Empty Rooms and Dark Nights

BATANAI MATSIKA

As I dropped off from a taxi to check-in at The Kingdom Hotel in Victoria Falls, it was as if I had entered a graveyard.

The silence was extraordinary.

The architectural designs that draw on the ancient Kingdom of Munhumutapa turned out to be more of scary scenes than unique experiences.

The domes, pillars and statues were dark and lonely as the doors of dream.

Of course, I had travelled on business to witness the launch of the Victoria Falls Stock Exchange (VFEX) but had hoped to seize the moment and take a break from the fast lanes of Harare.

The night life was totally non-existent and all that could be heard in the still nights was the rumbling of elephants and episodes of hyena laughs.

The mighty Makasa Sun Casino was under lock and key (MBA jargon for this would probably be “care and maintenance”).

It was a sad reality but it then dawned to me that Covid-19 was real particularly in areas that heavily depend on international tourists.

The staff at the hotel was skeletal and I could only imagine numbers of those that had been sacked right across the tourism industry which includes restaurants, shuttle companies, lodges and wildlife camps, to mention a few. According to the United Nations World Tourism Organisation (UNWTO), international tourist arrivals for all regions plunged 65% in the first half of 2020 showing the severe impact Covid-19 has had on the sector.

Asia and the Pacific, the first region to feel the impact of Covid-19 on tourism, was the hardest hit, with a 72% fall in tourists for the six-month period.

Europe was the secondhardest hit of all global regions, with a 66% decline in tourist arrivals in the first half of 2020.

The Americas (-55%), Africa and the Middle East (both -57%) also suffered.

We note that lockdowns introduced during the first half of the year have had a massive impact on international tourism.

In addition, the sharp and sudden fall in arrivals has placed millions of jobs and businesses at risk.

The UNWTO estimates that the massive drop in international travel demand over the period translates into a loss of 440m international arrivals and about US$460bn in export revenues from international tourism.

This is around five times the loss in international tourism receipts recorded in 2009 amid the global economic and financial crisis.

The tourism and hospitality sector in Zimbabwe is not an exception given that international tourists have essentially disappeared while bookings have fallen off a cliff.

In our view, the outbreak of Covid-19 has tainted the investment thesis in the tourism and hospitality sector.

The main risk that has emerged is that we are still some months away from the day hotel chains or resorts re-open on a large-scale basis.

In addition, air travel is likely to remain massively below prior levels for at least the remainder of 2020 and probably till mid2021.

Social-distancing has also made it difficult to hospitality groups to earn revenues from events (conferencing and workshops).

While both African Sun and Rainbow Tourism Group have done well in terms restructuring, reducing finance costs and adding value through refurbishments, occupancy levels will be abnormally low in 2020.

As Morgan & Co Research, we see a huge opportunity cost in holding onto tourism and hospitality stocks at this point in time.

We think pure defensive consumer stocks will yield better returns for investors.

SWITCH to Innscor Africa, National Foods, SeedCo or SeedCo international!

For the record, The Kingdom is an amazing hotel, but it is always better with more guests, a bit of noise and some acquaintances to share a Zambezi with at their magnificent bars.

Batanai Matsika is the Head of Research at Morgan & Co, and Founder of piggybankadvisor. com. He can be reached on +263 78 358 4745 or batanai@ morganzim.com/batanai@ piggybankadvisor.com