• The Hilton Durban becomes the latest in the chain to close.
• Trouble at Tsogo Sun; further restructuring at Sun International.
The new year may have brought a bit of optimism to life after 2020, but for economies around the world, the future is still full of uncertainty. Many businesses are having to downsize or close entirely, and the hospitality industry has been particularly hard hit.
Hotels around the world are suffering, and South Africa has its fair share of struggling resorts. The high profile closure of the Hilton Durban is a sign of just how bleak things have become, and with lockdown measures and border restrictions still in place, it may not be the only scalp. Possible closures, massive loss of income, and job losses loom large across the country.
Iconic Hilton Durban Temporarily Closed
Bookings ceased at Hilton Durban on January 11th, effectively closing the hotel. While management didn’t immediately announce the reason for the closure, the Hilton chain has closed over a thousand of its hotels around the globe, citing a massive downturn in profits due to the pandemic.
Despite the lack of official comment from Hilton Durban, an employee did suggest that the closure was temporary. Some reports suggest that an email was sent out to guests with bookings up to May 31st, 2021, cancelling their bookings and refunding the costs. If the closure is truly temporary, and how long it will be before it reopens remains to be seen. Even with various vaccines in circulation, no one can forecast how long the COVID-19 pandemic will continue affecting the hotel industry.
Hilton Not the Only One
Hilton is not alone in its troubles - several other high profile hotels in South Africa are threatened with closure or staffing cuts as tourism hits a record low. Tsogo Sun and Sun International, both internationally recognized brands, are both faced with difficult decisions as room prices and bookings plummeted.
Tsogo Sun began making cuts back in Autumn 2020, with staffing reduced and pay cuts coming into effect. New appointments were frozen, and by November the hotel faced further job losses and a miserable financial forecast. This is all despite Tsogo Sun receiving R103 million from the Temporary Employer/ Employee Relief Scheme which has now finished. “The group will have to consider further operational restructuring to align headcount with trading levels,” said a company source.
Sun International recently reopened some of its facilities after a partial closure. However, the situation looks precarious, with a reported adjusted headline earnings loss of over R800 million for the first half of 2020 - this is unlikely to have improved over the second half of the year.
This means job cuts and potential closures again - the chain has already closed key locations across South Africa during the past months. And a company restructure has been rolled out, essentially shutting down operations in Latin America, with locations in Panama, Argentina, Colombia, and Peru ceasing business. Major company investment in Chile has also been scrapped, with the group refocused on their native South Africa. But 3,300 jobs have already been axed, and it looks like more might follow.
Hotel and Casino resorts like Sun International and Tsogo Sun are full of places to eat, drink, and gamble and they have no backup source of revenue. They also used to have a great impact on SA tourism. The casinos are feeling the pinch more than most - on top of the loss of revenue and jobs, many punters are also opting to play at online versions instead, where games can be enjoyed in safety. It looks like players might change their land-based casino tour guides and pamphlets with online casino guides like casinos.co.za. Some think this could spell the end for bricks and mortar casinos.
Is There Any Optimism on Sight?
Major hotel chains are really feeling the disastrous economic effects of the coronavirus pandemic due to a wider downturn in all aspects of tourism. While South African borders are open to international visitors, most people are opting not to travel unless absolutely necessary. And if a group of tourists should come to South Africa they would find many businesses and attractions - including beaches - closed to the public.
Nightlife is also suffering - bars have to close at 10 pm, with some regions imposing a nightly curfew. And alcohol is only served Monday - Thursday, meaning that visitors can’t have a night out on the town.
It’s hard to see much cause for optimism at this point. The global hospitality industry has been torn apart by the pandemic and will have to be rebuilt or restructured when things finally begin to get back to normal.