Nigeria leads the pack in terms of hotel growth
9 Jul 2018 - by Sue van Winsen
Of all the countries included in the PwC Hotel Outlook:2018-2022 report (South Africa, Mauritius, Nigeria, Kenya and Tanzania), Nigeria is expected to be the fastest-growing country in terms of hotel guest night growth over the next five years.
The Nigerian economy began to recover in the second quarter of 2017, says Basheena Bhoola, associate director at PwC. During this time, guest nights grew for the first time since 2013 as economic conditions stabilised and confidence in business increased.
Guest night growth for the next five years will average 7,5% compounded annually, while the occupancy rate, which averaged 45,2% in 2017, will climb to 50% or higher in 2021-2022. The average room rate (ADR) is expected to increase by 4,8% compounded annually over the next five years from US$131 (R1 777) to US$165 (R2 238).
“Nigeria remains an attractive market for international brands and we’re going to see a number of these coming into the market,” says Bhoola. Hilton, Marriott, Westin, Sheraton, Radisson and Best Western are among those scheduled to open new hotels in the next five years. “But, as a trend, there were several new builds that didn’t realise in 2017,” she adds.
“Mauritius had a great year in 2017 with five-star hotels leading in terms of total revenue,” says Pietro Calicchio, hospitality industry leader, PwC Southern Africa, adding that the country has introduced several initiatives to keep boosting the market. “Mauritius is opening up as a stand-out destination for investors with a growing expatriate community.”
The number of available rooms continued to decline in 2017, falling 2,1% to 13 315. In late 2015, the Mauritius Tourism Ministry agreed to an 18-month moratorium on new hotel projects to alleviate overcapacity that led to a 15% drop in ADR between 2012 and 2015. Over the past two years, ADR rebounded with a cumulative 17% increase.
Only a few hotel openings are expected in the next five years. Anantara Le Chaland Resort should open a 164-room beachfront hotel mid-2019. Marriott announced plans to introduce its Aloft brand in Port Louis in 2022 through the conversion of an office building into a 150-room hotel. A Park Inn by Radisson Mauritius has also been announced for 2020 and Avani and Sheraton hotels are planned for 2021 and 2022 respectively.
“Kenya’s momentum continued in 2017 as one of the country’s main railways opened and made travelling to Kenya more accessible and less time-consuming,” says Bhoola.
However, it was a mixed year, she adds. “It got off to a good start with new hotels coming online and also a period of stability and security, but the elections created some uncertainty in the market,” she adds, however growth started to rebound by December.
She says a further rebound is expected in 2018. Over the next two years, Kenya will also see several new hotels opening from groups like Hilton, Radisson Blu, Pullman, Best Western and Mövenpick. Some 1 800 rooms will be added over this period. The combination of increased supply and reduced demand led to a drop in ADR in 2017, with occupancy rates falling to 47,3%, well below the 62,3% rate in 2012.
With real GDP growing 6,8% in 2017, projected to average 7% growth compounded annually over the next five years, Tanzania is one of the fastest-growing economies in the world.
However, the country’s 18% VAT on tourism services and increasing the visa charge for business travel to US$200 (R2 715) led to a drop in guest nights in 2017 and a 5,5% decrease in room revenue. The average room rate was virtually flat in 2017 after expanding by a cumulative 31% between 2014 and 2016. Bhoola adds though, that Tanzania is showing signs of early growth in 2018.
“Planned hotels do realise in line with projections in Tanzania,” says Bhoola. “Also, instead of these being over five years, we’re seeing Ritz Carlton, Rotanda and City Lodge’s properties all set to open within the next two years.”