Bumper Season for Cape Town Hotel Market
Although final figures for the Cape Town tourist season have yet to be calculated, analysis of hotel figures from October 2015 to February 2016 indicate that Cape Town hotels had a bumper summer season when compared to the same period in 2014/2015. This is according to a recent 2015 Market Snapshot on the Cape Town hotel market released by HTI Consulting.
CEO of HTI Consulting, Wayne Troughton, indicated that the “performance of the Cape Town hotel market in 2015 as a whole has been very impressive given the challenges in the tourism sector.” In 2015 tourism arrivals to South Africa declined by 6.8% whilst overseas demand reduced by 4.9%.
“The decline in tourism seemed to have a small effect on the Cape Town hotel market” says Troughton, “full year occupancy for the City was estimated by STR at 66.7% in 2015 versus 67.9% in 2014, whilst Average Daily Rate and Revenue Per Available Room increased by 10% and 8% respectively”. Troughton was quick to add that “the market would have shown positive growth had the challenges in the tourism sector not occurred, however what is important to recognise is the limited impact on the market despite the crisis”. He highlighted that the 2015 performance was driven largely by the last four months of the year. Monthly STR figures for Cape Town show that for the first eight months of the year, occupancies for Cape Town showed decline or stagnation. However, in September and October occupancy grew by 0.8 and 2.2 percentage points respectively and in November and December occupancy grew by 5.0 percentage points.
“The revisions to the visa laws and the removal of the Ebola threat, combined with the weaker rand against the dollar, influenced a more positive trend towards the end of 2015” says Troughton. “Positive conditions have continued in 2016 as January and February saw occupancy growth of almost 6.0 and 5.0 percentage points respectively. This has resulted in a bumper tourism season for hotels in the City” the CEO says. “For the 2015/2016 season (October to February) occupancies increased by 5.0 percentage points whilst Average Daily Rate and Revenue Per Available room increased by 11.0% and 18.04% respectively“.
Troughton highlighted that “Cape Town’s ability to sustain higher occupancies is influenced by its wealth of tourism attractions which is complimented by a strong corporate base and high levels of Government and convention and exhibition demand.” He concluded that hoteliers therefore have a more diverse market base from which to draw demand.
Looking forward Troughton predicts another year of positive growth for the hotel sector in Cape Town. Given the continued weakness of the rand, South Africa, and Cape Town, are likely to remain affordable to international travellers provided hotels do not increase rates excessively. No new supply is predicted to enter the market in 2016 and this is likely to continue to push occupancies and rates up in the City. HTI Consulting project that average occupancies in Cape Town should reach 69% to 70% for the year. In 2017, new supply under construction (approximately 1,000 rooms) should enter the market. The extent to which the new supply is absorbed in the market will depend on the pace of growth from international travellers and the effect that current economic conditions have on domestic corporate and leisure travellers, as well as Government.
Hospitality and Tourism International Consulting "HTI Consulting" is a niche, specialist hospitality, mixed-use, real estate and leisure focused consulting company formed in 2003. To-date more than 300 assignments have been completed covering 36 countries in Africa and the Middle East.
HTI Consulting has recent experience in Cape Town where we have recently undertaken Market and Financial Feasibility Studies, Valuations and Operator Selection. For additional information on these and other services please contact HTI Consulting: info@hticonsulting.co.za
