PwC Report Projects Growth in Africa’s Hospitality Sector

JOHANNESBURG, SOUTH AFRICA—According to a report issued by PricewaterhouseCoopers LLP (PwC), South Africa’s hospitality sector is poised for further growth in the next five years.

Nikki Forster, PwC leader of hospitality and gaming, stated, “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 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,” said 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.

“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,” said 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. The total number of travelers 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, reflecting an increase in stay unit nights and an 8.4% rise in the average room rate. The rise in hotel occupancy rates has inspired major hotel chains to start 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. 

Nigeria’s economy is thriving, lifted 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.

Overall room capacity is projected to increase at a 1.3% compound annual rate to 123,400 in 2018 from 115,700 in 2013. Guest houses are expected to be the fastest-growing category in respect of the availability of rooms averaging 3.7% compounded annually, with slower growth in other areas. Stay unit nights for hotels rose 4.8% in 2013 whereas guest houses and guest farms fell 4.5%. The overall occupancy rate across all sectors rose to 52.6% in 2013. Although guest houses/guest farms had the highest occupancy rate at 60.5%, it was the only category to show a decline in 2013, having posted an occupancy rate of 65.3% in 2012.

Hotels accounted for 71% of total accommodation revenue in 2013 and this share is expected to rise to 73% by 2018.

The hotel market in Nigeria grew 9% in 2013, which was the smallest gain since 2010. Stay unit nights increased 6.3% in 2013 and have grown faster than room availability over the past three years. Average room rates have grown slowly in the last two years, rising by only 2.5% in 2013. The number of hotel rooms is expected to triple during the next five years, rising from 8,400 in 2013 to 24,000 in 2018. Overall hotel room revenue is also anticipated to expand at a 22.6% compound annual rate to $1.1 billion (R12.1 billion) in 2018 from $413 million (R4.4 billion) in 2013.

Mauritius competes with the Maldives, Sri Lanka and the Seychelles for the tropical tourist market. The average hotel room in Mauritius costs €170 (R2 492), 2.7 times higher than average rates in South Africa and 28% higher than South Africa’s average five-star room rate. Due to the number of renovations and projects taking place in the industry, the number of available hotel rooms is expected to increase at a 2.9% compound annual rate to 14,250 in 2018. The average occupancy rate will edge down from 63.3% in 2013 to 61.5% in 2018.

Kenya’s hotel market declined during the past two years, falling 6.6% in 2012 and an additional 2.6% in 2013. The number of available rooms in Kenya is, however, projected to increase from 17,500 in 2013 to 19,400 in 2018 with an increase in the average room rate from $155 (R1 641) in 2013 to $163 (R1 726) in 2018. Total room revenue is expected to expand by 2.5% compounded annually, rising to $668 million (R7.1 billion) in 2018 from $589 million (R6.2 billion) in 2013.

Foster concluded, “Tourism is considered to be a key element in South Africa’s economy and is recognized in the National Development Plan as an important driver of economic and employment growth. Growth in travel and tourism is expected to fuel growth in the accommodation industry across the African continent during the next five years.”