South Africa’s hospitality sector is poised for further growth in the next five years on the back of rising room rates and growing tourism numbers, according to a report released by PricewaterhouseCoopers (PwC) last week.
PwC’s “South African Hospitality Outlook: 2014-2018” projects that the overall occupancy rate across all sectors in South Africa will rise to an estimated 58.4% by 2018, with total room revenue expected to reach R28.7-billion, a 10.7% compound annual increase over 2013.
Occupancy rates for South Africa’s hotels are projected to increase from 58.9% in 2013 to 71.1% in 2018, overtaking guest houses, bush lodges and guest farms to become the leading category once more.
“One of the most significant developments in 2013 in the South African hospitality industry was the rise in average room rates, which increased 8.4%, well above the 5.9% rate of inflation,” PwC leader of hospitality and gaming Nikki Forster said in a statement.
Despite the recent economic uncertainty, the total number of foreign overnight visitors to South Africa rose by 3.9% in 2013, down from the 10.2% increase in 2012, but still reflecting continued growth in foreign travel to South Africa.
“Tourism is considered to be a key element in South Africa’s economy, and is recognised in the National Development Plan as an important driver of economic and employment growth,” Forster said, adding that growing tourist numbers were expected to fuel growth in the accommodation industry across the African continent during the next five years.
Hotel accommodation

According to the report, overall spending on rooms of all categories in South Africa rose by 14% to R17.3-billion in 2013, reflecting an increase in “stay unit nights” and an 8.4% rise in the average room rate.
Stay unit nights for hotels rose 4.8% in 2013, whereas stay unit nights for guest houses and guest farms fell 4.5%.
The overall occupancy rate across all sectors rose to 52.6% in 2013. Although guest houses and guest farms had the highest occupancy rate at 60.5%, it was the only category to show a decline in 2013, having posted an occupancy rate of 65.3% in 2012.
Hotels accounted for 71% of total accommodation revenue in 2013, with PwC predicting that this share would rise to 73% by 2018.
The pick-up in hotel occupancy rates has stimulated new activity in South Africa’s hospitality industry, with a number of major hotel chains in the process of upgrading facilities, renovating their properties or making plans to open new hotels. The report estimates that by 2018 there will be about 63�600 hotel rooms available, up from 60�900 in 2013.
South Africa’s overall room capacity is projected to increase at a 1.3% compound annual rate to 123�400 in 2018, from 115�700 in 2013. Guest houses are expected to be the fastest-growing category in respect of the availability of rooms, averaging 3.7% compounded annually, with slower growth in other areas.
Cruise industry

South Africa’s cruise industry, according to PwC’s report, consists of spending by South Africans on cruises originating or departing from the country. The number of cruise passengers from South Africa totalled only 153�000 for the entire 2013/14 season, compared with 13.1-million stay unit nights for hotels in South Africa in 2013, the report found.
Durban is the leading cruise port in South Africa, accounting for about 70% of cruise passengers, with Cape Town being the next largest. The average cruise cost R13�365 in 2013/14, comparable to the cost of a week at a five-star hotel in Cape Town.
Cruise prices locally were nearly 30% less than the global average of R18�525, in part reflecting the popularity of shorter and less expensive cruises to local destinations, as well as lower incomes in South Africa.
PwC projected that the number of cruise passengers would increase to 186�000 by 2018/9. Although the number of passengers is expected to decline in 2014/15, the occupancy rate is projected to increase, to 85.2% from 74.6% in 2013/14, as supply falls faster than demand.
Passenger capacity is affected by the number and size of ships serving the market, the number of cruises per season, and the quality of cruise terminals. Transnet National Ports Authority is in the process of soliciting and evaluating for new cruise terminals in Durban and Cape Town.
“The construction of world-class terminals will improve boarding, which will enhance the cruise experience and encourage cruise lines to increase the number of cruises they offer in South Africa,” Forster said.
Total cruise revenue is expected to increase by a projected 9.4% compounded annually, rising to R3.2-billion in 2018/19 from R2-billion in 2013/14.