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South Africa: Further growth expected in Africa’s hospitality sector

Despite South Africa’s economy facing headwinds, the hospitality sector is poised for further growth in the next five years, in the wake of a number of inbound travellers into the African continent, according to a report issued by PricewaterhouseCoopers (PwC) Thursday.

Nikki Forster, PwC Leader of Hospitality and Gaming, says in the report: “Although South Africa’s economy has weakened, growth in international travel and tourism and rising room rates have bolstered the hospitality sector.”

PwC’s 4th edition of the ‘Hospitality Outlook: 2014-2018’ projects that by the year 2018, the overall occupancy rate across all sectors in South Africa will increase, rising to an estimated 58.4%.

Total room revenue is expected to reach R28.7 billion (US$2.6 billion) in 2018, a 10.7% compound annual increase from 2013.

“Occupancy rates are expected to increase for hotels over the next five years, overtaking guest houses, bush lodges and guest farms to again become the leading category,” says Forster. Occupancy rates for hotels are projected to increase from 58.9% in 2013 to 71.1% in 2018.

The report features information about hotel accommodation in Nigeria, Mauritius and Kenya.

Accommodation sectors in South Africa consist of hotels, guest houses and guest farms, game lodges, caravan sites, camping sites and other overnight accommodation.

For the first time, the report includes a detailed analysis of the cruise industry in South Africa.

“One of the most significant developments in 2013 in the South African hospitality industry was the rise in average room rates, which increased 8.4%, well above the 5.9% rate of inflation,” says Forster.

Despite the recent economic uncertainty, the total number of foreign overnight visitors to South Africa rose 3.9% in 2013, down from the 10.2% increase in 2012, but still reflecting continued growth in foreign travel to South Africa.

Foreign travel to South Africa was boosted in early 2013 by the African Cup of Nations football tournament and in December following the death of the late President Nelson Mandela, which led to an increase in the number of visitors to Robben Island where he spent many years in jail.

“The continued depreciation of the Rand is also credited with contributing to the growth in foreign tourism by making South Africa a less expensive country to visit,” adds Forster.

South Africans are also tightening their belts when it comes to luxury holidays abroad and turning to local travel as an alternative. The total number of travellers in South Africa is projected to reach 17.6 million.

In 2013, overall spending on rooms in South Africa in all categories rose 14% to R17.3 billion (US$1.6 billion), reflecting an increase in stay unit nights and an 8.4% rise in the average room rate.

The pick-up in hotel occupancy rates has stimulated new activity in the industry, with a number of major hotel chains in the process of upgrading facilities, renovating their properties or making plans to open new hotels.

The report estimates that by 2018 there will be about 63,600 hotel rooms available up from 60, 900 in 2013.

Elsewhere, Nigeria’s economy is booming, buoyed in part by regional and international investment.

Hotel room revenue rose 59% between 2009 and 2013. Conversely hotel room revenue in Mauritius decreased by 8.7% in 2013 but is projected to grow at 4.6% compounded annually to 2018. Kenya’s hotel market declined during the past two years, largely due to terrorist concerns.

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