Africa -  South Africa - Cape Town

South Africa remains a key trading partner for European and Asian countries, has comparatively low taxes, a clearly defined taxation system and a clearly regulated market for income investors. Following two quarters of negative growth, the South African economy expanded by 2.5% q-o-q and 2.0% q-o-q during the second and third quarters of 2017, respectively. The central bank reduced the prime interest rate by 25 basis points to 10.25% during July 2017, citing an improved inflation outlook, a faster-than-expected moderation in food inflation, continued subdued domestic demand and resilience in the exchange rate. Since then the prime interest rate dropped to 10% in March 2018 as the Rand reacted positively to recent political developments and the recent ratings announcement by Moody’s.

The improved outlook for the coming years is based on a recovery from the 2015-2017 drought, stronger mining production, and improvement in the country’s political dynamics. Cyril Ramaphosa was sworn in on the 18th February 2018 after former president Jacob Zuma was recalled by the ruling African National Congress (ANC) party. Ramaphosa, who was elected president of the ANC in December by a slim majority, has already begun changes to revitalize the South African economy which had been in decline under Zuma.

The prolonged drought throughout South Africa hit Cape Town hard as it has an ever-increasing population and up until now an outdated infrastructure in terms of its water source. With the beginning of stricter water restriction levels towards the end of 2017 and the announcement of ‘Day Zero’ by the City of Cape Town, the local hospitality industry experienced a more than 20% drop in arrivals. RevPAR still grew in 2017 but slowed down towards the end of 2017 and is forecast to decline this year, due to a dip in occupancy rates and a stronger Rand. However, the forecasted REVPAR for 2018 is the second highest of the past ten years showing the resilience of Cape Town to crisis.

Despite the drought and drop in occupancy, Cape Town has shown strong resilience: Cape Town’s room value increased by almost 25% in 2017 compared to the year before and the Cape Town International Airport had a growth of almost 10% in international travellers from January to March 2018 compared to the same period the year before. 

The decline in room value in 2018 is projected to rebound in 2019 and even exceed numbers from last year in 2020, mirroring RevPAR performance. Room nights sold declined during the high season of 2017/2018 due to the publicised ‘Day Zero’ and are therefore anticipated to show an overall low number throughout 2018. But Cape Town’s recovery in the coming years is expected because of a stronger economy, the recent announcement that there would be no ‘Day Zero’ for 2019 if water restrictions are adhered to and an anticipated faster growth in foreign and domestic tourism.

There has been a large amount of new hotel supply in the city centre last year which included the Radisson Red and the Silo in the trendy Silo District of the V&A Waterfront as well as the 504-bedroom Southern Sun and StayEasy Cape Town City Bowl. Marriott International is planning to open 539 rooms in the Cape Town Foreshore within the next five years: AC Hotel Cape Town Waterfront in November 2018, Residence Inn Cape Town Foreshore and Marriott Cape Town Foreshore in February and March 2023

Exchange Rate:

Exchange Rate 2016 Exchange Rate 2017 Change 2016/2017 Exchange Rate 2018 Change 2017/2018
US$ 1 0 0
South Africa - Cape Town 0.06812 0.07511 10.3% 0.08103 7.9%

Change In Value For Market:

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

South Africa - Cape Town RevPAR Change

South Africa - Cape Town RevPAR

Year RevPAR
2015 78.15
2016 94.60
2017 105.48
2018 (f) 98.68
2019 (f) 104.13
2020 (f) 110.61

For more information, please contact:

Tim Smith, MRICS
[email protected]
  • +27 797 342296 (w)
Rishabh Thapar
[email protected]
  • +27 0 792790584 (m)
Laura Dutrieux
[email protected]