Africa's hotels set for continued growth by 2022

Cape Town Marriott Hotel Crystal Towers, South Africa. Photo credit: Marriott International(Image: Marriott International)

Africa’s hotel sector is on track for further growth over the next five years. 

According to the latest report from PwC, an increase in both foreign and domestic traveler numbers along with an expansion in several hotel chains on the continent reinforce the hotel sector’s potential for growth. PwC predicts hotel room revenue for the five markets will increase 7.4 percent to R50.5 billion in 2022 from R35.2 billion in 2017.

“Tourism to the African continent has proven to be resilient in the face of economic and political uncertainty, impacts of droughts and other regulatory changes. The opportunities are aplenty for this industry to enjoy further growth albeit at a more modest pace. However, as we continue to see there are also a number of challenges facing each country. This is an industry that is reactive to the smallest change in political, regulatory, safety and sustainability matters,” Pietro Calicchio, hospitality industry leader for PwC Southern Africa, said in a statement.

South African hotel room revenue is expected to grow 5.6 percent to R21.8 billion in 2022, compared to the R16.6 billion recorded in 2017. The growth in South Africa's guestrooms is similar to that predicted by PwC in 2017. An additional 2,900 guestrooms will be added to the market's inventory over the next five years. PwC also predicts occupancy rates will continue to grow over the next five years, reaching 62.5 percent in 2022.

International visitor numbers to South Africa continued to grow with a 2.4-percent increase. This year's performance outlook remains positive, although the percentages are forecast to be lower than those recorded in 2016. PwC projects that the number of foreign visitors and domestic tourism will increase 5.3 percent in 2018. South Africa is expected to welcome 19.5 million travelers by 2022--a 4-percent increase from the 16 million seen in 2017. 

“There is also continued debate on further relaxation of visa requirements for international visitors and this may impact on our forecast growth,” Calicchio said.

The number of visitors from China to South Africa fell 17 percent in 2017, following the 38-percent increase seen in the previous year. The number of travelers from India rose 2.7 percent in 2017, below the 21.7-percent increase seen in 2016. The UK has retained its title as the largest source of visitors to South Africa at 447,901 in 2017. These numbers contributed to the 7.2-percent growth in visitor numbers from non-African countries in last year. Meanwhile, the largest number of African visitors came from Zimbabwe at 2 million. Lesotho followed with 1.8 million visitors, and Mozambique had a total of 1.3 million visitors.

Several factors affecting tourism to South Africa have remained favorable, including its improving global and local economy. However, other factors, like the water shortage in Cape Town, impacted the country. It is difficult to project the impact of the tourism drought because there is little historical precedence. Overall tourism to South Africa held up during the festive season and increased in the first quarter of 2018, despite Cape Town's decline in bookings. Hotels in the capital are working to conserve water. The crisis may be limited, if the winter rainfall continues at the current rate, 

PwC expects Nigeria will be the fastest-growing market over the next five years. Several new hotels are scheduled to open during this period. Continued improvement in the domestic economy will also allow the number of overnight stays to increase.

Kenya, Tanzania and Mauritius are forecast to be the next fastest growing markets with increases of 9.6 percent, 9.1 percent and 7.2 percent, respectively. However, South Africa is projected to be the slowest growing market with a 5.6-percent increase in rooms revenue.

Hotel performance in South Africa, Nigeria, Mauritius, Kenya and Tanzania

Rooms revenue in South Africa rose 4.6 percent to R16.6 billion in last year. Five-star hotels had the highest occupancy rates in the market in 2017 at 79.5 percent. Although ADR growth for these hotels slowed in 2017 to R2,6 million, the 8.8-percent increase was still well above the ADR growth recorded at three- and four-star hotels. This represented the impact of the high occupancy rate for five-star hotels.

Available rooms increased 1.8 percent for the first time since 2013, as several four-star hotels opening in 2017. Most of the upcoming hotel openings will be four-star hotels. Therefore, PwC to predicts available four-star rooms will increase 2.4 percent over the next five years, representing 76 percent of the total increase in available rooms for all hotels in South Africa. Three-star hotels accounted for 31 percent of total hotel room revenue in 2017.

The hotel markets in Nigeria and Mauritius continued to perform well in 2017. Both markets scored double-digit growth while Kenya and Tanzania had rooms revenue declines. The number of available rooms in Nigeria will rise 5.4 percent from 9,700 in 2017 to 12,600 in 2022, marking the largest expansion of any country in the report.

Rooms revenue in Mauritius increased 12.7 percent in 2017 as the country continues to experience growth in the number of foreign visitors. This rooms revenue is projected to grow 7.2 percent by 2022.

Visitor numbers to Kenya fell after the national elections in August 2017. However, the market saw these numbers recover in December with a 9.9-percent increase in visitor numbers. The increase was not enough to boost rooms revenue, which fell 13.5 percent last year. Tourism in Kenya is expected to increase 6.9 percent to 2.06 million in 2022 from the 1.47 million recorded in 2017.

Tanzania’s rooms revenue reached $206 million in 2017 after a 5.5-percent in 2016 due to a drop in overnight stays. However, PwC expects overnight stays will grow in 2018, allowing revenue to grow 10.2 percent.

The hotels and tourism sectors in each of the countries are all showing signs of continued growth over the next five years. Tourism remains an important part of each economy. However, the smallest change or disruption can have significantly impact the future growth of each market.
“It is therefore important that investors, hotel operators, tourism bodies and governments continue to work together to grow this important industry and ensure its sustainability so that all stakeholders derive the maximum benefit from it,” Calicchio said.