Tourism is rebounding as local and international holidaymakers head to hotels and lodges over the festive season.
However, car rental group Zeda, which debuted on the JSE on Tuesday, has adjusted its strategy to reduce reliance on the tourism industry and build a vehicle-leasing business with a strong annuity income.
Spun out of Barloworld, Zeda operates Avis and Budget fleet businesses, and was among the hardest-hit companies by the pandemic as airports and travel ground to a halt.
But the holiday season looks promising for tourism-related businesses.
“We anticipate a favourable festive period, with travel restrictions eliminated and pent-up demand elevated. International tourism spend remains significant for many operators in the tourism and hospitality sector that relied largely on domestic travellers last year, when the Omicron strain prompted a large number of cancellations by foreign tourists,” said Investec's Lara Hodes.
Data from FNB released this week points to a strong recovery and the Airports Company South Africa (Acsa) expects passenger volumes to return to near pre-pandemic levels during this peak season.
FNB Merchant Services CEO Thokozani Dlamini said there is an increase 55% turnover on the bank’s merchant services platform for the tourism industry, coupled with a 17% year-on-year increase in transaction volumes.
“An increase in travel spend in 2022 is further supported by the hospitality and tour operators within our base showing significant participation, contributing 35% and 16% respectively to overall tourism turnover.
"The increase in travel spend is driven largely by the increase in airline travel, with spending up from R4bn to R8bn in 2022 thus far,” he said.
Stats SA hotel accommodation income statistics for September showed this sector’s income levels making further progress post-lockdown.
On a year-on-year growth-rate basis, hotel-sector income was substantial, with a 118.6% increase in September, a renewed acceleration on the already strong growth of 58.5% in August.
Stephan Claassen, FNB national sales head, said this points to a sound rebound for the sector as “we have seen a 72% increase in travel turnover and a 71% increase in transaction volumes, which points to optimistic signals ahead of the festive season. This also suggests short stays and breakaways with experiences are popular trends in local markets, particularly in coastal regions.”
We are removing ourselves from the tourism industry, though it still plays a critical role. We want to earn (consistent) income for the rest of the year, which in the past was never there
— Ramasela Ganda, CEO, Zeda
And with international travel recovering, South Africa will see an uptick in foreign tourists.
According to Airports Council International (ACI), global air travel is expected to fully recover Covid-19-induced losses in 2024. Demand for air travel continues to be strong despite heightened macroeconomic risks.
Global domestic passenger traffic is expected to reach 2019 levels in late 2023, with full-year 2023 traffic on par with 2019. Global international passenger traffic will require another year to recover fully, reaching 2019 levels in the second half of 2024, Acsa said.
However, despite the brighter outlook for the sector, it is still vulnerable to unexpected events, and high fuel costs, rising interest rates and inflation may have scuppered many South Africans’ holiday plans.
Zeda CEO Ramasela Ganda said while the company has planned for demand for rental cars, the high costs of airfares are a challenge for local holidaymakers, with some opting to drive to their long-distance destinations or use public transport such as buses.
“We will handle the demand we believe gives us the return ... we are sitting comfortably for the activities we will see for the rest of the holiday season,” she said.
Before the pandemic, Zeda had 28,000 rental vehicles. This has been cut to 17,000, with Ganda saying the business is operating at 40% of pre-Covid levels. “As international travellers come back, we can expect to see real improvement in the tourism industry.”
Zeda, which was heavily reliant on tourism and business travel, has transformed its business from rental to integrated mobility provider to drive annuity business through subscriptions. Consumers, business owners, e-hailers and corporates are able to lease cars and extra-heavy commercial vehicles for between a month and four years.
“We are removing ourselves from the tourism industry, though it still plays a critical role. We want to earn (consistent) income for the rest of the year, which in the past was never there,” said Ganda.
There is an increase in people renting cars for regular use as these customers understand the cost of ownership, she added. This includes insurance and extra costs such as maintenance and balloon payments. To avoid these, customers opt to lease vehicles.
There has also been an increase in demand for heavy commercial vehicles to move goods, with Ganda expecting the agricultural sector to come on board. “We are seeing the farming industry coming into our subscription model,” Ganda said.
Zeda also has 14 dealerships selling used cars and will drive sales through its digital platform. “We will only open a dealership if we believe it will give us good return. Seventy percent of the business in the past has been online.”
Outside South Africa, Ganda said Zambia, Namibia, Botswana and Zimbabwe are showing good growth for Zeda.
Commenting on the listing, she said the company will give investors exposure to the growing mobility industry with high returns, while it will have the opportunity to gain access to capital.
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