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October 17, 2018
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Sub-Saharan Africa: Africa’s Hotel Sector at a Glance


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Photo by Martin Barraud/OJO Images/Getty Images

The latest data is in, and hotels in the Middle East and Africa have posted growth across three key performance metrics in August, according to STR. In the Middle East, Occupancy has increased by 2% to 63.4% this year with their average daily rate (ADR) also increasing 12.2% to US$169.63. On the continent, occupancy is up by2.2% to 63.1%, with a 10.8% increase in ADR to US$115.36. Revenue per available room (RevPAR) has also risen by 13.2% to US$72.77. According to The World Travel and Tourism Council, the number of international visitors to Kenya is expected to reach a total of 1.4 million for 2018.

The African Hotel Valuation Index (HVI) is an ever-growing marker showing the reach of the hospitality industry on the continent. “The number of markets included in the study continues to grow each year, exemplifying the ever-increasing interest in the African hotel market. In the first edition, we had 14 cities. That grew to 18 in the second edition, the third edition featured 21 cities, and we are now delighted to include 23 cities with the addition of Abidjan, Dakar, Kampala, and Maputo in the fourth edition,” says Tim Smith, managing partner at HVS South Africa.

According to the PwC Hotels Outlook, Mauritius and Nigeria had the fastest growing markets in terms of hotel room revenue, with increases of 12.7% and 11.7% for 2017. “Growth in South Africa moderated from a 12.2% increase in 2016 to 4.6% in 2017. This was caused by a smaller increase in international tourist arrivals and slower growth in the average room rate, in part the result of a strengthening rand that made South Africa effectively more expensive to foreign visitors. The increase in tourism was offset by the increased cost,” the report says. it cites Kenya, Tanzania and Mauritius as the next fastest growing, with Kenya set to benefit from a rebound in tourism, new hotels and infrastructure upgrades – in addition to the expectation of political stability.

Hotel values are booming in Cape Town in Rand, but the return looks far less exciting when converted into US dollars, Smith adds. And, while some markets are ahead of the game – Maputo and the Indian Islands for instance, others like Sharm el Sheikh, Harare and Marrakech are coping with political instability or threats of terror. Overall, despite slow economic expansion on the continent due to oil prices and SA’s downgrades, the region remains resilient. In 2015, 10 markets out of 21 cities were growing; in 2016, 14 markets were on the rise, according to the HVI.

In terms of tourism, the findings of the Domestic Tourism Survey 2017 reflect a general pattern of increase over the past year. One of the biggest shifts was that of day trips, which increased from 39.4 million in 2016 to 48 million in 2017. Overnight trips also increased from 43 million to 44.4 million, however total expenditure decreased by 1 billion to R86 billion in 2017. “The decrease was driven mostly by a decrease in spending on accommodation, food and beverages, recreation and culture, and shopping,” the report explains, “In Western Cape and KwaZulu-Natal, a relatively higher proportion of money was spent on accommodation when compared to other provinces.”

Opportunities to Explore

According to a recent PwC report, tourist arrivals from BRIC nations increased by 6.1% in 2017, with a total of 275 521 visitors entering the country and accounted for 2.7% of all arrivals – up from 2.6% in the previous year. Although these numbers seem slight, one should remember that BRIC visitors spend an average of R3-billion a year. The easing of visa requirements have added to this bump in arrivals, and Minister Hanekom’s dedication to continuing to ease the process is promising. And contrary to popular belief, BRIC travellers do not travel on budgets, but rather seek out luxury tourism experiences such as cruises, private tours, jewellery, and high-class culinary experiences.

A combination of business and leisure travel – also known as bleisure – is therefore key in introducing more people from BRIC nations and other countries to the many world-renowned offerings SA has in store. International travellers spend the largest amount of their cash on transport (at 26.5%) and accommodation (15%), but sectors like restaurant and retail can easily enjoy the direct economic benefit that tourism brings.

Rising Above the Challenges

Despite challenges for regions like the Western Cape, which experienced drought during the 2017/18 summer season, Cape Town remains a top-tier destination on the continent. The Cape Town International Airport also experienced a 10% increase in international traveller numbers from January to March this year, according to Tim Smith, Managing Partner at global hospitality consultancy firm HVS. “Cape Town’s recovery in the coming years is expected because of a stronger economy, the recent announcement that there would be no ‘Day Zero’ for 2019 if water restrictions are adhered to and an anticipated faster growth in foreign and domestic tourism,” he told IOL in September.

Last year saw a surge in hotels in the Cape including the Radisson Red and the Silo in the trendy Silo District as well as the 504-bedroom Southern Sun and StayEasy Cape Town City Bowl. Marriott International is also planning on opening 539 rooms in the Foreshore in the next five years with AC Hotel Cape Town Waterfront in November, Residence Inn Cape Town Foreshore and Marriott Cape Town Foreshore in February and March 2023.

Johannesburg looks particularly well despite challenges facing SA in the last twelve months, according to the HVI report. “Johannesburg’s international airport O.R. Tambo remains Africa’s largest and busiest airport with a total of over 21 million passengers in the financial year of 2017/2018, which represents a slight decline to the financial year before. In contrast, occupancy has shown a continuous growth and is the highest it has been since 2009 in Sandton and the surrounding hotels… Room nights sold increased by 7% during the high season of 2017/2018 and RevPAR is expected to climb in 2018 and then stagnate in 2019 and 2020 due to a slight increase in new hotel supply. Rosebank is a fast-emerging area in Johannesburg with vibrant commercial, residential and retail developments.”


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