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This year's Soccer World Cup will no doubt bring a much-needed boost to South Africa’s struggling hospitality industry but it may not be enough to lift the sector out of its recession.
In fact, it now appears overseas arrivals for the event – which takes place in June/July – may be lower than the 450 000 initially expected.
Economists have also recently downgraded their forecasts in terms of the impact the event will have on SA’s gross domestic product.
Though it was originally thought the tournament would boost GDP by 1% the current estimate is around 0.4%, with some economists even looking to 0.2%.
Not all going on a summer holiday
Hotel occupancies and revenues have been particularly hard hit by the sharp downturn in both local and international tourism since the global recession hit 18 months ago.
Sector heavyweight Sun International said in a recent trading update that earnings for the six months ended 31 December 2009 are expected to be between 25% and 35% lower year-on-year.
“Overall, trading for the six months remained subdued. Although casino trading patterns in the second quarter ended 31 December 2009 were similar to the first quarter of the current financial year, hotel occupancies and average room rates achieved showed further deterioration,’’ the statement read.
Fellow JSE-listed hotel group City Lodge has reported a 14% drop in earnings for the six months to year-end 2009 on the back of what management describes as “weak trading conditions” in both the SA and global travel markets.
Occupancies throughout the group's four brands – Courtyard, City Lodge, Town Lodge and Road Lodge – fell to 70% from 81% a year earlier.
Commenting on the upcoming Soccer World Cup, City Lodge CEO Clifford Ross said although bookings for the duration of the tournament are looking promising in the major host cities there are still rooms available in smaller cities.
Said Ross: “It’s important to note that throughout the event in all parts of the country there are opportunities for normal business travel to take place, keeping the wheels of commerce and industry turning.”
Ross said while trading conditions remained tough in January and the first half of February it was anticipated demand for hotel accommodation could increase in the lead-up to the Soccer World Cup, enabling the group to achieve an improved performance in the second half of its financial year.
Still better than the rest
However, the City Lodge group has emerged from the downturn in much better shape than many of its counterparts.
Latest figures from Smith Travel Research’s (STR) global hotel benchmark survey confirm SA occupancies and revenues are under pressure.
Average hotel occupancies dropped to 55.8% in December (December 2008: 60.6%), down from more than 70% during the boom years of 2006, 2007 and 2008.
Revenue per room dropped by 2.2% in December 2009 year-on-year to an average R487.52, reported STR.
Figures released by industry players at the annual Hospitality Investment Conference Africa held in Sandton in November last year showed while demand for hotel rooms was down last year supply had increased significantly.
In fact, industry players estimated SA currently has a 25% oversupply of hotel rooms.
The luxury end of Cape Town’s hotel market has been particularly hard hit, with occupancies reportedly down 30% last year.
Meanwhile, new four- and five-star hotels continue to open their doors in the Mother City.
Some 2 500 new five-star rooms would apparently have been added to Cape Town alone in the year to June 2010, bringing the city's total supply of five-star rooms to 14 000.
Not-so-good news
Figures from Gerald Nelson, CEO of JSE-listed Hospitality Property Fund, show Cape Town's current room supply (all grades) would surge by 40% over the next two years.
Nelson says, given SA’s hotel industry is already sitting with a 25% oversupply coupled to all the new stock still coming on stream, there’s no way anyone can expect good times ahead.
Though the industry may well be gearing up for a surge in occupancies during the Soccer World Cup the five-week event alone won’t support a sustainable improvement, says Nelson.
He warns it could take as long as five years for SA’s hotel demand and supply to normalise.
- Finweek
In fact, it now appears overseas arrivals for the event – which takes place in June/July – may be lower than the 450 000 initially expected.
Economists have also recently downgraded their forecasts in terms of the impact the event will have on SA’s gross domestic product.
Though it was originally thought the tournament would boost GDP by 1% the current estimate is around 0.4%, with some economists even looking to 0.2%.
Not all going on a summer holiday
Hotel occupancies and revenues have been particularly hard hit by the sharp downturn in both local and international tourism since the global recession hit 18 months ago.
Sector heavyweight Sun International said in a recent trading update that earnings for the six months ended 31 December 2009 are expected to be between 25% and 35% lower year-on-year.
“Overall, trading for the six months remained subdued. Although casino trading patterns in the second quarter ended 31 December 2009 were similar to the first quarter of the current financial year, hotel occupancies and average room rates achieved showed further deterioration,’’ the statement read.
Fellow JSE-listed hotel group City Lodge has reported a 14% drop in earnings for the six months to year-end 2009 on the back of what management describes as “weak trading conditions” in both the SA and global travel markets.
Occupancies throughout the group's four brands – Courtyard, City Lodge, Town Lodge and Road Lodge – fell to 70% from 81% a year earlier.
Commenting on the upcoming Soccer World Cup, City Lodge CEO Clifford Ross said although bookings for the duration of the tournament are looking promising in the major host cities there are still rooms available in smaller cities.
Said Ross: “It’s important to note that throughout the event in all parts of the country there are opportunities for normal business travel to take place, keeping the wheels of commerce and industry turning.”
Ross said while trading conditions remained tough in January and the first half of February it was anticipated demand for hotel accommodation could increase in the lead-up to the Soccer World Cup, enabling the group to achieve an improved performance in the second half of its financial year.
Still better than the rest
However, the City Lodge group has emerged from the downturn in much better shape than many of its counterparts.
Latest figures from Smith Travel Research’s (STR) global hotel benchmark survey confirm SA occupancies and revenues are under pressure.
Average hotel occupancies dropped to 55.8% in December (December 2008: 60.6%), down from more than 70% during the boom years of 2006, 2007 and 2008.
Revenue per room dropped by 2.2% in December 2009 year-on-year to an average R487.52, reported STR.
Figures released by industry players at the annual Hospitality Investment Conference Africa held in Sandton in November last year showed while demand for hotel rooms was down last year supply had increased significantly.
In fact, industry players estimated SA currently has a 25% oversupply of hotel rooms.
The luxury end of Cape Town’s hotel market has been particularly hard hit, with occupancies reportedly down 30% last year.
Meanwhile, new four- and five-star hotels continue to open their doors in the Mother City.
Some 2 500 new five-star rooms would apparently have been added to Cape Town alone in the year to June 2010, bringing the city's total supply of five-star rooms to 14 000.
Not-so-good news
Figures from Gerald Nelson, CEO of JSE-listed Hospitality Property Fund, show Cape Town's current room supply (all grades) would surge by 40% over the next two years.
Nelson says, given SA’s hotel industry is already sitting with a 25% oversupply coupled to all the new stock still coming on stream, there’s no way anyone can expect good times ahead.
Though the industry may well be gearing up for a surge in occupancies during the Soccer World Cup the five-week event alone won’t support a sustainable improvement, says Nelson.
He warns it could take as long as five years for SA’s hotel demand and supply to normalise.
- Finweek
