While some Southern African hotel markets have a long way to go in terms of recovery and regrouping, others have shown remarkable fortitude and resilience and provide hope that ‘normal’ conditions will once again prevail in the hospitality sector in Africa.
So says HTI Consulting CEO, Wayne Troughton, following the publication of HTI’s Review of the Year 2021.
“Throughout 2020 and into 2021, as wave after wave of COVID-19 infections continued to spread across the globe, hotels struggled to achieve sustainable levels of demand.
“Hoteliers and their staff have, however, been adaptable and resourceful over the period and quite a few of the properties that contributed to STR in 2019 have therefore continued to do so in 2021,” says Troughton.
“It is encouraging to witness the resilience of some of the key African cities as well as the boost in performances in the months leading up to the end of the year.”
NOTE: Founded in 1985, Smith Travel Research (STR) has had the singular focus of collecting, analysing and reporting hotel industry data. Since 1988, STR has released a monthly market share report and acts as a census database for all things hospitality, from competitive benchmarking to consumer research.
The below Review of the 2021 year sees HTI Consulting compare the
performances of 2021 with those of 2019 to identify the rate of recovery in key Southern African markets.
Occupancy Recovery Rates
The coastal town of Umhlanga in KwaZulu Natal showed the strongest occupancy recovery rate across Southern African markets, currently contributing to STR. With an average occupancy of 48.1% for 2021, occupancy for October and November was sitting at 65%, peaking at 71% in December.
Recovery rates over these three months ranged from 86% to 92%.
With an occupancy rate of 25.2% in 2021, Lusaka’s recovery is at 54% when compared with 2019 occupancy (54%).
Cape Town’s recovery is at a similar level (53%) with an average occupancy of 34.9% for 2021 vs. 65.3% in 2019. From October 2021 occupancy levels were pushed over 50%, driven by increased demand from overseas travellers after South Africa’s removal from the red list in October.
Despite the travel bans that ensued in December 2021, the December occupancy for Cape Town was also above 50% due to strong domestic leisure support.
Room Supply Recovery
Occupancy levels achieved should always be viewed in the context of the recovery of room supply. When assessing the number of rooms contributing to STR data in 2021, Windhoek, Namibia, and Gaborone, Botswana, have achieved equivalent levels to 2019. Occupancy recovery levels for these two markets are, therefore, more accurate.
Room supply in Umhlanga, Sandton, Johannesburg and Cape Town is noticeably down, with respective recovery of supply at 62%, 58% and 57%.
It remains uncertain as to whether or not the limited recovery in property contributions to STR is attributed to permanent closure or temporary closure.
Some are likely to reopen and, therefore, occupancies in these markets might take some time to regain 2019 levels. International market recovery will also take some time and increased business and leisure travel will be required to drive peaks achieved prior to COVID.
ADR (average daily rate) Recovery Rates
From a rate perspective, most key markets have made pleasing progress in rate recovery. Hoteliers, for the most part, have carefully managed discounting in order to avoid rate dilution and to facilitate a swift rate recovery once market conditions improve.
Umhlanga achieved an ADR of US$91 for 2021 vs. US$92 in 2019. This is a positive sign.
When considering the pressure the Lusaka market was under prior to the pandemic, the achievement of an ADR of US$82 is positive, particularly as rates achieved in 2019 were US$100.
Cape Town and Sandton have experienced similar recovery rates. Hoteliers in the Mother City have, however, found it challenging to push rates without higher paying international clientele. Sandton properties continue to discount.
RevPAR (revenue per available room) Recovery Rates
The RevPAR recovery rate continues to remain subdued, with market leaders only at 44% when compared with 2019. Low occupancies remained a challenge across the southern region, given the dearth of international leisure and domestic and regional business travellers.
The removal of Southern African countries from the ‘red list’ by most key source markets in early 2022 is likely to see a gradual uptick in foreign travellers, notably from February onwards. Increased activity from the business market is also anticipated, particularly with the view that the pandemic could potentially be downgraded to an endemic.
The outlook for 2022 is therefore cautiously optimistic, provided no more travel bans or lockdowns impact the region.
Market Outlook
The UNWTO frequently surveys tourism experts across continents in order to understand their views on when key tourism markets will recover to 2019 levels.
In May 2021, 45% of African tourism experts surveyed projected that the continent would recover to 2019 levels by the end of 2023. A similar survey in January 2022 highlighted that only 33% of experts saw recovery occurring in 2023, with 50% anticipating recovery in 2024 or later.
“For Southern Africa, the latter scenario is more likely, given the challenges in recent months,” says Troughton. “Uncertainty remains high due to erratic flight schedules, frequently changing COVID regulations and undeniable travel anxiety related to being stranded or having to undergo unexpected quarantine periods – as experienced by foreign travellers to South Africa in November 2021.
“As the region awaits the return of foreigners, many Southern African assets are struggling to maintain sustainable operations,” he adds. “HTI Consulting has worked with a number of owners to create strategies that will offload risk and stabilise cash-flow allocation for debt repayments.
“Converting operations from a management contract to a lease or franchise has been a prevalent trend in this region, as has the sale of distressed assets and the renegotiation of existing finance structures. This trend is expected to continue in the medium term and savvy investors have the opportunity to add good-quality assets to their portfolios.”