Revenue from Tanzania hotel rooms fall by 5.5pc, says report

Dar es Salaam. Revenue from hotel room occupancy in Tanzania declined by 5.5 per cent in 2017 compared to 2016 due to a drop in guest nights, a new report has revealed.

The multinational professional services company, PricewaterhouseCoopers (PwC), has published the 8th edition of its “Hotels outlook: 2018-2022” report that provides an overview of how the hotel industry in South Africa, Nigeria, Mauritius, Kenya and Tanzania is expected to develop over the coming years.

According to the report, room revenues amounted to $206 million (Sh469.5 billion) in 2017 compared to $218 million (Sh496.86 billion) as recorded in 2016.

PwC believes that the drop in guest nights was due to an introduction of 18 per cent VAT on tourism services and increased the visa charge for business travel to about $200 (about Sh455,840) in 2016.

Also the introduction of fixed-rate concession fees for hotels in the national parks, some as high as $59 per person per night in July 2017 was another reason.

“As we expected in our late report last year that guest nights would drop to 1.5 million from 1.6 million in 2016, which occurred,” PwC states in the report.

According to the report, the average room rate was virtually flat in 2017 after expanding by a cumulative 31 per cent between 2014 and 2016, in part reacting to the new VAT and the new fixed-rate concession fees that made rooms more expensive.

“The impact of the VAT amendment has now been more or less absorbed, but some hotel properties are still trying to recover from the introduction of the fixed-rate concession fee, the report reads.However, the business was good to Hyatt Regency Hotel, according to the director of Sales and Marketing, Mr Denis Glibic.

His business remained stable despite the changes of some policies in the sector because the hotel operates in the capacity of international standards with long marketing plan.

“The business was healthy and sound in 2017. Number of guest nights was high and it is increasing this year. This is because our marketing plan does not rely on particular clients,” he said.

He was wondering how and why the introduction of concession fees to guests, VAT to tourists and ban of public meetings in hotels can be a threat to the business.

“We operate our business in different countries and the same things are happening there but the sector is booming. Why not in Tanzania?” he wondered.

He believes that, the future of the hospitality sector is still bright if the operators will be creative enough to bring strong competitions among them.

On the other hand, the report forecasts room revenue growth of 10.2 per cent in 2018 and 11 per cent in 2019, as more flights and new hotels provide a boost to the market.

“While some hotels are still recovering from the increase, the industry is strengthening with a number of new flights added over the last year and new aircraft purchased by the national carrier [sic]. Additionally, Tanzania Tourist Board and Air Tanzania have teamed up to promote tourism to the country,” the report indicates.

In the medium-term, Rotana, Anantara, City Lodge, Hyatt Regency Sarovar Portico and Ritz-Carlton are expected to open seven new hotels in Tanzania, most of which will be opened in the next two years.

PwC expects 900 additional rooms by 2019 and 1,200 by 2022, with the total number of available rooms increasing from 7,700 in 2017 to 8,900 in 2022.

The company projects guest nights to rise from 1.5 million in 2017 to 1.9 million in 2022, a 4.8 per cent compound annual increase, growing faster than available rooms, and hotel occupancy will increase from 53.4 in 2017 to 58.5 per cents in 2022.

“Such growth will lead to a projected 9.1 per cent compound annual increase in room revenue, rising to $319 million (Sh727.1 billion) from $206 million (Sh469.5 billion) in 2017,” PwC concludes.

Tanzania was not alone, Kenya has recorded the drop on room revenue growth to negative 13 per cent in 2017, compared to five per cent recorded in 2016.

The reason was due to the fall of guest nights from 3.6 million in 2016 to 3.3 million in 2017.

This decline was mainly contributed by general election complications, according to the report.

Room revenues in Kenya are expected to rebound in 2018 to 5.7 per cent and 12.6 per cent in 2019.

According to the report, hotel room revenue in Mauritius increased by 12.7 per cent in 2017, and the country continues to experience growth in the number of foreign visitors.