Hotel Operators Head to Africa, Up Investment & Development

Hotel Operators Head to Africa, Up Investment & Development

Bloomberg Business Week recently reported that Hilton, Marriott International Inc. and Starwood Hotels & Resorts Worldwide have set greater sights on Africa, a continent whose tourism industries show great promise — and whose middle class has seen impressive growth.

In Kenya, tourism revenue is expected to rise to $1.15 billion, roughly $46 million more than last year, according to Bloomberg. The Rwanda Development board sees the country earning $440 million from leisure travelers in 2014. In addition, South Africa’s tourism arrivals experienced a 10 percent increase in 2012.

Aside from Africa’s increased trade with countries around the world creating a necessity for lodging, slow business in the U.S. and European markets has encouraged hotel operators and investors’ eyes to shift, according to Bloomberg.

“Africa’s middle class is almost as large as the entire populations of Russia and Brazil combined,” Hassan Ahdab, Starwood’s regional vice president for the African and Indian Ocean region, told Bloomberg via e-mail. “The boom in sub-Saharan Africa is attracting business talent from the rich world.”

According to Bloomberg, some of the highest management fees are paid to operators at Nigeria’s Transcorp Hilton Abuja.

The report noted that revenue from the Middle East and African markets is Starwood’s highest. This may be the reason why Marriott will be investing in 55 percent more hotel rooms than last year.

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More so than population booms across the continent, Urbanization, Bloomberg reports, is contributing to international and domestic lodging demand. Compared to 30 percent in India, 40 percent of Africa’s population lives in urban centers. A younger population — the media age in Nigeria and Ethiopia is 18 — is driving and broadening African business industries.

“Business schools, including the London Business School, are now getting in on the game and offering Africa-specific seminars, training and clubs. For many of these business students, Africa is like India and China 10 years ago,” Ahdab continued.

Kempinski, a luxury hotel operator is planning to increase development in Kenya by 23 percent. Through 2016, the report states that more than half of Africa’s countries are expected to see an annual 5 percent GDP increase.

“When it comes to Africa, many people have tended to focus on the negative — the wars, the corruption,” Trevor Ward of W Hospitality told Bloomberg. “But there is not that much opportunity left in the more-developed markets like Europe and in the U.S. for new hotel developments. Today, Africa is seen as a big blank block on the map where hotel companies need a presence in.”