HOSPITALITY AND RECREATIONAL PROPERTY MARKET

HOSPITALITY SECTOR

The market for Hospitality and Recreational Properties in Tanzania continues to grow and shows signs of becoming a competitive space among both local and foreign investors. The Hospitality, Tourism, and Entertainment Property Market is highly competitive in terms of growth, especially in major and smaller cities, tourist destinations, national parks, coastal areas, and natural scenic locations such as mountains and forests.

Types of Hospitality Properties

• 1. Hotels: All hotel buildings fall under the Hospitality Sector, and this includes hotels of all standards and categories.
• 2. Guest Houses: Guest houses are among the buildings classified within the Hospitality Sector.
• 3. Lodges: These are improved guest accommodation properties popularly known as lodges. The difference between guest houses and lodges is minimal largely based on perception, with lodges often seen as more scenic and comfortable for overnight stays.
• 4. Inns / Small Hotels: These are hospitality buildings that have not yet reached full hotel status, but their room services are equivalent to 1-star, 2-star, or 3-star hotels.
• 5. Recreational Properties: These include properties such as:
  • A. Night Clubs – Entertainment venues and buildings related to clubbing.
  • B. Swimming Pool Facilities – Premises designed for swimming and related activities.
  • C. Casinos and Gambling Facilities – Similar to nightclubs but primarily intended for gambling, betting, or gaming activities.
• 6. Food Service Properties (Restaurants, Cafés, and Cafeterias): These are buildings that provide food services to large groups of people, such as:
  • 1. Cafeterias – Often serve students or single groups.
  • 2. Restaurants – Serve a wide variety of individual customers.
  • 3. Cafes– Specialize in beverages like coffee and light meals.
• 7. Low-Cost Accommodation Properties (Hostels, Motels, and Dormitories): These are hospitality properties offering budget accommodation, also part of the hospitality sector.
• 8. Conference and Convention Centres: Meeting halls and convention centers also fall under the Hospitality Sector due to their service-oriented nature in hosting events and conferences.

Conclusion

In Tanzania, the market for Hospitality, Tourism, and Recreational Properties is highly competitive, particularly in major cities such as Dar es Salaam, Arusha, and Zanzibar.

Key Drivers of Growth in the Hospitality Sector

The hospitality sector has been closely linked to tourism and security. The following are the key drivers of growth in Tanzania’s hospitality sector:

• 1. Growth of Tourism: The increase in both domestic and international tourists leads to growth in the hospitality sector. Wildlife parks, beaches, mountains, and scenic natural areas attract various tourists. For example, between 2012 and 2016, the number of tourists increased from 800,300 to 980,000. And from 2017 and 2021, the growth was more moderate. However, between 2021 and 2024, the number of visitors to tourist attractions rose sharply, making Tanzania one of the African countries with the highest number of tourists, with cities like Zanzibar and Arusha leading in tourism.
• 2. Political Stability, Peace and Security: Tanzania is among the few African countries with political stability, peace, and security. This has made Tanzania a preferred destination for East African tourists compared to Kenya or Uganda, where security remains a concern. Note: This does not mean Tanzania is free from social issues, but the level is relatively low.
• 3. Heavy Marketing Strategies: Several initiatives have been taken to promote Tanzania’s tourism and hospitality sector; including:
  • Formation of the Tanzania tourist board; which launched a digital/electronic marketing campaign aimed at attracting tourists from the USA, Germany, Italy, the UK, etc.
  • Bilateral partnerships; with countries such as Mauritius and Germany to promote Tanzania’s tourist attractions.
  • Establishment of the Tanzania Safari Channel; A national tourism TV channel aimed at promoting domestic tourism and encouraging Tanzanians to visit national attractions and learn about cultural heritage.
  • The creation of the tourism documentary; The Royal Tour featuring president SAMIA SULUHU HASSAN, which significantly boosted global awareness of Tanzania’s attractions. Example: Serengeti National Park has been ranked the best Park in Africa and the world three times in a row, surpassing Kruger (South Africa), Maasai Mara (Kenya), and Okavanga (Botswana). The film also repositioned Zanzibar as a top Africa tourism destination.
• 4. Government’s Role in Improving Infrastructure: The government has continued to improve old infrastructure and build new modern infrastructure to make tourist destinations accessible. Examples include:
  • Airport construction, bridges, purchasing passenger planes, road and railway repairs.
  • Launch of the Standard Gauge Railway (SGR), which is expected to boost tourism.
  • Acquisition of passenger aircraft.
  • Rehabilitation of railways.
• 5. Private Sector Investment: Local and foreign private investors are actively participating in developing the hospitality sector. They contribute by:
  • Building hotels and hospitality facilities.
  • Running companies, especially in regions like Arusha and Zanzibar.
• 6. Increase in Income and Interest among Tanzanians to Visit Tourist Attractions: A growing middle and upper-income class in Tanzania has led to:
  • Increased spending power.
  • A growing interest in leisure travel among Tanzanians, especially during holiday seasons. For instance, there is an increase in domestic tourists during holiday months.

Conclusion

The Royal Tour, the efforts of private stakeholders in the tourism sector, and the government’s efforts greatly help grow the hospitality and entertainment property market in Tanzania.

Challenges Hindering the Growth of the Hospitality Property Sector in Tanzania

• Challenge #1: Poor Infrastructure (Deteriorating Infrastructure) – According to a 2022 study by TBS and international tourists about Tanzania’s infrastructure, only 40% of tourists were satisfied with the tourism infrastructure and hospitality property market in Tanzania. 60% were dissatisfied with the existing infrastructure and requested improvements such as roads, hotel services, security, airports, bridge construction, better customer service especially in wildlife parks, beach safety, mountain climbing facilities, etc.
  • Mainland Tanzania; infrastructure quality is rated at 48.5%.
  • Zanzibar (islands); Rated slightly better at 56%, but this is mostly due to Mjini Magharibi Region, which scored 85%. Other regions such as Unguja South and North, and Pemba South and North were all below 50%.
• Challenge #2: Increased Costs Due to VAT Charges – In 2016, the Tanzanian government imposed VAT on tourism services as a way to increase revenue in the tourism sector. As a result this move led to:
  • A decline in tourist arrivals.
  • A negative impact on the hospitality and recreational property market.
  • Ongoing concerns among some tourists about potentially rising costs.
• Challenge #3: Political Uncertainty During Elections, Especially in Zanzibar – Zanzibar’s tourism sector becomes unstable during and after elections due to security concerns. Example: In 2015/16, tourist numbers dropped by 26%. In 2000, Zanzibar’s tourism was severely affected by political and election-related issues.
• Challenge #4: Low Motivation for Domestic Tourism – Many Tanzanians have not been encouraged to visit tourist attractions such as wildlife parks due to economic challenges or lack of a travel culture. This may be due to:
  • Economic hardships
  • A general lack of tradition or culture of traveling for leisure within the country.
  Note: There is relatively high interest in visiting beach destinations compared to other attractions. NB: Both the Union Government and the Zanzibar Government are making strong efforts to improve the tourism sector. For instance, in Zanzibar, tourism is the leading contributor to the regional GDP.

Conclusion

The hospitality property sector in Tanzania is growing rapidly, especially in cities and regions with rich tourist attractions. This growth is fueled by increasing tourism activity, government and private sector investment, and the rising demand for accommodation and entertainment facilities in popular destinations, i.e, Dar es Salaam, Zanzibar, and Arusha.