@finweek finweek finweekmagazinecover story travel and tourism
By Jaco Visser
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South Africa’s travel and tourism industry is struggling to grow the number of foreign
visitors to our shores, and now the coronavirus is wreaking havoc on international travel.
Although local stocks exposed to the sector are cheaply valued, the current local and global
environment weighs heavily on the outlook for companies operating in this space.
finweek 19 March 2020 35t
he number of foreign tourist arrivals in
South Africa declined by 2.2% to 2.612m in
2019 compared with the 2.672m in 2018,
according to data from Stats SA. Total
arrivals, which include those from the rest of
the continent, slumped 2.3% to 10.2m in 2019
compared with 10.4m the previous year, the
data shows.
“We were hoping for a recovery,” says
Tshifhiwa Tshivhengwa, CEO of the Tourism
Business Council of SA. Couple the current
global outbreak of the coronavirus with last
year’s lacklustre arrivals, and “this is unknown
territory”, he says (see sidebar on p.37).
The part of the industry – which can be split
into accommodation, rental cars and airlines- that’s listed on the JSE, struggled to deliver
decent returns to investors (see graph 1 on p.36).
And it doesn’t look like it’s about to improve.
Suffice to say, SA, which lured a million
visitors in 2018, has a miniscule listed tourism
sector, consisting of Comair (in the airline
category); Phumelela, Sun International and
Tsogo Sun Gaming (in the gambling category);
City Lodge and Tsogo Sun Hotels (in the hotels
category); and Hosken Passenger Logistics
and Rail (in the travel and tourism category).
Ts h i f h i wa Ts h i v h e n g wa
CEO of the Tourism
Business Council of SAThe travel and leisure sector also includes the
restaurants and bars category, which counts
only three stocks among them: Famous Brands,
Spur Corporation and Taste Holdings (which is
now a jewellery brand owner).
Over the past three years those shares
exposed to the travel and tourism industry
performed poorly. Tsogo Sun – which split its
hotel business off from its gaming venture last
year – remains the largest among these stocks.
On 12 June 2019, a day after the unbundling of
Tsogo Sun Hotels, the combined share price of
the two Tsogo stocks was R20.51. By 10 March,
it had slumped to R12.64 for both – a 38%
decline in less than nine months.
Sun International, which owns the Lost
Palace near Pilanesberg in the North West, lost
44% over the same period. City Lodge Hotels
dropped by 54%. Both are trading at their
lowest levels in more than five years.
The decline in overseas, or even total, tourist
arrivals is not only frustrating for investors
in those listed companies exposed to the
tourism industry, but it also bears down on
the government’s hopes that the sector would
boost employment and support non-existent
economic growth.