Johannesburg | The hospitality industry has taken another hit at a time when it was expecting a significant recovery during the upcoming holiday season. Due to the discovery of the new variant omicron, hospitality stocks have plummeted, and some countries have reinstated South Africa on the red list.
South Africa’s tourism industry was celebrating a few months ago when the country was removed from the United Kingdom’s list of banned countries due to ACOVID 19 restrictions. However, it appears that the sector has returned to that bleak place, as the United Kingdom recently added South Africa back to its list of banned countries.
As the JSE has fallen at an alarming rate since October 2020, hotel and leisure stocks have led the way. The discovery has also alarmed investors around the world, with stock markets in Asia, Europe, and the United States experiencing massive losses amid fears that an increase in Covid-19 cases, lockdowns, and travel restrictions will jeopardize the global economic recovery.
In South Africa,the rand dropped as much as 2.5% on Friday, falling to R16.36/$ at one point, the weakest level in a year. It closed 2.1% weaker at R16.3027/$, taking its drop over the past month to more than 8%.
According to Ryan Booysen, MD of DG Capital Forex, because the rand is one of the most traded emerging-market currencies, it is always the first to suffer when volatility takes hold.
The impact of COVID 19 has taken a heavy toll on South African markets over the last two years. Sun International, City Lodge, and Tsogo Sun Hotels were the hardest hit, with losses ranging from 10% to 20%, though they later pared their losses. It was a global trend, with the Dow Jones industrial average in the United States having its worst day of 2021. In Europe, IAG, the parent company of British Airways, was among the biggest decliners, along with German rival Lufthansa.
The United Kingdom’s ban on South Africa poses a significant challenge to the South African tourism sector, as Britain is the country’s primary source of tourism revenue. Abdul Davids, portfolio manager at Kagiso Asset Management, expressed concern about the new variant’s impact on the tourism sector.
“We rely on inbound tourism for top-line growth in the sector, especially the UK, which was the biggest source of tourists for SA [before] Covid,” said Abdul Davids
“The higher transmissibility, coupled with our low vaccination rate compared to European peers, could result in higher hospital and ICU admissions [which] will force the government’s hand to introduce stricter lockdown levels.” he said.