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HVS In-Depth Africa Hotel Valuation Index:
Ramaphosa’s proposals to revitalize the country in 2018 sounded promising and following the excitement of a change in presidency, the GDP grew by 2.6% and 1.4% in the last two quarters of 2018 respectively. 2019 saw a sharp decline in GDP in the first quarter of just over 3% reflecting in part the effects of Eskom’s power cuts on mining and manufacturing. While there was a growth of over 3% in the second quarter, the South African Rand and the general economic sentiment remains bleak amidst the global economic slowdown and the USA China trade war.
National elections took place on the 8th May 2019 and the ANC won with 57.5% of the count which was its worst performance by the party in any national election. There were just a few service delivery protests leading up to the elections and on election day, otherwise it was a peaceful turnout.
Cape Town’s economic development agency Wesgro as well as local, provincial and national government agencies have worked together over the last few years to solve a problem of declining interest by airlines to fly to Cape Town. “The city is welcoming nine new international airlines, 14 new direct routes and 19 route expansions, resulting in more than 1 million two-way seats being added into Cape Town International Airport.” said Sasha Planting from Daily Maverick. Perhaps the most exciting news is a direct route to the US starts service in December. To date, the CTAA initiative has added R6 billion to the local economy, according to research by Wesgro. Following the growing interest by airlines and the increased traffic, Cape Town International is currently planning a R7 billion expansion project that is expected to start construction at the beginning of 2020 and will take about five years to complete.
Cape Town’s water restrictions have been eased after good rainfall in 2018 and 2019 with dams’ levels over 80%, but the City of Cape Town is still developing diverse sources of water in a large scale, including groundwater, water reuse and desalination. Also, the Western Cape in general and hotels in specific continue to save water. Being completely off the grid and not using municipal water at all is the goal as the Western Cape will always remain an area prone to drought.
An increased supply of rooms in the city coupled with the water crises in 2017 and 2018 caused occupancy levels and room revenues to decrease. Nonetheless, the attractiveness of Cape Town as a destination protected the city and occupancy levels could have been worse.
We expect 2019 and 2020 to be years of recovery from the impact of water crises. The growing number of international tourists in 2019 are also being persuaded by a weak Rand and better-connected flights and more convenient routes, thanks to the CTAA initiative by Wesgro and other agencies. Furthermore, the World Travel Awards in Lisbon last year awarded Cape Town as the World’s Leading Festival and Events Destination and the International Congress and Convention Association classified Cape Town as the African city with the most meetings in 2018.
In addition to the increased supply mentioned in our previous HVI the Signature Lux Hotel by ONOMO at the Waterfront opened in September 2018 with 87 rooms; the Onyx Hotel, managed by Newmark Hotels, Residences, Reserves & Lodges, opened early December last year with 102 apartment-style rooms; another Newmark hotel called Stock Exchange opened its doors in March 2019 in Woodstock with 33 apartment style room; a 32-room luxury boutique hotel called Gorgeous George by Design Hotels opened April this year.
An exciting precinct development and R550m investment by Growthpoint will take place over the next few years at Longkloof Studios in Cape Town CBD. Hilton has already signed a management agreement with Growthpoint and wants to open its first Canopy by Hilton, the Canopy Kloof Street, in Africa with 150 rooms by 2021.
ADR, Demand, Occupancy, RevPAR, and Supply Projections:
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|Hotel Occupancy Increase/Decrease
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