Luxury Hotels In KZN And Sandton Struggle As Occupancy Rates Fall Amid Uneven Tourism Recovery

Tourism stakeholders have voiced concerns over flagging five-star hotel occupancies in KwaZulu-Natal and Sandton, which have compounded the issues faced by the same regions in the three- and four- star segments.

BDO’s Tourism Trends Report highlights that average room occupancy (ARO) at five-star hotels in KZN plummeted to 46% in the first seven months of 2025, from 61% in 2024 and 67% in pre-COVID 2019. In Sandton occupancies fell to 57%, from 65% in 2024 and 62% in 2019.

In comparison to 2019, average room rates (ARR) at Sandton properties were down by 20% in real terms to R1 468 ($84), and down by 1% in KZN to R1 930 ($111).

“The sustained underperformance of KZN and Sandton is a concern, as these regions are central to both business and leisure tourism. Their recovery is vital for maintaining employment, attracting investment, and supporting the broader hospitality value chain,” FEDHASA National Chairperson Brett Tungay told Travel News.

Tungay said that a prolonged weakness in both regions was indicative of deeper structural issues that required coordination action from both the public and private sectors. “KZN, in particular faces a destination perception issue which the province is working hard to overcome through infrastructure repairs, crime reduction, and repositioning as an attractive destination.”

Lee-Anne Bac, BDO Advisory Partner: Tourism, said that South Africa desperately needed to heed repeated calls to tackle crime, grime and decay through meaningful collaborations such as city improvement districts.  “Dereliction of our public spaces will continue to drive both domestic and international tourists away – we need to recreate spaces that we are all proud of and tourists would love to visit.”

In a Tourism Update poll conducted in October, the largest proportion of respondents (42.9%) chose combatting crime and infrastructure challenges as the most urgent priority to address to enhance the country’s tourism sector.

Tungay said that FEDHASA was advocating for a national campaign and public-private sector partnerships to restore South Africa’s image and address safety concerns, alongside other  other initiatives such as focused skills development and the leveraging of major gatherings such as the G20 in showcasing the country’s events and conferencing capacity.  

Cape Town continues to shine

Five-star hotels in the Cape Town recorded an ARO of 67% – level with 2019, but ARR in real terms mushroomed by 41% to R4 393 ($252), triple that of properties in Sandton.

“Cape Town’s strong performance remains encouraging and highlights what is possible when all elements of the tourism ecosystem align,” said Tungay.

“Strong public-private sector collaboration has ensured clean, safe and well-managed tourism precincts, and the city has developed a high-quality, diversified tourism product that offers both urban and natural experiences.”

He stressed, however, that the success was primarily reflected in high-performing core areas such as the V&A Waterfront, the City Bowl and the Atlantic Seaboard.

“The broader Cape regions still face seasonal and affordability pressures, underlining the need to spread demand and ensure inclusive growth. Ensuring that development remains sustainable, and that benefits extend to surrounding regions, is essential to preventing overtourism and preserving the destination’s long-term appeal.”