Hospitality outlook: 2019-2023

9th Annual edition: Unparalleled experience

PwC’s team of hotel specialists provide an unbiased overview of how the hotel industry in South Africa, Nigeria, Mauritius, Kenya, Namibia and Tanzania is expected to develop over the coming years.

Overview

Overall room revenue in South Africa, Nigeria, Mauritius, Kenya and Tanzania rose 7.4% in 2018, up from the 1.9% increase in 2017, principally reflecting a 28 percentage point turnaround in Kenya, a 15.4 percentage point turnaround in Tanzania, as well as a 7.2 percentage point improvement in Nigeria. Mauritius continued to grow at double-digit rates in 2018 but room revenue growth in South Africa fell to only 0.5%.

In South Africa, concerns about the water shortage in Cape Town led to a drop in guest nights and slower growth in ADR (average daily rate), continuing the trend from 2017. 

We project South Africa to be the slowest-growing market with a 3.3% compound annual increase in room revenue. This relatively modest increase will reflect the expectation of low ADR growth, as growth in online booking and the increasing use of travel sites promotes price shopping. At the same time, we look for an improvement in guest night growth as tourism increases during the latter part of the forecast period.

(Main picture: Montecasino - Image courtesy of Tsogo Sun)

 

Silverstar hotels

Image courtesy of Tsogo Sun

 

Download the latestHotels outlook: 2019-2023

Hotel interior

Image courtesy of Tsogo Sun

Key trends

  • Online travel sites are allowing visitors to become more price conscious, which will dampen ADR (average daily rate) growth. 
  • South Africa is becoming more aggressive in bidding for MICE (meetings, incentives, conferences and exhibitions) business, supporting growth in international tourism.
  • Growth in domestic tourism and adventure tourism will benefit mid-market hotels appealing to millennials.
  • Airbnb growth will compete at the low end of the market but will not have much of an impact at the high end.

 


Hotel room revenue

Hotel room revenue for the five markets as a group will increase at a 5.8% compound annual rate to R50.6 billion in 2023 from R38.1 billion in 2018.

Tourism Amendment Bill 2019

The Tourism Amendment Bill 2019 was issued in the Government Gazette on 12 April 2019. The Bill’s stated aim is to provide for the development and promotion of sustainable tourism for the benefit of South Africa, its residents and its visitors; to provide for the continued existence of the South African Tourism Board, and to regulate the tourist guide profession. The most controversial aspect of the Bill is its proposal to regulate ‘short-term home rentals’ under the Tourism Act. This means home-sharing apps such as Airbnb and their hosts will soon be regulated in South Africa.

The proposed legislation would empower the minister of tourism to determine ‘thresholds’ regarding these shortterm home rentals and enforce limits on, for example:

  • The number of nights booked through these apps;
  • The upper limit on the value of a night stay; or 
  • The income earned for each Airbnb owner.

 

Woman standing at an airport desk

The thresholds would apply to ‘non-businesses’ that do not operate on a full-time basis. The Bill does not specify the exact thresholds that the Act will enforce. The bill was open for public comment until 11 June.


The economy

The South African economy weakened in 2018 with real GDP edging up only 0.8%, down from the 1.4% rise in 2017, which was itself a lacklustre performance. The economy continued to falter in early 2019 and we expect economic growth to drop to 0.4% for the year as a whole. We then expect modest improvements but the economy will remain sluggish. Growth for the entire forecast period will average an estimated 1.1% compounded annually, matching the 2014-18 period.

Consumer price inflation moderated to 4.7% in 2018, down from increases of 6.4% and 5.3%, respectively, in 2016 and 2017. With the economy remaining relatively weak, we look for inflation to drop to 4.0% in 2019. Then, as economic growth picks up a bit, we look for inflation to pick up as well, although price increases will remain moderate compared with recent years. For the forecast period as a whole, we project consumer price inflation to average 4.4% compounded annually.

Tourist arrivals

Growth in foreign tourism dropped to 1.7% in 2018, down from the 2.4% gain in 2017 and the 12.8% increase in 2016. The slowdown in large part reflected concerns about the drought in Cape Town and the possible approach of Day Zero when Cape Town would run out of water. It turned out that citizens of Cape Town did a remarkable job in conserving water, reducing city usage per day to 507 million litres in 2018 from 600 million litres in 2017. That effort, together with the good rains in 2018 helped avert Day Zero, however the drop in tourist numbers was felt throughout the rest of 2018 and early 2019.

The rainy season in 2018 produced good rainfall and reservoirs have risen to 70% capacity. Although the threat of a Day Zero has been alleviated, we don’t expect a rebound in foreign tourism in 2019.

Another development in 2018 was the increase in tourism from Africa, which offset declines from Europe and Asia-Pacific. More flights and visa waivers that went into effect in late 2017 made it easier for people in the rest of Africa to visit South Africa. The number of visitors from Africa rose 3.0% in 2018, while visits from Europe fell 2.5% and Asia-Pacific was down 1.9%. Declines from the UK, Germany, France and the Netherlands contributed to the drop from Europe, while India, China, and Australia posted decreases from Asia-Pacific. 

Recent developments

Guest nights dipped 0.7% in 2018, principally reflecting a decline in visitors to Cape Town due to the drought, although Johannesburg and Durban also recorded modest declines. We expect guest nights to stabilize in 2019 and to grow at somewhat faster rates in subsequent years as tourist arrivals pick up. For the forecast period as a whole, we look for the number of guest nights to increase at a 1.8% compound annual rate.

The number of available rooms rose 2.3% in 2018, the largest increase during the past six years. This increase was the result of a full-year’s benefit of the 13 hotels that opened in 2017, including three Radisson hotels, two Sun International hotels, an AHA, a StayEasy and Sun Square by Tsogo Sun, an Onomo and The Silo Hotel, among others. There were eight additional hotels that opened in 2018, including a Marriott, a Sun International, and an Onomo hotel.

Contact us

Pietro Calicchio

Partner

Tel: +27 (0) 11 797 5292

Basheena Bhoola

Associate Director

Tel: +27 (0) 11 797 5687

Follow us