Hotel Market Analysis – Cape Verde

Hotel Market Analysis – Cape Verde

Cape Verde is a former Portuguese Colony, which gained its independence in 1975. As the second most politically stable country in Africa, Cape Verde has potential to become a small, but strong investment node on the continent. Recent analysis undertaken by HTI Consulting in the country highlighted that the hotel sector is an area that represents potential opportunity.

A hotel market analysis revealed that there are a number of factors that can positively influence the sector in the medium- to longer-term, including:

• Plans to grow air capacity and air lifts to the country through Iceland Airs, which purchased a 51% stake in Cabo Verde Airlines;
• A CAGR of 12.5% in tourist arrivals between 2010 and 2018, as highlighted in the graph below; and
• The growing presence of internationally branded hotels in the country.

International Tourist Arrivals (Sal International Airport)

An analysis, notably on the island of Sal, indicated that the industry is dominated by the leisure market, with limited demand from the corporate and conference market. Most leisure demand is international and from traditional European markets, including the UK, France, and Germany.

Whilst there are a number of facilities on the island of Sal, the HTI Consulting analysis focused on less than ten establishments positioned towards the higher end of the market. Most of the hotels assessed are larger properties offering more than 200 rooms with the exception of one.

The analysis highlighted a strong occupancy performance for the proposed establishments. The market peaked in 2018 due to political instability in traditional European holiday markets, and hotels in Cape Verde were able to capitalise on this. Whilst occupancies have declined since 2018, this has been attributed to increased competition from other destinations, as well as hotels that were closed for renovation re-opening. It was revealed that ADR had remained relatively stagnant, despite the declining occupancy trend. However, the stabilised ADR was not sufficient to offset the occupancy decline and RevPAR has declined since 2016 by 9%.

Within the next two years, an additional 1,000 new rooms will be added, and based on our research, this will place strong pressure on occupancy and ADR. However, considering the long-term vision of Iceland Air to position Cabo Verde as an airline hub, the year-round sunshine experienced in the destination and its proximity to Europe, the long-term opportunity for Cabo Verde is strong, and watchers should keep an eye on this interesting destination.