Business Confidence Dips for South Africa’s Hotels and Restaurants

South Africa’s hospitality sector faces renewed challenges as business confidence in hotels and restaurants fell below its long-term average in the fourth quarter (Q4) of 2024, according to the Bureau for Economic Research (BER).

Despite a generally positive economic outlook, this subsector was a notable exception, reflecting weaker trading conditions and fewer tourists during September and October.

Hospitality Sector Struggles Amid Broader Economic Optimism

The BER’s Other Services Index for Q4 highlighted that, while overall business confidence dipped slightly to 57 points, the sector remained in positive territory. Confidence across subsectors varied, with transport and real estate seeing improvements, but hotels, restaurants, and business services experiencing declines.

Key findings from the BER report include:

Hotels and Restaurants

• Confidence dropped below the long-term average despite increased business volumes.
• Business conditions worsened, approaching long-term averages.
• Slower growth compared to the post-pandemic recovery, exacerbated by reduced air traffic affecting tourist arrivals.

Transport

• Confidence rebounded, bolstered by higher delivery volumes during the festive season and Black Friday orders.
• Improved business conditions and volumes contributed to positive sentiment.

Real Estate

• Confidence surged, with historically high business volumes and optimistic future expectations.

Business Services

• Confidence dipped slightly from a previous peak, with high interest rates cited as a key barrier to growth.

Despite challenges in the hospitality sector, South Africa’s broader economy showed encouraging trends:

• No load-shedding, a stable political climate under the Government of National Unity (GNU), and a stronger rand.
• Lower international oil prices and two repo rate cuts since September, fostering economic stability.
• The RMB/BER Business Confidence Index (BCI) rose to 45 points in Q4, marking its third consecutive improvement.

The BER report underscores the resilience of South Africa’s Other Services sector, with business confidence and volumes surpassing 2023 levels.

However, the hospitality industry will need to address pressing challenges such as air traffic issues and slower tourist arrivals to regain momentum.

Looking ahead, the broader economy’s performance hinges on:

• Expectations of further interest rate cuts.
• Sustained government stability under the GNU.
• Continued economic benefits from lower oil prices and a stronger currency.

As South Africa’s hotels and restaurants grapple with falling confidence and strained trading conditions, the hospitality sector must navigate the road ahead carefully. Strategic interventions to attract tourists and improve trading conditions will be critical in ensuring recovery and growth in 2025.

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