Hotel Industry Analyses

Hotel industry analyses indicate that the water crisis has had an impact on the performance of hotels in Cape Town. The figures published by STR indicate that the occupancy levels for Cape Town have decreased by 9,2%. Although a proportion of this is due to new supply entering the market, a 6% decline in the number of rooms sold highlights a decline in demand for hotels in the city.

Further hotel industry analyses undertaken by Cape Town Tourism show the correlation between the negative publicity around the water crisis and its impact on international online travel bookings to Cape Town during the first half of 2018. After each new level of water restrictions was introduced, the analyses show a decline in international online travel bookings for Cape Town. During 2017, the declines were temporary and during each quarter in 2017, there was positive growth in international online bookings. However, after the announcement of Day Zero in 2018, international online travel bookings to Cape Town decreased by 20,9% between January and February of 2018 when compared to the same period in 2017. As a whole, international online bookings for Cape Town declined by 10,7% in the first quarter of 2018.

Although the above paints a negative picture, the hotel industry analysis indicates that although the market is down, it is still achieving strong performances. Occupancy for Cape Town, which experienced a supply increase of 1 000+ rooms in 2017 is only slightly below the 70% mark. In addition, the ADR for the city has only declined by 1%. The hotel industry analysis shows that the decline in ADR has primarily been driven by the five-star segment. Five-star ADR declined by 2,4%, while there was an increase of 0,9% and 2,7% in the four-star and three-star segments respectively. Hotel industry representatives are not, however, concerned for the future of the hotel industry in the medium to long term. Although hotel industry analyses do point to a more subdued performance year for 2018, most players are confident that the market will recover, if not in 2019 (an election year), then from 2020 onwards.

The hotel industry analysis indicates that additional supply is planned for Cape Town within the next two to three years. The extent to which such new supply will affect the market will be dependent upon the level of recovery in the market demand in the medium term.