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Covid-19 Impact Could Be Huge Opportunity For Value-Driven Tourism Products

Post-pandemic price-conscious travellers will want bigger bang for their buck than ever before.

With a national lockdown in place to try to slow the spread of the Covid-19 virus, March 2020 will go down in South African tourism history books as the month in which the local industry came to a grinding halt. And with ratings agency Moody’s having downgraded the country’s sovereign credit rating to junk status, the already floundering economy compounded restrictions even further, on both corporate travel budgets and domestic travel consumption.

“Concern in the industry right now is at what stage international travel will resume and under what restrictions,” says Wayne Troughton, managing director of HTI Consulting, a development consultant for the hospitality sector across Africa and the Middle East. He posits a possible timeline of anything between one and two years for the industry to reach pre-Covid-19 levels. “Because the virus has impacted almost all countries in the world, at different levels and in different timeframes, the question is will markets and countries wait until the threat of the virus has been eliminated entirely? We hope that travel will start before this time in a controlled manner, with a ramp up to being fully operational to all markets and countries.”

Travellers battered by the pandemic, recession or slow economic growth will want either a cheaper price or more value-add, says Troughton. “It’s becoming clear to us that value-driven products, especially in the accommodation sector, like aparthotels or traditional hotels offering far more amenities over and above their core offering for the price of a room, will be better positioned to meet these travellers’ needs.” “Aparthotels” are full sectional-title apartment blocks that operate as serviced luxury hotels, combining the daily amenities of traditional hotel accommodation with the space, flexibility and self-catering convenience of furnished apartments.

Figures in late 2019 highlighted that five-star-hotel occupancy, where most aparthotel operators, such as Totalstay, are positioned, had increased by 4% over the previous year, while the average daily rate (ADR, the average realised room rental per day) had grown by 2,6%. The four-star sector’s occupancy, despite new hotel entrants, had also increased, by 1,6% and with a 2,2% increase in ADR.

Aparthotels are full sectional-title apartment blocks that operate as serviced luxury hotels.

Troughton believes that South Africans are largely unaware of the attractiveness of the aparthotel option, partly because this kind of accommodation offering has previously been managed on an ad-hoc basis. “But now we have a professionally managed, new supply of brand-focused, quality and value-driven entrants, really beginning to make a difference, and with that, awareness will increase,” he says.

Troughton believes that the way in which Covid-19 has constrained travel spend will present new, exciting opportunities. “For hotel investors, it presents an opportunity for possible conversions into other real-estate assets like aparthotels. The benefit of aparthotels is that they represent a quick, more risk-averse exit strategy than conventional hotels, as they can easily be sold off on a sectional-title basis as micro apartments or co-living apartments.”

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