Hilton, Nairobi

Africa’s hotel sector has the potential for further growth over the next five years. Increasing the number of foreign and domestic travellers, as well as a swelling a number of hotel chains on the continent has continued to boost the hotel industry’s untapped potential.

PwC’s Hotels Outlook: 2018-2022 sheds light on the hotel industry in major markets including South Africa, Nigeria, Kenya, Tanzania and Mauritius.

The report projects that hotel room revenue for the five markets will increase at a 7.4% compound annual rate in 2017. In East Africa, Kenya and Tanzania are expected to see an increase in hotel room revenue of 9.6% and 9.1% respectively.

Kenya, which experienced a drop in visitors following the contentious elections of August 2017 began recovery around December with an increase in visitor numbers resulting in 9.9% overall growth. However, the total effect was a 13.5% decline in room revenue.

“We expect tourist arrivals to Kenya to increase 8.8% in 2018, building on the pickup in December 2017. Going forward, assuming a period of relative stability, we expect tourism to Kenya to increase at a 6.9% compound annual rate, rising to 2.06 million visitors in 2022 from 1.47 million in 2017,” says the report.

Hotel room revenue in South Africa rose 4.6% in 2017. Five-star hotels had the highest occupancy rates in the market in 2017, at 79.5%. According to the report, the average daily rate (ADR) growth for five-star hotels in 2017 slowed for the market as a whole. However, five stars experienced an 8.8% increase, well above the increase for three- and four-star hotels.

The report also projects that most of the hotel openings scheduled for the coming years will be four-star hotels, leading to a projected 2.4% compound annual increase in available four-star rooms over the next five years, an equivalent of 76% of the total increase in available rooms for all hotels in South Africa.

The number of four-star hotels opening in 2017 increased the available rooms by 1.8%, the first rise since 2013. Meanwhile three-star hotels accounted for 31% of total hotel room revenue in 2017.

Nigeria and Mauritius continued to perform well in 2017 with both markets achieving double-digit growth in the hotel industry whereas Kenya and Tanzania saw a decline in room revenue. PwC projects that the number of available rooms in Nigeria will rise from 9,700 in 2017 to 12,600 in 2022, a 5.4% compound annual increase exceeding that of all the other markets covered.

In Mauritius hotel room revenue increased by 12.7% in 2017 as the country continued to welcome growth from the number of foreign visitors. Its hotel room revenue is projected to grow at a 7.2% compound annual rate to 2022.

Tanzania’s hotel room revenue amounted to US$206 million in 2017, a decline of 5.5% over 2016 due to a drop in guest nights. However, the report cites strong economic fundamentals to project a growth of 10.2% for 2018.

Tourism remains an important part of the hotel industry in all the five countries. However, it is susceptible to abrupt changes which might have a profound impact in any particular market. Overall, there is a good case for growth in all the markets over the forecast period. Of particular importance, according to the report’s conclusion is how all stakeholders and governments can work together to grow industry.