The Hotel Sector is Recovering from its Hangover

Indications are that the hotel industry – after going into a slump due to oversupply after gearing up for the 2010 Soccer World Cup – would, during 2013, start recovering from the “delayed hangover effect”

Early indicators are that the hotel market is recovering

So said Nicolette Kruger, country manager at NFS Technology, a leading worldwide provider of software solutions for the hotel industry, including conference meeting, venue management, events, catering and resources management software.

“At the end of the day the ramping up of accommodation ahead of the World Cup Soccer led to an oversupply of beds – something that happens to all countries who are hosts of the popular event. But, in South Africa’s case, we were hit by a double whammy. Besides building up an over-supply of hotel, guest house and bed and breakfast accommodation, the lingering effects of a global financial recession, which started in 2008, made the recovery that much more difficult.”

Another player in the market who is optimistic is JSE-listed Hospitality Property Fund (HPA,HPB), which invests in hotel and leisure properties. Speaking to the press recently – at the IPD Property Conference – CEO Andrew Rogers said that while the sector had been through a “tough time”, he believed it had “turned the corner and already the early indicators are that the market has recovered”.

He concurred with Kruger, saying that the ramp up in accommodation – due to the excitement over the 2010 Soccer World Cup – had led to an oversupply, which had ultimately created lower occupancy figures.

According to professional services firm PwC, occupancies in the industry reached a low of 53% in 2011, compared with 72% in 2007.

PwC projects that by 2017, average hotel occupancies in South Africa will have increased to 68.7% from 56.5% in 2012, while average room rates will have grown 5.4% compounded annually to R936 in 2017 from R718 in 2012.

Hospitality Property Fund’s portfolio comprises 27 hotel and leisure properties. The fund’s portfolio is valued at about R4.5bn while its market capitalisation is R3bn.