With the majority of tourism industry operators closing completely for extended periods during Covid-19 lockdowns and SA being placed on the UK’s “red list” in 2021, it’s safe to say companies operating in the SA hospitality and tourism industry have endured a challenging few years.

Since the Covid-19 restrictions were completely lifted early in 2022 trading the sector had gradually returned to normality. The sector is no longer in survival mode but in strong recovery. Key players in the sector have been reporting positive financial performances, with losses turning into profits and being able to service their long-term debt obligations comfortably. Stats SA reports that SA’s GDP is returning to pre-Covid-19 levels, and with all systems go after a bumper Christmas season, this could be the sector to watch in 2023/2024.

SA 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 SA annually, with the sector contributing 7% to GDP and being responsible for 2.8-million jobs.

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

A look at the results of the JSE-listed hospitality groups suggests a return to profitability, led by Sun International. In addition to investing in a significant upgrade of its Sun City precinct, the group has declared its first dividend in six years. Industry peer Tsogo Sun Gaming reported a stronger than expected recovery to profitability for the six months to end-September, with earnings before interest, taxes, depreciation and amortisation at 99% of pre-Covid levels. On average the hotel operators on the JSE are now trading at about 70% of pre-Covid levels, with full recovery expected this year and next.

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 affect the recovery in the sector. But the numbers we’re seeing are promising. When SA tourism gets back to pre-2019 levels it will be a game changer for the economy and employment in the country.

Courtesy of Business Day – read full article here.