SA’s hotel industry finally seeing some positive signs

Hotels in SA are showing signs of recovery, with occupancies across the sector up more than 10% in January compared with the same month a year earlier, with strong rebounds in the five-star segments Cape Town and Johannesburg,

Hotels in SA are showing signs of recovery, with occupancies across the sector up more than 10% in January compared with the same month a year earlier, with strong rebounds in the five-star segments Cape Town and Johannesburg.

Statistics for January from consultants STR Global show room prices have increased in tandem with occupancies in what have been the hardest hit of the hotel grades.

However, the double-digit improvement should be viewed against the low base the sector has been operating from.

Hotels have languished across the country, barely managing to fill half their beds for much of the past 18 months. The sector was hit hard by the combination of the drop off in demand following the 2008 economic crisis, and an increase in hotel stock as SA prepared for the 2010 Soccer World Cup.

January’s improvement was encouraging and was the sixth successive month of occupancy growth according to Danny Bryer, director of sales, marketing and revenue for Protea Hotel Group.

In the five-star segment, occupancies rose to 54,9% from 47,8% a year earlier.

Revenue per available room (Revpar) rose to R917,22 from R774,24 due to increased occupancy levels and an increase of 3,3% in average daily rates. Revpar is a measure the hotel industry uses to calculate daily sales by multiplying the occupancy rate with the average daily rate for a room.

Average daily rates were still growing too slowly, Mr Bryer said. While there had been growth, it was below inflation and Cape Town was still priced much lower than other major tourist cities in the world.

"For the past few months, average daily rates have been growing at up to 3%. It needs to be higher than that, closer to 6%," he said.

Overall occupancies in Cape Town in January rose to 62,5% from 55,4% a year earlier, according to STR Global. This increase was pushed Revpar higher to R706,39 from R607,53 a year ago. Five-star occupancies in Cape Town were higher than the overall performance for other hotels in the city at 66,4% from 55,1% from a year ago.

December, January and February tended to be strong months for cities such as Cape Town, especially with events such as the Mining Indaba, which draws a consistent foreign audience, Mr Bryer said.

Events in SA were increasingly playing an important role in the performance of hotels.

"We are seeing a lot more visitors from Africa who are coming to Cape Town and to Johannesburg for business," Mr Bryer said.

In Gauteng, occupancies rose 17,2% to 48,6%. But this positive growth was blemished with a fall in average daily rates of 0,2%.

Sandton and surrounding hotels were still battling. Occupancies for the suburb grew 17%. Despite this stronger growth, the hotels are still half-empty with an occupancy rate of 49,9%. The five-star Sandton segment grew 18,1% year on year to 51,5% occupancy rate, STR shows.

Occupancy rates grew the most in the five-star segment, up 14,7%, followed by the four-star hotels, up 13,2%. Three-stars hotels were up 5,8% in January. The strong growth in the higher end of the market indicated there was momentum for average daily rates to climb higher, Mr Bryer said.