Fact of the Day: Addis Ababa has Africa's highest hotel room rates

The Sheraton Hotel Addis Ababa, Club Room

A price survey of international-grade hotels in select major African cities, produced by hospitality research firm STR Global, ahead of the Africa Hotel Investment Forum (AHIF), taking place at the end of September, has revealed that Addis Ababa is the most expensive place for a good night’s sleep.
 
The average rate (in US dollars) for a hotel room during the first six months of this year in Addis Ababa was $231.78/night. This compares with $215.75 for a room in Lagos, $144.76 in Nairobi, $122.30 in Cape Town, $105.73 in Casablanca, $103.54 in Cairo, $72.90 in Johannesburg and $70.70 in Sharm el-Sheikh.
 
The price of a hotel room in Nairobi is almost double that of a room in Johannesburg. The room rate in Addis is 60% more expensive than that in Nairobi. Why are prices so different?
 
Thomas Emanuel, Director of Business Development, STR Global, says: “A great deal of the reason for the difference in rates across major African cities is simply supply and demand.”
 
Addis Ababa has a shortage of top quality hotels relative to demand. The Ethiopian economy has been growing at a rapid pace of over 10% per annum for the past 10 years. More conferences have been coming to the city by virtue of its status as the seat of the African Union. Ethiopian Airways has been aggressively increasing the number of new routes to and from Addis, causing increased passenger traffic. These are some of the reasons for the high demand for premium hotel rooms in Addis.
 
On the other hand, Johannesburg has been a well-established international hub for a much longer time. Consequently, the city has a large number of 5-star hotels and a competitive hotel market for visitors.
 
Over the past year, hotel rates have been on the increase in Sharm el-Sheikh (42.5%), Addis Ababa (14.9%), Johannesburg (11.0%), Cape Town (10.8%), Cairo (10.6%) and Lagos (5.8%). Hotel rates in Nairobi have essentially remained the same. Hotel rates in Casablanca have declined by 4.0%.
 
The recovery of Egypt‘s tourism industry is the factor behind the room rates increase in Sharm el-Sheikh and Cairo, following several years of political unrest from the so-called “Arab Spring”.
 
Cape Town hotel room rates have been on the increase primarily due to increased demand. Additionally, there has been no significant increase in Cape Town’s room supply since the 2010 FIFA World Cup, which was hosted in South Africa.
 
Kenya‘s image as a tourist hub has taken a hit, in some circles, due to recent isolated terrorist attacks. There is a tendency to magnify the significance of such attacks in the media, particularly the Western media. Kenya remains a safe and hospitable country for the vast majority of inhabitants and visitors. Nonetheless, tourism numbers in Kenya have suffered a decline in recent years. Consequently, Nairobi room rates have remained largely constant given the lower occupancy rates.
 
Supply and demand factors do not explain the increase in Lagos room rates because there has been a combination of factors in Nigeria that should normally exert downward pressure on rates. Firstly, there is a hotel development boom in Lagos, with 3,611 new hotel rooms in the pipeline, according to W Hospitality Group. Secondly, Nigeria’s heavily oil-dependent economy is taking a hit due to the collapse in the price of oil. In spite of these factors, hotel room rates in Lagos have been on the increase.
 
The decline of room rates in Casablanca is due in part to economic weakness in France, which is Morocco‘s largest source of visitors.

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