Overview
Overall room revenue in South Africa, Nigeria, Mauritius, Kenya and Tanzania rose 7.4% in 2018, up from the 1.9% increase in 2017, principally reflecting a 28 percentage point turnaround in Kenya, a 15.4 percentage point turnaround in Tanzania, as well as a 7.2 percentage point improvement in Nigeria. Mauritius continued to grow at double-digit rates in 2018 but room revenue growth in South Africa fell to only 0.5%.
Nigeria, Kenya and Mauritius had the fastest-growing markets with increases of 20.0%, 14.6%, and 11.7%, respectively, in 2018. Growth in Mauritius was due to a large increase in ADR that offset a drop in guest nights.
During the next five years we expect Nigeria to be the fastest-growing market with a projected 12.0% compound annual increase. A number of new hotels are scheduled to open in the next five years, which will accommodate further growth in guest nights, without putting upward pressure on ADR.
(Main picture: Montecasino - Image courtesy of Tsogo Sun)
Image courtesy of Tsogo Sun
Image courtesy of Southern Sun
Key trends
- Nigeria remains an attractive market for major hotel brands with a strong infrastructure for urban visitors.
- The MICE sector will drive guest nights and overall room revenue.
- The mid-scale market will present the best opportunities for growth.
Hotel room revenue
Hotel room revenue for the five markets as a group will increase at a 5.8% compound annual rate to R50.6 billion in 2023 from R38.1 billion in 2018.
With Nigeria's growing affluence, we expect consumer tourism to become a more important sector. Adventure tourism is becoming more popular and the growing interest in experiences is allowing Nigeria to attract visitors interested in the local culture.
The economy
The Nigerian economy has experienced sharp up-and-down swings in recent years, reflecting large fluctuations in oil prices as the Nigerian economy is dominated by oil.
Real GDP declined in 2016, remained weak in 2017 and plunged by 13.4% in the first quarter of 2018. Since then, however, the economy has picked up, averaging 5.9% real growth during the final three quarters of the year. For 2018 as a whole, real GDP rose 1.9%, which was its strongest performance since 2015.
Economic forecasts are somewhat muted because of the volatility of oil prices. Another decline could quickly lead to a downturn in the economy. Even so, the projected 2.7% compound annual increase in real GDP over the next five years would be an improvement compared with the past few years. As of this writing, economic growth appears to be stronger than that and we expect that there is more of an upside to the forecasts than a downside.
Another positive development is a moderating inflation rate. Consumer price inflation spiked in 2016 and 2017, in large part reflecting a depreciating Naira, whose value fell by a cumulative 45% against the US dollar between 2015 and 2017. The weaker Naira led to rising import prices and higher overall inflation. In 2018, however, the value of the Naira stabilised and inflation dipped to 12.1% from an average of more than 16% annually in 2016-17.
While still high, the trend is in the right direction and we expect the inflation rate to continue to fall during the forecast period, averaging 8.5% compounded annually for the 2019-23 period as a whole.
Recent developments
Guest nights rose 12.5% in 2018, the largest increase during the past six years as economic conditions improved and consumer inflation moderated.
The number of available rooms rose 2.1%, which was the smallest increase during the past six years as the uncertain economic climate in 2015-17 discouraged or delayed development.
We expect room capacity to accelerate beginning in 2019 with increases averaging 11% annually in 2020-21 based on current plans. For the forecast period as a whole, we estimate the number of available rooms to increase at a 7.6% compound annual rate to 14 300 in 2023 from 9 900 in 2018, well in excess of increases in any of the other countries analysed in the Outlook.
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