Hotel Industry Analysis

Winelands Hotel Industry Analysis

The hotel industry analysis on the Cape Winelands, in particular the Franschhoek region, illustrates that the hotel market is predominately geared towards the luxury boutique hotel market with approximately 75% of the supply positioned within the four- and five-star segment. The hotel industry analysis indicated that the Franschhoek region suffers from seasonal demand, with notable declines in both occupancy and achieved rates during the low season or winter months.

The hotel industry analysis highlighted that the bulk of available rooms/suites (approximately 50%) is provided by guesthouses and bed and breakfast establishments, with a small percentage being hotel rooms. Establishments within the Franschhoek hotel industry tend to be independently managed, with only a few branded establishments. In addition, the hotel industry analysis provided insight into the local brands that are present within the hotel industry, such as Protea Hotel by Marriott and Dream Hotels & Resorts.

Despite the significant growth in international tourism demand, the occupancy performance for establishments in the Franschhoek hotel industry have been relatively stagnant over the last three years, which became apparent when conducting the hotel industry analysis in the region during 2017. Statistics recorded by local tourism bodies highlight an average of 60%-62% over the last three years. The statistics are, however, misleading when compared with hotel industry interviews conducted during the hotel industry analysis. Over the peak summer seasons, establishments achieve extremely high occupancies, as seen by the Q1 2017 performance in which an occupancy of 87% was achieved. The hotel industry analysis indicated that the ADRs over this period are also considerably higher when compared to the year as a whole.

The seasonal demand for Franschhoek was highlighted during the hotel industry analysis with a very high summer demand and a low winter demand, therefore limiting the extent to which establishments can maximise their performance and occupancies of 60%-65% in this seasonal climate. The overall continued effort to curb seasonality in the market resulted in a stronger winter average occupancy of 40% compared to the previous year, where 37% was achieved during this period.

During the hotel industry analysis, interviews with management staff pointed to a longer length of stay by foreign tourists, therefore positively impacting hotels within the Winelands hotel industry. Another important trends which was highlighted during the hotel industry analysis was the use of out-of-season events and festivals to continue to drive demand to the Winelands during the quieter months, attracting both the domestic and international tourists.