Occupancies in South Africa, and Cape Town in particular, are set to continue increasing as the sector comes out of an oversupply that, according to STR Global, saw occupancies drop to 54% in 2011.
So says Wayne Troughton, CEO of hospitality and property consulting firm, HTI Consulting. He points out that last year SA saw an increase in average room rates and occupancies in all classes of hotels and across all provinces. Demand will continue to increase across all accommodation classes, Troughton adds. Occupancies were at 62% for 2013, according to STR Global, and Troughton predicts that these should reach 65% this year.
“Areas like Cape Town are absolutely booming,” Troughton says, adding that the city had a very good season, helped by the weakened rand. According to him, occupancies in Cape Town should reach 68% by the end of the year.
Troughton believes the growth will be driven by an increase in visitors to Cape Town, both from overseas and also Africa. He says despite Cape Town’s being a long-haul destination, the weakening rand has seen international travellers booking stays later in a bid to take advantage of the exchange rate. “We are seeing lead times drop down from months to weeks.”
Furthermore, the memorial week for former president Nelson Mandela has sparked renewed interest in SA as a destination, Troughton says. He argues that while SA also received media coverage around the World Cup, the timing is favourable now, unlike in 2010, when demand was low because of a weak international economy.
He also points out that Cape Town has received a number of recent accolades recognising the city as a prime destination and that its status as World Design Capital 2014 should also boost travel to the city.
SA has seen an increase in travellers from overseas as well as from the rest of Africa, according to Troughton. He says travel from the rest of Africa offers the biggest opportunity to SA. “Africa is a huge market that SA Tourism is focusing on quite aggressively,” he says, adding that it is the future market that SA needs to focus on. “Because of strong GDPs in Africa, people come to SA for medical, shopping and leisure tourism.”
However, while Troughton predicts increased occupancies for Cape Town as well as the rest of South Africa, he cautions that development should be sustained to avoid the oversupply that caused a dip in occupancies a few years ago.
He argues that overdeveloping the hotel industry could result in five to six years of low occupancies. “I would encourage steady and continuous development that is controlled.” He argues that if new hotels aren’t brought into the market, in a few years, when the country is sitting at 75% occupancy, there could be a development boom, followed by an oversupply. “It’s much better to have controlled supply and SA is at the point where it can absorb additional hotels coming on stream in three or four years’ time.”
