The latest Tourism Business Index (TBI) released by the Tourism Business Council of South Africa (TBCSA) cited a decrease in accommodation supply due to several establishment closures as one of the additional positive contributors in the improvement in tourism business performance.
However, overall, the number of rooms has increased. Occupancy levels have increased by one percentage point last year from 62.7 percent in 2014 to 63.7 percent in 2015, according to an STR census of all grades of accommodation. The year also saw a 0.9 percent growth in hotels and 1.6 percent growth in room numbers. In 2014, there were 44 886 rooms in SA and compared to the 45 603 rooms last year.
TBCSA CEO, Mmatšatši Ramawela, warned that, although the cited decline in accommodation supply was a positive outcome from a competitor point of view, it revealed an overall contraction of supply, which is not a good sign for the industry. The closure of several establishments could be concentrated in the informal sector, said Wayne Troughton, CEO at HTI Consulting. This sector includes small guesthouses and B&Bs. Wayne added that limited new supply had entered the formal sector in the last five years.
Troughton said that if the economy contracted and slowed further, it would result in negative growth in hotel demand and would create an imbalance between supply and demand, as some markets would be placed under increased pressure. However, he added that growth in hotel supply was still expected in 2016, albeit at a lower level. Troughton does not believe an oversupply of hotel rooms is currently occurring. He said if an oversupply did occur, it would be seen in 2016 and 2017. However, Clifford Ross, CEO of the City Lodge Hotel Group, disagrees and argues that an oversupply is currently being seen in the four-star accommodation segment. Ross added that this could be further exacerbated, as the current pipeline of new development appeared to be in the four-star segment.
Compiled By: Melissa Jane Cook. Source: Daniella Di Gaspero. Image: Four Seasons Westcliff