Revenues from Africa's hotel industry expected to grow till 2022

16 July 2018 Authored by Consultancy.africa

PwC has released the eight edition of its ‘Hotels Outlook’ report for Africa, and the findings reveal continued growth for the sector across the continent despite events that induce uncertainty such as droughts and political upheavals. Total room rates are expected to increase over the next four years in the key economies of South Africa, Nigeria, Mauritius, Kenya and Tanzania.

In addition to the widespread uncertainty bred by geopolitical events across the world, a combination of major political upheavals, natural disasters, and outbursts of conflict has put many regions in Africa into a state of economic uncertainty. One sector that appears to be riding the wave rather well, however, is that of hospitality and travel.

While the weakness of national passports and relative weakness of currency act as a barrier to residents in Africa travelling abroad, the same conditions are major causes of attraction for tourists across the globe to travel across Africa, given that the continent is endowed with ample natural beauty and cultural diversity.

Total room revenue in South Africa and Nigeria

According to Big Four accounting and advisory firm PwC, the travel and tourism sector, and consequently the hospitality sector on the continent is thriving under these circumstances, and will continue to do so up until 2022, especially in some of the continent’s largest economies.

In South Africa, for instance, revenues generated in the hotel industry increased by 4.6% last year to reach a value of nearly $1.3 billion, driven by a corresponding increase in the number of visitors to the country, which increased by 2.4%. Of these, the number of visitors form non-African countries grew by 7.2%, indicating the popularity of the country across the globe.

Over the course of 2018, the firm expects the number of visitors – both foreign and domestic – to increase by as much as 5.3%. In turn, this is expected to drive hotel revenues up by 3.3% this year. By 2022, the report estimates this figure to reach a value of $1.65 billion.

Tourist arrivals and total room revenues in Mauritius

A similar growth trajectory can be traced for Nigeria, which is the largest economy on the continent. The overall hospitality industry in the country grew by as much as 11.7% over the last year and the expected compound annual growth rate (CAGR) for the sector till 2022 is 12.7%.

This growth will largely be driven by an increase in room revenue, which is expected to grow at a CAGR in excess of 7% over the next five years. Currently, the total room revenue in the country stands at $210 million, which will grow to $380 million by 2022 according to the report. The country’s largest city – Lagos – also boasts one of the highest occupancy rates on the continent.

In Mauritius, the room revenue levels increased by nearly 13% to reach a value of $861 million last year, which comes as no surprise given the country’s renowned beauty and popularity amongst tourists from across the world, particularly in Europe. Up until 2022, this figure will grow by a CAGR of over 7% to reach a value of $1.2 billion.

Total room revenues in Kenya and Tanzania

The thriving East African economies of Kenya and Tanzania were the only two of those surveyed to register a decline in occupancy and room rates. In Kenya, the report attributes the decline to national elections in August last year. The country’s visitor numbers still grew by almost 10%, but the room revenue still registered a steep decline of 13.5%. Nevertheless, the study predicts steady growth over the next five years.

Tanzania’s decline of 5.5% last year is attributed by the report to a lack of guest nights, although this situation is also expected to rectify itself over the next four years. By 2022, this figure is expected to reach a total of nearly $320 million, up from last year’s figure of $208 million.

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