7% and creates about 1.1 million jobs. In 2021 hospitality and tourism sectors only contributed 3.7% to GDP and employed roughly 1 million people – a significant drop for such a key contributor. It is estimated that close to 500 000 jobs were shed in 2020 during the first year of the pandemic.

A look at the results out of the JSE-listed hospitality groups suggest a return to profitability and this has been led by Sun International, which not only have invested in a significant upgrade of its Sun City precinct but has declared its first dividend in 6 years. Industry peer, Tsogo Sun Gaming, reported a stronger than anticipated recovery to profitability for the 6 months to 30 September 2022, with earnings before interest, taxes, depreciation, and amortization trading at 99% of pre-Covid levels. Whilst the hotel operators on the JSE are currently trading at c.70% of pre-Covid levels with full recovery expected in 2023/4.

Of course, it’s still early days – and we’re cognisant that the global consumer is still under pressure due to high inflation and rising interest rates, which may impact the recovery in the sector. But the numbers we’re seeing are promising. If South African tourism gets back to pre-2019 levels, it will be a game changer for the economy and employment in the country.