Mauritius – A new hotel investment prospect in the Indian Ocean

March 14, 2016 / By  

Along with the Maldives and Seychelles, Mauritius is an Indian Ocean island paradise, synonymous with tropical luxury, cobalt blue seas, white sandy beaches and luxury hotels. While for many the Maldives remains unaffordable, Mauritius has some of the best value accommodation in the Indian Ocean, offering an alternative to tourists looking for a tropical island holiday without the hefty price tag.

Mauritius is becoming increasingly popular as a holiday destination, with international visitor arrivals up by 10.9% y-o-y in 2015, and growing at a compounded annual growth rate of 3.9% over the last ten years. This has been supported by the increasing number of direct flights thanks to the open skies policy in Mauritius, providing greater accessibility for tourists especially from the Middle East, Mainland China and European countries such as Germany and France. Emirates now lands two A380 planes daily and Turkish Airlines are soon to start a full schedule with more airlines to follow. The lucrative Mainland China market in particular grew strongly in 2015 with visitor arrivals up by 41.4% y-o-y. This increase in tourist arrivals has been reflected in hotel occupancy, which was up by 13.7% in 2015 to 72.9%[1].

A two year moratorium on hotel development, which began in November 2015, should provide a boon to the Mauritius market. Only hotels currently under construction (an estimated 130 rooms in total) will be allowed to open until the end of 2016, maintaining a sustainable balance between supply and demand. In combination with the development of a hotel classification system, both tourists and investors will be provided with reliable information on the quality of hotels in Mauritius, and hoteliers will be encouraged to upgrade and invest in existing hotels in order to achieve a better ranking. These are just two of a number of initiatives put in place by the Ministry of Tourism and External Communications to help drive tourism growth in the country. Other plans include improving training of tourism employees, accommodating emerging markets such as Mainland China and India by catering for their cultural and culinary habits, establishing Mauritius as a hub for medical tourism and devising a strategy to boost tourism in the low season.

The moratorium will allow existing hotels to undertake these refurbishments without the added threat of new supply coming to the market. As the construction of a new hotel typically takes a minimum of 24 months, any new supply won’t hit the market until 2019, allowing the newly refurbished properties time to stabilise and benefit from higher rates and occupancy which will ultimately lead to better operating profits. These hotels will be ideally placed to capitalise on the growing tourism numbers, making them attractive to investors looking for opportunities in the Indian Ocean. While there have been limited hotel transactions in Mauritius to date, these new initiatives, combined with strong and improving market fundamentals, have the potential to make Mauritius the latest Indian Ocean destination to capitalise on demand for hotel investments in the region.

[1] Source: STR Global

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