Business

SA hotels want municipal rates to be lowered – to help with the post-lockdown recovery

Business Insider SA
(Getty Images)
(Getty Images)
  • South Africa's hotels are slowly filling up after two years of lockdown but have a long way to go before matching pre-pandemic occupancy levels.
  • And while the embattled hospitality sector attempts to recover, municipal rates and taxes continue to eat away at revenue.
  • Hotels being lumped into the same category as commercial property and heavy industry is hurting the sector's recovery, says Marc Wachsberger, managing director of The Capital Hotels and Apartments.
  • Reducing these rates or creating a new category for the sector could help businesses survive and stave off further job losses, says the Federated Hospitality Association of South Africa.
  • For more stories go to www.BusinessInsider.co.za.

South Africa's hotels are trying to recover from two years of lockdown restrictions that emptied rooms and say lower municipal rates will help the sector get back on its feet.

South Africa is no longer under lockdown to mitigate the impact of the Covid-19 pandemic, but its economic consequences are still being felt across multiple sectors. The travel industry, one of the sectors hardest hit by border closures, flight suspensions, and stringent entry requirements, is still reeling ahead of the traditionally quieter winter season.

Although hotels have started to fill up again, with March being the best month for the industry since the start of the pandemic, occupancy rates remain far below those seen in 2019. In the first quarter of 2019, hotel occupancy rates were above 55%, compared to just 35% in 2022, according to the latest accommodation data from Stats SA.

Hotels that have managed to weather the storm of the past two years have been afforded limited reprieves from the government, and stubbornly high municipal rates are repressing the sector's recovery.

"South Africa's hotel sector is never going to recover and create the jobs the country so desperately needs if municipalities continue to lump them in the same category as commercial property and heavy industry, subjecting hotels to rates and utilities costs that are triple those paid by residential properties," said Marc Wachsberger, managing director of The Capital Hotels and Apartments.

"That's why municipalities need to add a new category for hotels to their property classifications, charging rates and utilities fees that still cover their costs, but that don't exploit hotels at the expense of job creation."

And while high municipal rates chip away at hotels' turnover, Airbnb properties, with less potential for major job creation, argues Wachsberger, benefit from lower residential tariffs.

"Furthermore, the country's thousands of Airbnb properties and other types of accommodation in residential areas benefit from residential rates and utilities prices – despite not having the potential to create hundreds of jobs that hotels do."

The call for municipalities to reduce rates for hotels has been echoed by the Federated Hospitality Association of South Africa (FEDHASA).

The association says that during the height of the pandemic, 86% of a large hotel's total revenue would be used to maintain rates, with only a few municipalities allowing businesses to defer payments. Prior to the pandemic, around 3% of revenue would be used to pay municipal rates.

Rates currently cut around 10% from hotel revenue, according to FEDHASA's National Chair, Rosemary Anderson, which is "simply unsustainable".

"Municipal rates are now an unaffordable expense for hospitality businesses, which are still battling the fall-out of Covid-19 regulations and travel bans," explained Anderson.

"If government is serious about trying to stop job losses, one way that further job-shedding could be prevented and the hospitality sector helped to get back on our feet, would be the reduction of rates in the short- to medium-term."

It's estimated that around 300,000 workers in South Africa's tourism sector lost their jobs within a year of the pandemic's start.

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