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South Africa: COVID-19 has huge impact on accommodation industry South Africa: COVID-19 has huge impact on accommodation industry

The COVID-19 pandemic and national lockdown have drastically impacted the South African travel accommodation industry. As a direct result, many small businesses devastated by financial hardship are now forced to seek some form of financial aid. Nationwide survey of accommodation establishments was conducted, to ascertain how this pandemic has impacted their financial performance and workforce. The survey explored how many of these businesses have applied for and received financial relief from either banks or relief funds, and how business owners view the future of the tourism industry in their region. 4,488 contributions were received from accommodation business owners in this survey who represent 7,262 local accommodation establishments, making this survey one of the largest surveys of its kind.

Examining the wreckage: How COVID-19 brought South Africa’s flourishing travel accommodation industry to a crashing halt

28% of South African accommodation providers may not survive the COVID-19 crisis. The COVID-19 pandemic has profoundly impacted the South African travel accommodation industry, leaving uncertainty, financial difficulty and, in many cases, economic devastation in its wake.

Results show that a 56,5% majority of businesses have been largely impacted and that the next few months will be a struggle. 27,6% indicated a high likelihood that their business will not survive, of which 3,9% said that their business would not survive the pandemic. Limpopo (37,5%), North West (37,8%), Mpumalanga (33,5%) and the Northern Cape (34,2%) reported a particularly high chance of business failure. With Limpopo and Mpumalanga widely regarded to be the provinces with the most locally and internationally sought-after game viewing opportunities, these potential business failures could have a dramatic long-term impact on South Africa’s tourism economy, with noteworthy short-term economic difficulty already being be visible in these results.

Comparatively 82,6% of respondents reported that their businesses were stable before COVID-19, of which 49,8% indicated steady revenues compared to the previous year and 32,8% indicated that their businesses were thriving. In order to shed light on how far-reaching the COVID-19 crisis’ impact has been on the future of the travel accommodation industry thus far, owners were asked to indicate their accommodation booking cancellation rates for the upcoming June/July, September and Christmas seasons. Upcoming booking cancellations were recorded at 82% for the June/July season, 61% for September and 30% for the Christmas season nationwide. These figures demonstrate a devastating immediate impact on revenues, with a dramatic effect still predicted for the third fiscal quarter. Current figures for December show potential for this effect subsiding in the fourth quarter.

One respondent from Robertson in the Western Cape stated that his main concern, however, is more deeply rooted than the drastic cancellation rate. “The current issue is not about the number of cancellations for the coming months. It is about the total lack of new bookings coming in ─ from overseas guests it is zero as there is no perspective about when the travel ban will be lifted.”

Another respondent from Clarens in the Free State further emphasizes that cancellation rates only minimally reflect the true economic impact the pandemic and lockdown has brought about. “I haven’t had any cancellations from June – September because there has been hardly no enquiries since the announcement of lockdown. [sic]”

Given the dramatic effect COVID-19 has had on revenues, owners were also asked whether they’ve had to implement any salary reductions or retrenchments as a direct result of the pandemic. 78,1% of travel accommodation businesses report instituting some form of temporary salary reductions as a direct result of COVID-19, of which 24,7% reported significant temporary salary reductions and 31,8% reported their entire workforce on temporary zero pay. Only 21,9% of respondents reported that their workforce has been unaffected by the pandemic.

The results further show that at 77,6%, hotel representatives reported the highest number of significant salary reductions and at 70,1%, lodge representatives’ reports come in at a close second. With self-catering representatives reporting the lowest number of businesses implementing significant salary reductions (54,6%), this data shows that the majority of travel accommodation businesses nationwide has had to significantly reduce payroll costs.

In contrast with 56,5% of respondents that have implemented significant temporary salary reductions, 62% of respondents said that they have not permanently retrenched any staff as a direct result of COVID-19. Despite permanent retrenchments being indicated in minority, 20,7% of businesses say they have had to permanently retrench some staff as a direct result of COVID-19, while 9,3% have had to make significant retrenchments and 8% have entirely retrenched their workforce. KwaZulu-Natal respondents reported the largest number of significant retrenchments at 24,3%, demonstrating a significantly high overall number on provincial level, with the far less densely populated Northern Cape reporting 17,9% significant retrenchments.

In examining the wreckage that COVID-19 has left in its wake, the survey results clearly indicate significant short-term financial consequences for the travel accommodation industry, resulting in both fiscal damage regarding business revenues and noticeable traumatic socio-economic implications for the South African tourism workforce.

These results, however, do not anticipate the same dramatic long-term losses surpassing the fourth fiscal quarter. Even though uncertainty seems to remain the only certainty for the near future, the majority of the respondents indicated that they believe they will see normal levels of tourism by this year’s Christmas season, demonstrating a positive outlook on the future of tourism despite our current difficulties.

Seeking refuge: How the travel accommodation industry makes its way through financial hardships

57% of local accommodation owners have been forced to seek financial aid due to the COVID-19 lockdown measures. According to one the largest nationwide surveys of its kind, the majority of accommodation owners have had no other choice than to apply for financial assistance from either banks or relief funds to prevent business failure, with a noticeable gap in success rates between provinces being reported when it comes to applying financial relief from COVID-19 support funds.

Accommodation owners say that many of the steps that have been taken to reduce the COVID-19 infection rate has had a drastic impact on the local travel accommodation industry, leading to the majority of the operations in this industry being halted until Alert Level 1 of the national lockdown. The survey was conducted to measure business owners’ approval rating of government measures and government aid to small businesses, as well as to ascertain how many of these businesses have applied for and received financial relief from either banks or relief funds.

When asked about financial relief applications from banks, a total of 34,8% of respondents indicated that they have made these applications. The most applications were made in North West and KwaZulu-Natal, with 44% of respondents in both provinces indicating that they have applied. The lowest application rate was observed in the Western Cape, with 26,6% of respondents reporting applications. When it came to the success of these applications, the highest was recorded in the Free State, with 30% of respondents indicating success with their applications. The lowest success rate was recorded in Limpopo at 14%. An overall nationwide application success rate of 24% was recorded.

A noticeable large gap between provinces with high and low success rates in applications for financial relief from COVID-19 support funds was recorded. When asked whether they have applied for financial relief from these funds, a total 50,1% of respondents indicated that they have applied, with KwaZulu-Natal respondents reporting the most financial relief fund applications at 64,4%. Results further show that Limpopo respondents reported the most success for relief fund applications at 34,1%, despite being the least successful province at obtaining bank funding. Seven provinces reported a success rate below 10%, with the Eastern Cape achieving the lowest success rate at 6,9%. With only 14,1% of applicants achieving success with their applications nationwide, there is a noticeable large gap between provinces with high and low success rates.

When asked whether respondents agree with the government’s approach to lockdown, a total of 40,9% of respondents indicated that they do not agree with these measures, with 28,3% indicating that they disagree with these measures and 12,6% strongly disagreeing. A total of 37,4% respondents however indicated that they do agree with these measures, while 21,7% remained neutral on the subject. Noticeably, the highest approval rating of the measures was recorded in the Western Cape, which currently also holds the highest number or confirmed COVID-19 cases. Provinces that reported the highest disapproval rating of government measures are the Northern Cape at 52,7%, Limpopo at 48,8%, Mpumalanga at 46,6% and North West at 45,6%. These four provinces also report some of the lowest number of confirmed COVID-19 cases in South Africa.

Respondents were subsequently asked how they felt about the government’s efforts in aiding small businesses during the COVID-19 crisis, to which 79,2% of respondents indicated that the government has not done enough to aid small businesses, with 29,9% indicating they are dissatisfied and 49,3% very dissatisfied with government efforts. The highest disapproval rating among respondents was recorded in Limpopo at 88,7%. KwaZulu-Natal reported the lowest number of very dissatisfied respondents at 39,7%.

During the course of this survey, respondents were given the opportunity to add overall comments to their responses. A noticeable number of respondents commented that successfully applying for financial relief proved challenging. One business owner from Tzaneen in Limpopo cited a number of complaints in this regard: “We applied for UIF for our employees. That disqualified us from the other funds. We do not want to borrow money from a fund that has to be repaid afterwards because we are starting all over again after the crisis without a sent as backup. We feel that our national Tourism department has failed us 100% with the clause regarding BEE-status in the Tourism fund. We also would have appreciated more guidance in this time regarding how we should handle business during this time. [sic]”

Another owner from Pinelands in Cape Town further emphasizes this difficulty: “It is disturbing to us that we cannot claim from the Tourism Relief Fund because of the BBEEE criteria. We are all suffering. [sic]”. An owner from Knysna in the Western Cape also stated her inability to apply from relief funds due to BEE criteria: “I am unable to apply for relief because of BEE criteria. My guesthouse is 100% my pension. I now have zero income for foreseeable future. [sic]”.

The survey results clearly indicate that the tourism industry has suffered severe damage during the COVID-19 outbreak. Many travel accommodation businesses are being left to their own devices by not being able to successfully procure financial aid to carry them through what is certainly the most challenging time our industry has faced in recent history. While many of these establishments may be able to whether the storm, a lot of small businesses may not survive without further financial support.

Looking to the future: Business owners weigh in on the travel accommodation industry post-COVID-19

The majority of local accommodation establishment owners believe that tourism will be back to normal levels before the 2020 Christmas season. This statistic inferred from one the largest nationwide survey of its kind, paints an optimistic picture about the future of travel amid the COVID-19 pandemic.

With the COVID-19 pandemic sending shockwaves through the South African tourism industry and bringing travel to a screeching halt, many accommodation owners are left wondering what will happen to this industry once this pandemic has subsided.

While accommodation bookings still remain low during the national lockdown, respondents were asked when they think tourism in their region will return to normal levels. A slight majority of business owners, 55,2%, expect business to get back to normal by or before Christmas season 2020, while the remainder are more pessimistic. Should normal levels come to fruition by Christmas season, some salvaging of the remainder of the fiscal year might be a possibility.

At 68,9%, Limpopo recorded the highest number of respondents indicating an expectation of normal levels before the 2020 Christmas season, while the Free State, Eastern Cape, Mpumalanga and North West all reported over 60% expectation of normal levels within this time frame. This data indicates that there remains a positive outlook for the 2020 calendar year despite extreme hardship.

When asked about their outlook on the future of tourism in their region once the pandemic has long passed, most business owners responded with either a positive or uncertain outlook on the future of the industry, with only 9,4% indicating they were quite pessimistic and 3,7% reporting extreme pessimism. 43,4% expressed uncertainty about the future, while 30,7% said they were quite optimistic and 12,8% extremely optimistic. With these results showing a majority of optimism at 43,5%, paired with the majority of business owners predicting normal levels of booking by or before Christmas, it can be concluded that a large number of business owners believe that the COVID-19 pandemic will subside and that the travel accommodation industry will be salvaged.

Despite many business owners indicating a positive outlook on the future, there is still a large number of owners that remain uncertain about the future of travel in their region. One owner from Jeffreys Bay in the Eastern Cape commented “at the moment I feel as though I am in limbo and the future is uncertain.” Another owner in Modimolle in Limpopo commented that the uncertainty in the tourism industry directly results in a lack of any new bookings. “As a result of the uncertainty in the tourism industry I have not had any new bookings for June/July or Sept to Dec. Usually by now I am fully booked. [sic]”

This survey shows that the enormous impact of the COVID-19 pandemic has led to both travel accommodation owners and travelers being riddled with uncertainty about the future of travel. The lack of incoming bookings indicates a lack of booking confidence with travelers, leading to great financial uncertainty for these businesses.

Source: eTurboNews