select
|

Sub-Saharan Africa’s hotel industry poised for growth

The outlook for the hotel industry in Sub-Saharan Africa looks increasingly positive, with potential growth of 7-15 percent in RevPAR (revenue per available room) expected for 2012 compared with 2011 - which augurs well for the future of the industry in the region, said Joop Demes, CEO of Pam Golding Hospitality, a member of the Pam Golding Property group.

Speaking at the Africa Property Invest Summit in Johannesburg (4 & 5 September 2012), Demes said this is almost double the growth anticipated for America and Asia. “According to a recent report by Goldman Sachs, growth in 2012 RevPAR in America and Asia’s hotel industry is forecast at around 5-7 percent. In further contrast, in Europe overall 2012 RevPAR is expected to be flat with a decline of 2-4 percent in a number of South European countries such as Italy, Portugal, Spain and Greece.

“Compared with the same trading period in 2011, the South African STR results for July 2012 reflect an overall year to date RevPAR growth of between 9.8 percent for 3-Star hotels up to 12.6 percent for 5-Star hotels. In addition, the July year to date occupancy of 57.7 percent in South Africa compares well with America’s forecast of 60 percent in 2012. Furthermore, in regard to South African hotels, the July 2012 PricewaterhouseCoopers Hospitality Outlook publication forecasts a growth of 14.4 percent in 2012 RevPAR, while also predicting a compound 8.7 percent annual growth rate in RevPAR from 2012 to 2016.”

Asked what the key factors were which are driving new growth opportunities in Africa, Demes said growth in RevPAR in the hotel industry, as well as the room pipeline of hotels, is strongly dependent on GDP and employment growth.

“From these statistics one can easily select the African countries that offer growth opportunities – which tend to be the resource rich countries. There are, however, also many branding opportunities for existing hotels in Africa. In America approximately 70 percent of all hotels are branded, while in Africa (other than South Africa) we estimate that some 35 percent or less are branded, and this presents an opportunity for the large and well-known South African and international operators,” he said.

“Further growth opportunities for the hotel industry in Africa exist in regard to the development of affordable holiday resorts for domestic and regional holidaymakers, including timeshare developments by well established and trusted operators. Historically and globally, many traditional hotel companies have extended their operations into timeshare, corporate and residential apartments or condominiums. Branching into these markets allows hotel operators some protection from hotel and travel cycles.”

Demes pointed out that in 2011, as much as 13 percent of the total turnover of Starwood Hotels – one of the larger global hotel operators – was derived from timeshare related trading. He says the purchase of timeshare in Africa will not only provide the owner with affordable regional and international exchange and holidays, it can also, if the model is designed properly, provide the owner with the opportunity to make an exchange through points for stays in city hotels.
Current ‘buy-down’ trend among consumers.

Demes said that the current ‘buy-down’ trend among consumers in the South African hotel market has been imbalanced by severe discounting. “If we take the achieved average daily rate in South Africa’s hotels and extrapolate this by a compounded rate of 6 percent, and then compare this to what the prevailing rates in 2012 should be, it reveals that on average 5-Star hotels are currently discounting rates by 19.4 percent, 4-Star hotels by 19.9 percent and 3-Star hotels by 12.2 percent. Presently this is impacting negatively on budget hotels, whose customers are poached by higher graded hotels. This trend towards discounting is however, not sustainable as the newer hotels will need to increase rates to service debts.”

He said another trend evident in the local market is that free independent travel is increasing at the cost of standard tour operator business, while globally lead times prior to booking accommodation becoming shorter and shorter.

Importantly, Demes highlighted the fact that due to a number of important factors, certain existing hotels present the opportunity for lucrative acquisitions compared to retail and commercial.  “As mentioned, GDP growth drives the average daily rate and occupancy, as does the low availability of capital for new hotels and low room pipeline (ie fewer additional rooms planned).  A further positive is that since 2007/8, hotels have been compelled to consider and dramatically increase their operating efficiencies and margins.

“After a number of highly attractive 5-Star hotel transactions, we now have a number of very attractive 3-Star hotel opportunities available with existing yields between 8-12 percent, and at an acquisition price that is about half of replacement value. So if one adds to this the above reasons of increased operating efficiencies, declining room pipeline, declining availability of capital for new hotels and forecast GDP and employment growth - as to why we are optimistic about increasing yields in the hotel industry in South Africa - the time is indeed right to consider acquisitions, particularly from a black empowerment point of view,” added Demes. “We also see the opportunity for a real estate investment trust structure that incorporates mid-market hotels spread across borders in a number of African countries,” he said.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK