Investment 2015: The State of South African Hospitality Real Estate

 Long term Investors take note – South Africa’s hospitality industry is set for yet another boom as international and domestic tourism continues to grow.  The hospitality sector in …

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 Long term Investors take note – South Africa’s hospitality industry is set for yet another boom as international and domestic tourism continues to grow. 

The hospitality sector in South Africa consists of hotels, guesthouses, guest farms, game lodges, caravan sites, camping sites and other overnight accommodation; all of which attracts an increasing number of tourists and investors.

Famed for its unique natural beauty and wildlife, friendly people and affordability, South Africa has seen consistent growth in its hospitality real estate sector.

And within the next decade the country’s hospitality sector will undergo yet another particularly great spurt as foreign investors continue to pump capital into the market by snapping up the various forms of accommodation and real estate available for sale. This has made long-term investment – and the accompanying strong returns – a particularly financially attractive venture.

This general consensus is also now supported by hard facts and forensic research completed by international auditing firm PricewaterhouseCoopers (PwC), which recently released the fifth edition of its regular report on the industry; titled Hospitality Outlook: 2015-2019.

According to the report, the country will see an incredible growth and by 2019 the overall hospital occupancy rate across all sectors in South Africa will continue to increase, rising to an estimated 58.3% from 54.4% in 2014.

This makes it all the more financially prudent to purchase a hospitality real estate.

The Rainbow Nation has unwittingly reaped the rewards as other African countries such as Nigeria and Kenya suffered substantial losses in both international and domestic tourist travel due to the recent outbreak of the deadly Ebola virus, as well as the growing threat of terrorism and internal violence.

With this in mind, South Africa’s hospitality industry is expected to experience an additional boost as tourists slowly relook their travel destination options; which will again increase the demand for hotels on sale.

According to Hospitality Outlook: 2015-2019, total spending on hospitality rooms in the country rose by 9.1% to R18.9-billion in 2014; with booming room rates being the primary driver.

Hotel occupancy rates rose by 7%, with five-star hotels achieving the fastest growth of any accommodation at 12.8%.

With the market now improving, there is renewed activity in the hospitality industry as major hotel chains upgrade current amenities, renovate their properties or make plans to expand and open new hotels.

The report estimates that by 2019, there will be about 63 600 hotel rooms available in South Africa, rising from the 60 800 which were available in 2014.

This has in turn driven further property investment in the hospitality industry, as an increasing number of parties take advantage of the low asking prices of the sale of guesthouses.

Despite the passing of new, controversial visa legislation by the South African government, which requires parents and guardians travelling with minors to have an unabridged birth certificate that shows the names of both parents, the outlook is still highly positive for investors seeking to make the most of the numerous hotels, guesthouses, and available lodges.

With this in mind, South Africa is set to remain a global leader in viable hospitality real estate investment, with sound returns and long-term gains.

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