September 2022 hotel revenues – year-on-year growth still strong off a low base as post-lockdown recovery continues, but hotel income level still falls short of ‘fully recovered’ status, remaining significantly weaker than pre-lockdown levels.
“The StatsSA release of September 2022 preliminary monthly tourism statistics showed the Hotel Sector’s income levels making further progress on the post-lockdown recovery, but still not fully recovered back to pre-lockdown levels,” says John Loos, Property Sector Strategist at FNB Commercial Property Finance
“On a year-on-year growth rate basis, total Hotel Sector income was a very strong 118.6% in September, which was a renewed acceleration on the already-strong August growth rate of 58.5%.
“These very strong growth rates, however, have limited significance, given that this income growth was coming off a very low base as 2020/21 lockdowns eased.
“Given the abnormalities created in post-lockdown growth rates, due largely to the low 2020/21 lockdown base, it makes sense to also view total revenue value, and compare it to the comparable month back in 2019, the pre-COVID 19 period.”
Loos adds; “We then get a better perspective of a Hotel Sector whose income is clawing its way back out of the lockdown dip, but which is still under significant pressure, albeit getting nearer to full recovery. By ‘full recovery’ we mean getting back to 2019 levels.
“Total Hotel Industry Income in September 2022 was still -12.9% below the income for September 2019, the last corresponding month prior to the 2020 lockdown. This is an improvement on the August 2022 level, which was a greater -16% down on the August 2019 number.”
He says that in real inflation-adjusted terms (using a Hotel and Restaurants CPI), this September income level was still a very significant -21.4% below the September 2019 level.
“Going further to view occupancy rates, in the typically good seasonal month of September, the September 2022 national hotel occupancy rate was 38.9%, still well-below the 50.6% rate for September 2019,” notes Loos.
“Of late, it appears to have been more the low occupancy rate, than the average value of stay nights sold, that has been constraining hotel income.
“The average hotel income per stay night in September 2022, after significant post-lockdown recovery, was +5.1% above the September 2019 level.
“However, while this level may appear similar to that of 2019, in inflation-adjusted real terms it is still -5.1% below the September 2019 level.”
Conclusion
Loos say the Hotel Sector’s revenue recovery made further progress in September 2022, with income being down on the corresponding month of 2019 by a smaller percentage than the August 2022 income level was down on its 2019 corresponding month.
“These still-weak revenue figures are expected to continue to improve gradually as the year draws towards an end, with Covid-19 lockdown pressures long since having receded.
“However, surges in fuel prices earlier in 2022, as well as in overall inflation (driven mainly by fuel and food prices), along with rising interest rates and a slowing economy, have become a more recent source of financial pressure on both business and consumers,” he adds.
“This, in turn, may have constrained the pace of recovery in demand for tourism trips of both a holiday and business nature, albeit it not stopping the recovery entirely.
“I expect that ‘full recovery’ back to where real (inflation-adjusted) hotel income reaches 2019 levels, may only occur well-into 2023 at best.
“The coming December 2022 holiday season looks set to see improvement on December 2021, but may still be below the December 2019 level of occupancy rate and income, given the recent economic constraints mentioned above.”
He adds that while holiday travel may ultimately return to ‘normal’ pre-Covid 19 levels, possibly only when household finances are fully recovered, the business travel element of hotel stays may remain below pre-Covid-19 levels on a longer-term basis due to the Business Sector successfully having ‘Zoomified’ much of its interaction during forced lockdowns.
“This likely pushes it partially away from less efficient physical travel. A portion of that costly physical business travel hotel stays may therefore never return.”