Conducting research of the hotel and tourism industries is a crucial element of a hospitality feasibility study. The combination of hotel and tourism research highlights the nuances of these industries of a specific location, and can aid in guiding future development and investment decisions in a region. Our hospitality consulting firm, HTI Consulting, frequently undertakes hotel and tourism research when conducting market and financial feasibility studies throughout Africa.
When conducting hotel and tourism research at a location, it is important to understand the connection between the hotel industry and the overall tourism industry, as these two industries often work hand in hand. Hotel and tourism research therefore needs to encompass both tourism related statistics, such as international arrivals, length of stay, purposes of visits, and revenue generation, as well as the performance of the hotel industry with regards to the size and market positioning of hotel supply, occupancy performance, seasonality trends, and Average Daily Rates (ADS) achieved by hotels within the market.
To gain an in-depth understanding of the hotel and tourism industry, our consultants will liaise with tourism officials, associations, airport representative, and other tourism bodies when undertaking hotel and tourism research. It is important to gain a holistic understanding of the tourism industry prior to undertaking more detailed research into the hotel market. For this reason, when conducting hotel and tourism research, it is recommended to liaise with the aforementioned tourism officials prior to hotel representatives, as the tourism industry directly influences the performance of a hotel market.
An example of this has recently been seen in the Cape Town tourism and hotel market which was affected by the 2018 water crisis. The high-quality research conducted by our consultants indicated that the negative publicity around the water crisis had a damaging impact on the number of overseas tourists travelling to the city, which in turn adversely affected the occupancy of the hotel market. Although new supply in the market also contributed to the occupancy decline, our month-on-month research showed that room nights sold declined between February and August, before showing a recovery from September 2018. It also indicated that a recovery in the film industry and last-minute group bookings, relating primarily to incentives, had assisted the recovery in the hotel market towards the end of the year. Whilst the recovery is evident, a full-market recovery is only anticipated for the 2019/2020 season.
The research also indicated that the overseas visitor arrivals for 2018 are expected to be slightly less than for those in 2017. Statistics released by South African Tourism show a decline of -1,6% in overseas visitor arrivals to South Africa YTD October 2018. This is one of the reasons that the hotel demand for Cape Town for the year-end was down when compared to the same period in 2017 (rooms sold decline of -0,7%).
Whilst recovery in the Cape Town hotel market is expected towards the latter part of the year, a slowdown in the global economy is rumoured in 2019, given the economic uncertainty in countries such as England. The hotel and tourism research warns that a global slowdown will have a strong impact on the tourist arrivals to South Africa with a knock-on effect for the hotel performances in key nodes.