From bets to boarding passes

We debut our travel and leisure monitor to provide insights on key trends across tourism, travel, hotels, food service and gambling.

Foreign arrivals to South Africa have recovered to 2019 levels but trail African peers by 2-3 years. Peers have benefited from policy-driven measures (visa liberalisation and aggressive airlift strategies) and favourable short-haul positioning versus long-haul destinations. While SA has introduced supportive initiatives (e-visas to 132 countries, 90-day visa waivers for Indian and Chinese tourists, and a 36-month remote-work visa), these are yet to fully materialise, creating upside potential, in our view. Elevated crime perceptions remain a drag (five of the world's riskiest cities are in SA, Worldatlas 2025), though we believe the government's R1bn policing allocation could offer gradual improvement. Globally, economic factors appear less restrictive than 2-3 years ago (UNWTO), which could support a rebound in long-haul destinations such as South Africa. Incremental upside may come from younger and first-time visitors (mix down 400bps and down 1300bps vs 2019), supported by IShowSpeed's visit and endorsement of South Africa. However, geopolitical tensions in the Middle-East (ME) could constrain momentum, especially long-haul travel activity. Domestic tourism recovered to 2019 levels in 2022 but has likely peaked, in our view, with both traffic and spending cooling. A relatively stronger rand may encourage outbound travel and cap domestic activity. In our view, SA GDP growth remains insufficient to meaningfully lift disposable income for outbound high-ticket leisure spend.

South Africa's hotel industry has leaned heavily on room-rate increases since the pandemic, with occupancy recovering more slowly. We estimate average room rates were up 28% vs 2019 by CY25 (SSU-not covered: +38% and CLH-not covered: +24%), levels we view as potentially unsustainable. Slower hotels occupancy recovery (down 250bps vs 2019 in CY25) appears linked to travellers' preference for staying with friends and relatives rather than in hotels, in our view. Among foreign tourists, the proportion of bed nights by accommodation type is up 1500bps and down c. 1700bps vs 19, respectively. This aligns with spending data showing reduced allocation to accommodation per R100 spent (foreign: -18% vs 19; domestic: -30% vs 19). In terms of foreign traffic, this shift seems concentrated among African travellers, as overseas arrivals only returned to 2019 levels in Jan-26. Should overseas traffic (typically higher-spending, longer-stay) continues its positive trajectory through 2026, we could see occupancies sustainably exceed 2019 levels, but long-haul activity could be limited by the ME conflict.

Food service market: QSR continues to outperform CDR, reflecting sustained consumer demand for convenience over experiential dining. This backdrop is less supportive for SPUR Corp, given its >75% exposure to CDR, though the group has still delivered strong growth, underscoring solid execution and brand strength. Famous Brands (FVVR: R58-R68), despite >75% QSR exposure, has underperformed expectations; however, the recent focus on drive-through formats and self-service kiosks could capture convenience-led demand, improve efficiency, and support manufacturing margins. We expect volume improvement in 2H26E (FY26 results due May). Input-cost pressure has been more acute in CDR than QSR due to the foot-and-mouth outbreak driving beef prices higher and lifting pork and lamb prices, proteins more central to CDR menus.

Gambling remains fast-paced, led by exponential growth in online betting despite rising regulatory scrutiny and advertising backlash. Betting GGR reached R75bn in FY25 (+45% y/y). We estimate GGR of R66bn in FY26E and R79bn in FY27E, implying R14bn in incremental player losses. Betting deposits (seed capital) could exceed R250bn by FY27E (FY25E: c. R171bn, FY24E: R115bn), a 25% CAGR. In our view, growth could remain resilient despite advertising restrictions and potential tax hikes. National Treasury's public consultations concluded on 27 Feb-26. While Treasury proposed an additional 20% GGR tax, we expect a more moderate 6% - 7% increase, lifting the blended effective rate to 25% (from c. 18% - 19%), as higher levels risk market disruption and increased illegal activity. Land-based casinos (16% of Total SA GGR) continue to lose share (GGR: FY25E down 3% - 4%, then plateau thereafter), requiring self-help initiatives to outperform. Limited Payout Machines have recovered and are tracking above 2019 levels. Overall, operators with meaningful online exposure should outperform, albeit with elevated regulatory risk. Therefore, we remain constructive on Sun International (FVVR: R50-R57) relative to Tsogo Sun (not covered).

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