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 Tanzania, the impact of the 18% VAT on tourist services and rising visa costs for business visitors that hurt the market in 2017 was largely absorbed in 2018 and guest nights rebounded. Nigeria was helped by a pickup in the economy during the latter part of the year and an increase in guest nights.
We project Tanzania and Kenya to be the next fastest growing with compound annual increases of 8.2% and 7.4%, respectively. Increased room capacity, a strong economy, growth in tourism from India and China, and Tanzania’s appeal as an exotic destination will fuel growth over the next five years.
(Main picture: Montecasino - Image courtesy of Tsogo Sun)
Image courtesy of &Beyond Hotels
Image courtesy of Legendary Expeditions
Key trends
- Tanzania is targeting India and China to bolster tourism and drive growth in guest nights.
- The trend toward growing interest in experiences and adventure travel will benefit Tanzania as it is a well-established exotic destination.
- To widen its appeal beyond adventure tourism, the government is looking to expand its MICE offerings to boost business tourism.
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.
In 2018, Tanzania was named the Best Exotic Destination by the Russian National Geographic Traveller. Tanzania is well positioned to attract more adventure tourists, which is becoming a more important sector in the overall tourism industry.
The economy
Tanzania remains one of the fastest growing economies with an average growth rate of 7% in the years up to 2016, which appears to have moderated in 2017 and 2018, but still remains robust. Real GDP is projected to increase at a 6.5% compound annual rate over the next five years. GDP growth is forecast to be even higher by other institutions like the African Development Bank.
Consumer price inflation fell to 3.5% in 2018 following increases in excess of 5% in prior years. We expect consumer price inflation to remain moderate during the forecast period with a 3.5% compound annual increase.
Recent developments
Guest nights declined in 2017, hurt by the impact of the 18% VAT on tourism services introduced in 2016 and the fixed rate concession fee introduced in 2017, which increased costs for travel agents and other travel packagers, and cut into demand. With the impact of that cost increase largely absorbed, guest nights increased in 2018, returning to their 2015-16 level.
There was also an increase in available rooms with the opening of a City Lodge and Zuri Zanzibar and the full- year impact of a new Melia hotel that opened in late 2017. Rotana, Melia, Anantara, Sarovar Portico and Ritz-Carlton are among the major hotel brands with planned openings in the coming years, together adding a 1 000 rooms over the forecast period.
The occupancy rate increased to 56.2% in 2018, comparable to the levels in 2015-16. ADR rose 3.0% as occupancy increased.
We expect the tourist initiatives and an emerging MICE market, along with a strong economy, to lead to further growth in guest nights, which we project will rise at a 3.5% compound annual rate. A fledgling Airbnb market is growing rapidly on a percentage basis. While remaining only a small component, it will cut into guest night growth at the lower end of the market to some degree.
