Is Cape Town’s hotel market headed for a downturn?
Cape Town’s hospitality sector appears to be saturated, yet developers are planning to bring another 2,000-odd new hotel rooms to the market. Will the tourism cycle turn again soon?
The mini-boom in Cape Town’s hotel development market could not have come at a worse time. At least five new hotels have opened in the Mother City over the past 18 months — a period that coincided with the worst drought in decades and a drop in the number of overseas tourists. The result has been that hotel occupancies in Cape Town decreased by an overall 6.5 percentage points in 2018 to 65% (from 71.5% in 2017), according to figures from global hospitality research group STR. Revenues, as measured by average daily room rates, declined by 1.7% to R1,765 over the same period. Figures released by Stats SA last month show a similar year-on-year decline (-1.6%) in overseas tourists to SA between January and November. That follows a bumper 2016 and 2017, when the tally of overseas visitors rose by 12.8% and 7.2% respectively after a 6.8% drop in 2015. The 2016/2017 uptick was seemingly driven by the relaxation of visa regulations.
Last year’s decline in Cape Town occupancies and re...