Luxury Hotels in South Africa

2020 IMPACT

International and interprovincial travel restrictions lead to decline

Luxury hotels saw a double-digit current value decline in 2020. Interprovincial and international restrictions due to the COVID-19 lockdown to stop the spread of the virus led to a reduction in the travel and tourism industry, which was limited to business travel.

Hotel vacancies rise despite use for COVID-19 isolation

Luxury hotels had a high level of vacancies in 2020, largely as a result of reduced travel activity as part of the country’s lockdown rules. The government undertook contractual arrangements with some hotels so that they could be used for patient isolation.

Staff layoffs and pay cuts are the new reality as hotels struggle to make ends meet

Hotels had to resort to cost-cutting measures such as staff pay cuts, and in the worst cases, redundancies, in order to reduce their operational costs. These measures had to be put in place in order to manage the negative impacts brought about by the COVID-19 pandemic on the industry.

RECOVERY AND OPPORTUNITIES

Innovative and local solutions needed to prevent permanent hotel closures

Luxury hotels, like the overall hotel industry, experienced a decline in 2020 due to the lack of a customer base as a result of COVID-19 travel restrictions and bans. In light of the high second wave of COVID-19 infections from the end of 2020, as well as the emergence of different and more infectious strains, this situation is likely to continue into the early forecast period.

Reassessment of travel culture could drive growth in luxury hotels

The impact of the COVID-19 pandemic on travel in South Africa and globally has resulted in significant declines for the tourism industry. This low point presents an opportunity for the travel and tourism industry to reassess the situation and innovate with strategies and solutions for the new limited global travel-based culture, which had previously been a large contributor to luxury experience and luxury hotels.

Hotel packages catering to middle-income local audiences could help with survival

The fact that luxury hotels in South Africa are heavily reliant on international tourist activity did not work in their favour in 2020, due to the restrictions on international travel and global social distancing efforts. As a result, players have had to look at ways to reduce overhead costs whilst trying to remain operational, which has been a major challenge, as the majority low-income and unemployed local population is far from the ideal target.