The hotel industry in Africa is growing with opportunities and excitement, as investors make plans to enter the market while other more established players look to expand their footprint on the continent.
The likes of Carlson Rezidor and Marriott International have announced exciting expansion plans on the continent which include 37 new hotel properties in the pipeline.
Africa is experiencing a 30% increase in hotel development year on year during 2016, and this will be helped by Nigeria, Angola and Egypt adding many new hotel options, alongside many other African countries.
The stats and facts speak for themselves, and Africa is a positive prospect for growth as far as the hospitality industry is concerned, despite the difficult global economy at the moment.
Here are 12 things that perhaps you did not know about the hotel industry in Africa.
Africa is attracting an increasing number of hotel investments due to the fact that the continent remains under-supplied with growing tourism and a rising middle-class. Investor sentiment into Africa’s hotels remains positive despite the challenges that remain.
According to research done by STR, the average daily room rate (ADR) and revenue per available room (RevPAR) in Africa grew by 8.6% to $103 and 4% to $56 in the year to August respectively. These are two key metrics trusted by investors and used by the hotel industry to measure hotel profitability.
The number of planned hotel rooms in Africa increased to 64,000 in 365 hotels during 2016, up almost 30% on the previous year, according to new figures from the annual W Hospitality Group Hotel Chain Development Pipeline Survey.
The latest information on hotel development pipelines in Africa for 2016 show that Nigeria will add more than 10,000 rooms this year, while Angola will build over 7,500 and Egypt over 6,600. Morocco, Algeria and Tunisia follow behind the top three, followed by Kenya, Ethiopia, South Africa and Senegal.
The hotel industry in Africa is under-supplied, and therein lies the opportunity. Analysis from research firm STR reveals that countries such as Libya, Somalia, Congo and Central African Republic remain under-supplied, with less than 500 branded rooms available in those nations.
Some of the more established countries on the African continent as far as the hospitality industry is concerned are South Africa and Egypt. The two countries are among those that boast over 50,000 branded hotel rooms.
With deep pockets and global experience, international hotel groups are the main players owning branded hotel rooms in Africa. These include the likes of Hilton Hotels and Resorts, Marriott International, Rezidor Hotel Group, AccorHotels and others.
One of the big players in the African market is US-head quartered Marriott International. They recently announced plans to spend $209.4 million on five new hotels in South Africa, with the properties to be spread between Johannesburg and Cape Town.
A combination of the 2008 global financial crisis and the hangover following the 2010 soccer World Cup in South Africa left the industry in that country with a tough and saturated market, but it continues to grow along with expansion in tourism numbers.
Hotel group Carlson Rezidor, the operator of the Radisson Blu and Park Inn brands, is expanding into Africa with 32 hotels in the pipeline in sub-Saharan Africa. A total of 17 hotels will open in the next two years, with the main focus in South Africa, Nigeria, Kenya and Ghana.
While Africa presents a unique opportunity for investors, it also presents a unique set of challenges, with issues such as poor land ownership rights frameworks, political instability in certain regions, bureaucracy in the approval processes for real estate projects and customs regulations among the most frequently sited.
According to a World Bank report from 2011, Africa’s competitiveness is affected by the high cost of developing hotels and debt financing. The average cost of developing a full-service hotel was around $200,000 at the time, while in Nigeria and Ghana the costs would be above $400,000 and around $250,000 respectively for a mid-market hotel.