Hotel Market Analysis

Hotel markets in East Africa and how they performed

HTI Consulting has recently published a hotel market analysis which outlined the performance of key hotel markets in Africa and how they performed in 2017, as indicated by STR. A key outcome from the hotel market analysis was the decline in occupancy and ADR experienced in Nairobi in 2017. The hotel market analysis indicated that occupancy in Nairobi declined by 11,1% in 2017 due to an increase in supply (478 rooms) and a reduction in demand as a result of the violence surrounding the 2017 elections. The hotel market analysis also revealed that ADR in the city declined by 8,4% in 2017. The increased supply combined with reduced demand therefore forced hoteliers to compromise on their rates.

The STR hotel market analysis of Nairobi for year to date February 2018 indicates a strong turn around in the market. The occupancy for the first two months of the year indicates a growth of 4%, despite a 7,3% increase in available rooms. On a positive note, the hotel market analysis also indicated an 11,6% increase in rooms sold, thus highlighting that strong levels of demand are returning to the market.

In terms of ADR, the hotel market analysis indicated continued reductions of 3,3%. Considering the growth in supply in the market, the lower ADR is not surprising. The rates are likely to be under pressure in the medium term, as new supply continues to come on line.

The hotel market analysis of 2017 also indicated that both Gaborone and Addis Ababa had declining occupancies of 5,9% and 6% respectively. Regarding Nairobi, a more positive scenario was evident in the first two months of 2018. Both cities experienced occupancy growth, with Addis Ababa increasing by 6,6% and Gaborone increasing by 4,7%. A more stable political environment in Ethiopia and improved economic conditions in Gaborone have positively influenced the markets. Whilst ADR in Addis Ababa remains under pressure with a decline of 8,5%, the hotel market analysis reveals that ADR in Gaborone grew by 17,8% for the first two months of the year.

The hotel market analysis for Dar es Salaam indicates that occupancy has started to stabilise after a 9% decline in 2017. Occupancy, in fact, grew by 2,3% for the first two months of the year. ADR continued its downward trend, but the decline has slowed from a total of 7,8% in 2017 to just 2,3% for January and February 2018.

In summary, the hotel market analysis for the first two months of 2018 indicates a more favourable scenario in the markets. HTI Consulting will keep a close eye on these areas during the course of the year, in order to keep our investors informed of conditions in key African markets.