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Modest SA hotel rate hikes forecast for next five years Today's News

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The average daily rate (ADR) for South African hotels rose by just 3,9% in 2017, the smallest increase since the 9,4% decline in 2011. 

This is according to PwC’s Hotel Outlook: 2017-2022 report, which stated that a dip in occupancies, a stronger rand and slower domestic inflation all contributed to the slower growth in ADR. Looking ahead, this trend is expected to continue with modest ADR growth predicated in the coming years. 

In 2017, ADR was R1 160 per night, increasing to R1 205 in 2018. In the next five years, ADR is projected to grow to R1 475 in 2022 per night, a 4,1% compound annual increase. 

Slow ADR growth has impacted SA hotel revenues, which, despite an increase in guest nights, rose by just 4,6% in 2017. Pietro Calicchio, hospitality industry leader, PwC Southern Africa, explained that an increase in hotel inventory with more properties coming online during 2017 also impacted revenues, but he added: “Thankfully, we haven’t seen the undercutting that we saw a few years ago.” 

Openings in 2017 included the Radisson Blu Hotel & Residences and Radisson Red V&A Waterfront in Cape Town and the Sun International Meropa in Polokwane (both four-star hotels); and the Stayeasy in Cape Town City Bowl (a three-star hotel). In 2018, openings include the Menlyn Times Square in Pretoria, the refurbished Grandwest in Goodwood and Carnival City Resort in Brakpan. Scheduled openings for 2019-2021 include the Radisson Blu Oceans Umhlanga in Durban, the Marriott Johannesburg Melrose Arch, two Hilton Garden Inns – one in Durban and another in Malelane – and the Novotel Sandton Summit (all four-star hotels). A total of 2 900 rooms are expected to be added by 2022. 

In its report, PwC stated: “The improvement in real GDP growth for South Africa was accompanied by a drop in consumer price inflation from 6,4% in 2016 to 5,3% in 2017. Inflation for the early part of 2018 has been slowing even more, and we expect it to average only 4% in 2018, its lowest level since 2010. Faster economic growth will likely lead to somewhat faster price increases thereafter, but we still expect inflation to remain lower than in recent years, averaging 4,3% compounded annually over the entire forecast period.” 

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