Confidence in hotels and restaurants reaches peak before Omicron setback

Confidence in hotels and restaurants reached a peak before the Omicron setback that brought new travel bans and the fourth Covid wave, jumping from 37 in the third quarter to 49 in the fourth quarter. However, at the beginning of December, business confidence in the sector more than halved.

According to the Bureau of Economic Research (BER) at the University of Stellenbosch, this 32-point increase is the largest ever recorded in the survey’s 16-year history, bringing confidence to within a hair’s breadth of the neutral 50-mark, the point where equal percentages of executives are satisfied and unsatisfied with prevailing business conditions.

However, the fieldwork for the survey was conducted before South African scientists went public with the identification of a new Covid-19 variant, Omicron, on 25 November, leading to a large number of countries banning travel to South Africa.

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Confidence rose with more reservations

The business confidence of hotels and restaurants surged from 11 to 58 thanks to bumper reservations from local and foreign visitors. This 47-point jump was the largest increase between consecutive quarters ever recorded, although confidence in the hospitality industry in the fourth quarter was only back at the level of five years ago.

Confidence was relatively unremarkable even before the international travel bans were instituted, indicating how far it has dropped since the onset of the pandemic and how many businesses continue to struggle to survive despite an increase in restaurant patrons and healthy reservations.

Then came the fourth wave of the pandemic with the international travel bans that dealt the industry a heavy blow instead of a better high season bringing the hospitality industry a reprieve after surviving 20 months of almost no travel.

The UK and Europe are major source markets for foreign tourists to South Africa’s high season in summer and the travel bans could not have come at a worse time. It will once again be up to domestic tourism to ensure some demand.

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Confidence halved in December

When the BER conducted a snap poll between 6 and 8 December among the respondents in November, they indicated that confidence in the hospitality sector more than halved, dropping from 58 to 25, which is similar to the second quarter before the third wave and the unrest in July that affected transport services in the third quarter.

Hotels and restaurants ramped up their hiring of additional staff in the run-up to an expected bumper summer season, while hotels also lifted their prices from previously deeply discounted levels.

The BER says the international travel bans and rapid rises in new Covid-19 infections could not have come at a more inopportune time for the hospitality industry.

“At least to some degree, increased hiring in preparation for a good summer season has likely been reversed. This will have an immense adverse social impact amidst record-high unemployment levels.”