At first glance, the latest hotel sector revenue statistics suggest that revenues have returned to pre[1]COVID-19 levels. However, when adjusted for general price inflation, this is not entirely the case. The sector has faced a challenging post-pandemic environment, but 2025 appears poised for improvement.
November 2024 hotel revenues – year-on-year growth accelerates.
The StatsSA release of November 2024 preliminary monthly tourism statistics showed the Hotel Sector’s income levels having got back to “nominal” levels above those recorded prior to Covid-19 lockdowns. However, when adjusting for inflation, the “real” picture is one of the sector still not “fully recovered”, after the big 2020 lockdown dip, and more recently the economic growth slowdown and late-2021-2024 period of higher interest rates.
In November 2024, hotel sector revenues grew by 9.5% year-on-year, up from 6.8% in October. This higher single-digit growth, outpacing general inflation, is encouraging. It marks a significant recovery from the earlier slowdown in 2024, which saw year-on-year revenue decline by 3% in July. The recent acceleration suggests a turnaround, supported by declining interest rates and improving financial conditions for both households and businesses.
Is the Hotel Sector Fully Recovered?
A key question remains: has the hotel sector fully recovered from the 2020/21 lockdowns?
For many households and businesses, tourism remains a discretionary expense, often reduced during economic downturns. While economic conditions have improved since the lockdown period, GDP growth slowed down to just 0.6% in 2023, and early indications suggest a similar trend for 2024. Additionally, from late 2021 to mid[1]2023, interest rates remained elevated, only decreasing by 50 basis points since September 2023.
At face value, Stats SA’s November 2024 total hotel income data suggests that the sector has recovered, with revenues estimated to be 3.65% higher than in November 2019, just before the COVID-19 shock.
However, when adjusted for inflation using the Consumer Price Index (CPI) for Hotels and Restaurants, real (inflation-adjusted) hotel income in November 2024 was still 17.74% below November 2019 levels.
Hotel Occupancy Rates and Spending Patterns
Further analysis of occupancy rates supports this picture of an incomplete recovery. The national hotel occupancy rate in November 2024 was 46.9%, significantly below the 54.7% recorded in November 2019. This decline stems from a 14.25% drop in stay nights sold compared to five years ago.
However, spending patterns have evolved. The average income per stay night sold in November 2024 was 26.9% higher than in November 2019. Adjusted for inflation, this figure is only 0.7% higher than five years ago, suggesting that while fewer people are staying in hotels, those who do are spending roughly the same in real terms as before the pandemic.
Conclusion – A sector on the path to recovery.
The November 2024 hotel sector data confirms that the industry has not yet fully recovered to pre-COVID-19 strength. The post-lockdown period presented additional challenges, including inflationary pressures, interest rate hikes (475 basis points between late 2021 and May 2023), and a slowdown in economic growth.
While revenue per stay night sold has recovered in real terms, lower occupancy rates mean total revenues remain well below pre-pandemic levels when adjusted for inflation.
Looking ahead, 2025 is expected to be a stronger year for the sector. Declining interest rates and improving economic conditions should support higher tourism and accommodation demand. Notably, the 9.5% year-on[1]year revenue growth in November 2024, significantly outpacing the 3% CPI inflation rate, reinforces expectations of a stronger revenue performance in the coming year.
John Loos: Property Strategist
FNB Commercial Property Finance
Soweto Sunrise News
