In PwC’s "Hotels Outlook: 2017-2021," the firm projects that South African hotel room revenue will grow by 10.1 percent in 2017, reaching R17.5 billion or around USD $1.3 billion. Overall hotel room revenue for South Africa is expected to expand at a 9.3-percent compound annual rate to R24.8 billion in 2021 from R15.9 billion in 2016.
When adding the countries of Nigeria, Mauritius, Kenya and Tanzania to South Africa, revenue for the five markets as a group is forecast to rise at an 8.7-percent compound annual rate to R59.2 billion in 2021 from R39 billion in 2016.
“Africa’s hotel sector has remained resilient in the face of strong economic headwinds," said Pietro Calicchio, Hospitality & Gaming Industry Leader for PwC Southern Africa. "The hotel market in each country is affected by both the local and global economy, with some countries being more dependent on foreign visitors than others. We are also seeing certain local governments continuing to invest in infrastructure and implementing other plans to unlock the substantial potential that this industry has to bring.”
Nigeria is expected to be the fastest-growing market from a revenue perspective over the next five years with a projected 14.7-percent compound annual increase in revenue. Its industry will benefit from an improving economy, continued growth in domestic tourism, and expansion in the number of available rooms. South Africa is projected to follow close behind with a 9.3-percent compound annual increase in room revenue, most of which will be generated by rising average room rates and continued but moderating growth in tourism. However, the emergence of peer-to-peer inventory from entities like Airbnb has bolstered growth in non-hotel accommodation. Ongoing growth in the peer-to-peer sector over the next few years will make the market more competitive, which may limit room-rate growth for hotels.
South Africa’s hospitality sector is poised for further growth in the next five years. Despite a difficult and volatile economic climate, inbound travelers will bolster the industry, according to PWC's projections. Overall, room revenue in South Africa rose 12.2 percent to R15.8 billion in 2016, the biggest increase since 2013. Over the past five years, the occupancy rate has risen, surpassing the 60-percent level and reaching 61.2 percent in 2016. This gain has stimulated interest and a number of new hotels are expected to open in the next five years. The overall number of available rooms is expected to increase at a 0.9-percent compound annual rate to 63,900 in 2021 from 61,200 in 2016. This increase will add 2700 rooms over this period. Guest nights are forecast to increase at a 1.8-percent compound annual rate to 15 million in 2021 from 13.7 million in 2016. In response, occupancy is expected to increase to 64.3 percent in 2021 from 61.2 percent in 2016. T
The outlook for 2017 is positive with an increase in the number of international visitors to South Africa expected. Domestic tourism is also anticipated to increase by 2.2 percent in 2017. “One of the positive outcomes for the hotel market in South Africa was the amendment of visa requirements that required foreign visitors from certain countries to provide biometric data in person. International visitor numbers to South Africa rebounded significantly in 2016 with a 12.8-percent increase as compared to the 6.8-percent decrease in 2015,” Calicchio commented. Visits from China and India increased in 2016 due to the relaxation in the visa requirements. Travelers from China to South Africa increased by 38 percent, and India recorded a 21.7-percent increase. Of non-African countries, the UK is still the largest source of visitors to South Africa at 447,840 in 2016. Of the African countries, the largest number of foreign visitors to South Africa in 2016 came from Zimbabwe at two million, followed by Lesotho at 1.8 million and Mozambique at 1.3 million. In addition, visits from East and Central Africa also rose by 11.2 percent in 2016.
Five-star hotels have had the highest occupancy rates in the market at 79.3 percent in 2016. Room revenue for five-star hotels is expected to expand at an 11.4-percent compound annual rate to about $324 million in 2021 from about $185 million in 2016.
The hotel sector in Cape Town flourished in 2016 as the dominant tourist destination in the country. Over the next five years, 55 percent of all the rooms expected to be added in South Africa will be in Cape Town. Durban’s hotel market attracts more tourists than Johannesburg, but fewer than Cape Town. Although Durban benefitted from the pick-up in tourism in 2016, a weak business market held back overall growth.
Tourism Initiatives for Nigeria, Mauritius, Kenya and Tanzania
Elsewhere on the African continent, a number of initiatives have taken place to promote tourism and positively impact the hotel market. The hotel market has benefitted from an increase in direct flights and government investments in tourism. The 9-percent rise in guest nights and an increase in average room rates caused room revenue to increase by 15.3 percent in 2016. Calicchio added, “Many destinations have invested in improving and promoting the quality of their tourism offering and are reaping the benefits. In addition, we are seeing the impact of technological disruption play a part over the past year in certain countries.”
The hotel market in Nigeria rebounded in 2016 with a 5.2-percent increase in total revenue. However, a number of projects in Nigeria have been delayed or postponed in the wake of the recent economic uncertainty. “Consequently we now expect a smaller expansion in the number of available rooms that we predicted in last year’s Outlook report,” Calicchio added. Nevertheless, there is still a lot of activity in the market for new hotels, which will continue to expand overall hotel capacity. Nigeria is projected to be the fastest-growing market from a revenue perspective over the next five years. This is mainly due to an improved economy, continued growth in domestic tourism, and expansion in the number of available rooms. Overall hotel room revenue is expected to expand at a 14.6-percent compound annual rate to USD $517 million (R7.6 billion) in 2021 from USD $261 million (R3.8 billion) in 2016.
In 2016, the number of tourists to Mauritius increased by 10.8 percent. However, an 18-month moratorium was placed on hotel construction in Mauritius in November 2015. Mauritius is projected to be the slowest-growing of the five countries, with a 6.2-percent compound annual increase in room revenue. While there is a moratorium on new projects in place in the near term and relatively few rooms expected to be added through 2021, growth in the non-hotel inventory will ease pressure on average room rates.
The tourist market in Kenya rebounded in 2016 following four years after decline. The government has introduced a number of initiatives to boost tourism. Hotel room revenue is projected to grow at 6.2 percent compounded annually by 2021 as the number of available rooms is projected to increase from 18,600 in 2016 to 21,000 in 2021.
Tourism is the largest industry in Tanzania, accounting for more than 17 percent of GDP. Over the last year, tourism increased in Tanzania despite the imposition of an 18-percent VAT on tourism services. Total room revenue is expected to rise to $371 million (R4.6 billion) in 2021 from $224 million (R3.3 billion) in 2016.