Growth in Africa’s hotel sector is expected to remain positive over the next five years despite current economic uncertainty and tempered foreign investment.
This is according to the latest report issued by PwC on Africa’s hotel sector. PwC’s ninth edition of the Hotels Outlook: 2019-2023 includes information about hotel accommodation in South Africa, Nigeria, Mauritius, Kenya and Tanzania.
Pietro Calicchio, Hospitality Industry Leader, PwC Southern Africa says while leisure is an important component of the tourism industry, governments are taking steps to develop more diverse initiatives, fueled by business tourism and conferencing.
Business Tourism
“Business tourism is a critical component to the growth of African economies – business events are increasingly being held in a number of diverse locations across the continent.”
“This is an excellent opportunity for Africa to be branded as a destination that not only offers an amazing travel experience but one also for business and global conferences,” Calicchio adds.
Hotel room revenue for the five markets (South Africa, Nigeria, Mauritius, Kenya and Tanzania) as a group will increase at a 5.8% compound annual rate to R50.6 billion in 2023 from R38.1 billion in 2018.
Hotel Room Revenue: South Africa
In South Africa, hotel room revenue rose only 0.5% in 2018, its smallest increase during the past six years. Growth is expected to pick up beginning in 2019 and is forecast to expand to R19.7 billion in 2023, up 3.3% compounded annually, from R16.7 billion in 2018.
While three-star hotels accounted for 36% of all available hotel rooms in South Africa in 2018, it is projected that they will generate 41% of the overall increase in room revenue during the next five years.
With a number of four-star hotels opening in 2017-18, available rooms increased 3.4%, the largest increase during the past six years.
Guest nights in five-star hotels fell 11.1% amidst concerns about the drought in Cape Town and due to general economic pressures.
The Airbnb market has grown in South Africa. It is believed that much of the Airbnb traffic occurs at peak periods when hotels are full.
It is at the lower end of the market that moderately priced hotels face growing competition from Airbnb outlets.
Hotel Room Revenue: Nigeria
In Nigeria, room revenue rose 20.0% in 2018, fueled mainly by an increase in guest nights.
Overall hotel room revenue is expected to expand at a 12.0% compound annual rate to $445 million (R5.9 billion) in 2023 from $252 million (R3.3 billion) in 2018.
Guest nights will continue to increase over the forecast period, rising at a 7.6% compound annual rate to 2.6 million in 2023 from 1.8 million in 2018.
Hotel Room Revenue: Mauritius
Hotel room revenue in Mauritius is expected to grow at a 5.7% compound annual rate to 2023.
An expected increase in room capacity and less aggressive growth in average daily rate should have a positive impact on guest nights if supported by an increase in airline capacity and routes.
Challenges that remain for operators are their actions with regards to sustainability, labour and the regulation of the informal sector.
Hotel Room Revenue: Kenya
The January 2019 terror attack at a hotel and office complex in Nairobi may temporarily impact tourist arrivals and guest nights in Kenya.
Kenya will benefit from growing demand for experiences and adventure, with mid-scale hotels being the main driver, but growth in Airbnb and the shared economy will cut into the hotel market.
Hotel Room Revenue: Tanzania
Tanzania is targeting India and China to bolster tourism and drive growth in guest nights. To widen its appeal beyond adventure tourism, the Government is looking to expand its MICE offering to boost business tourism.
Hotel Room Revenue: Namibia
Namibia has been targeting the Asian and American markets and has seen a small growth in Chinese arrivals to Namibia.
Leisure tourism to Namibia contracted slightly in 2018 and is expected to decline in 2019. In Windhoek (300+ rentals) and Swakopmund (400+ rentals),
Airbnb has placed the hospitality market under pressure in terms of both supply and price.
The category of ‘home vacation rental’ has not yet been officially recognised by the Namibia Tourism Board and Airbnb providers cannot be registered for now.
