State curbs to hit travel sector

Johannesburg - Already-high vacancy rates in the country's hotel sector may worsen as government plans to cut down on travel expenditure, industry experts have warned.

According to data released by Statistics SA on Monday, annual revenue in the accommodation industry fell by 9.6% in 2009, compared to the previous year.

Further evidence of the decline can be seen in the recently released results of listed property and tourism groups. Hospitality Property Fund, which owns hotels like the Radisson Blu in the V&A Waterfront and Mount Grace in Magaliesberg, has seen a 13% jump in vacancies, while value player City Lodge also reported an 11% increase in empty rooms.

According to a statement released by the Democratic Alliance last week, government spent an estimated R3bn on luxury travel, accommodation and meals between March 2008 and September 2009.

Hospitality Property Fund CEO Gerald Nelson estimated government makes up between 15% and 20% of hospitality industry business.

Coronation Fund Managers property analyst Anton de Goede said the industry's woes will be exacerbated by the state's recently implemented cost-saving strategies, which instruct departments to either travel less or trade down.

"Government has not started travelling much yet [this year] and after the Budget speech I doubt we'll reach the levels we saw two to three years ago again," De Goede said.

According to Nelson, the days of state employees staying in five-star hotels are over. "Government will continue to trade, and continue to conference, but the excesses of the past will be curtailed," he said. "Hoteliers have to be circumspect about it."

However, City Lodge CEO Clifford Ross said he has not yet experienced the benefit of travellers buying down. "These are tough times for everyone, but I think the discount factor applied by some hotels is bruising the egos of a lot of people used to staying in five-star hotels," said Ross.

- Fin24.com