By Dr Roelof Botha, Economic Advisor to the Optimum Group
Most countries that boast meaningful activity related to inward-bound tourists from overseas are sitting at just above a level of 80% of pre-Covid tourist arrivals. During the first two months of 2024, South Africa’s recovery rate stands at 82% (compared to January & February 2020).
During January and February 2024, two changes occurred regarding the top-10 ranking for tourist source countries. The most significant one was in the top-three, with the US dropping from second place to third place, at the expense of Germany, which has again assumed its long-standing silver medal position, after the UK, which has now consolidated its dominant position as the most valuable source of overseas tourist arrivals.
Exhibit 1 depicts the tourist arrivals from South Africa’s top-ten source countries during the first two months of the year. An interesting phenomenon during the start of 2024 is the high growth rates of tourist arrivals from countries that fall outside of the top-ten but are still meaningful sources of overseas tourist arrivals.
Source: Stats SA. Data as at February 2024. Past performance is not a reliable guide to future performance. For illustrative purposes only and not indicative of any investment.
In February, the year-on-year growth in tourist arrivals from Saudi Arabia, Japan, Singapore, Brazil, and Chile all topped 100%, whilst China, South Korea and Taiwan also fared exceptionally well.
Hotels outperform the rest
An outstanding feature of the latest data on accommodation income in the tourism sector is the stellar performance of South Africa hotels, which have finally recovered to the same level as before Covid (in terms of the four-quarter average income, which automatically eliminates seasonal influences).
During the first quarter of 2024, the monthly average accommodation income from hotels amounted to just more than R1,6 billion, which is 3,5% higher than four years ago. In the process, hotels have gained considerable ground on the so-called second division of tourist accommodation, namely the combination of guest houses & lodges, and bed & breakfast & self-catering establishments.
Just before the Covid pandemic, hotels accounted for 59% of the total accommodation income from all these facilities (excluding caravan parks). This ratio predictably dropped to 51% during the first half of 2021, directly because of the pandemic, but has now moved upwards to a ratio of 64%.
Source: Stats SA. Data as at quarter 1 of 2024. Past performance is not a reliable guide to future performance. For illustrative purposes only and not indicative of any investment. *Note: 4-quarter average.
Exhibit 2 illustrates the fall and subsequent recovery of tourism accommodation income for these two key groups of establishments.
In the absence of meaningful real growth in key sectors such as retail trade and motor trade, the recovery of tourism is quite welcome. Once monetary policy is relaxed, domestic tourism will almost certainly benefit from higher levels of affordability amongst indebted households.
