SA’s hotel, restaurant sector receives hit by COVID-19 pandemic registering 32% decline in revenue

SOUTH AFRICA – The South Africa hotel, restaurant, and institutional (HRI) industry has been severely affected by government restrictions imposed beginning in March 2020 in an effort to control the COVID-19 pandemic.

Social-distancing measures, curfews, and restricted operating hours have decreased revenue for the sector which has led to the closures of many businesses and loss of jobs.

The effects of disruptions caused by the pandemic are evident from the 32 percent decline of the industry’s revenues in 2020 to US$3 billion, compared to 5 percent revenue growth in the previous year to US$5.1 billion, according to Statistics South Africa (StatsSA).

According to the report, restaurant and coffee shops registered a 35 percent decrease in revenues last year.

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Many restaurants remained open for take-away and home delivery service, but alcohol sales, which contribute a significant portion of a restaurant’s revenue, were largely prohibited during the period under review.

Some outlets closed in response to the alcohol ban, noting that it was not profitable to remain open without access to a major revenue stream.

Meanwhile, take-away and fast-food outlets, saw a 23 percent decrease in revenues from 2019 to 2020, smaller than the other previous categories as more consumers turned to safer options in the food service industry.

These establishment are involved in the sale and provision of meals and drinks, ordered from a menu, prepared on the premises for takeaway purposes in a packaged format, at a stand or in a location, with or without provided seating.

However, catering services and institutional kitchens that service schools, businesses, and prisons, registered the highest decline in revenue of 44 percent due to restricted number of allowed gatherings and closure of most of the institutions during the onset of the pandemic.

Despite the challenging landscape, South African e-commerce sector is flourishing as online purchases and meal delivery operations saw sales growth of 59 percent in 2020 compared to 2019, according to Euromonitor International.

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Other than customers shifting to more convenient and safe mode of accessing meals from the different outlets, South African consumers continued to seek out healthier options, with a focus on wellness products, low-fat and high-protein foods, and so-called “superfoods.”

This has availed bigger opportunities for U.S. exports, especially those products that can meet the growing demand for healthy and/or ready-to-eat foods, as well as those that offer great value based on volume, quality assurance provisions, and packaged foods of differing pack sizes.

With this, local manufacturers have been able to align their operations with the needs and demands of consumers such as availing products in smaller pack sizes, already common in many traditional grocers and open markets, boosting their affordability.

Other than decline in earning in the HRI sector, the food retail industry saw its sales decline to 6% to US $39.8 billion in 2020, due to reduced disposable income.

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