Hotel investors not too bothered by Africa slowdown as planned hotel rooms rise sharply

Most of the growth has been driven by a strong showing in investments in sub-Saharan Africa, where planned hotel rooms are up 42.1% on 2015

THE number of planned hotels in Africa this year has risen nearly 30% from the same time last year, new data shows, underscoring the continent’s continued attractiveness as a place of opportunity, even as lately the sheen of Africa’s growth story has been dimmed somewhat by a slowed global economy.

Most of the growth has been driven by strong growth in investments in sub-Saharan Africa, where planned hotel rooms are up 42.1% on 2015, significantly higher than in North Africa which only had a 7.5% increase in its hotel pipeline this year.

The new figures from the annual W Hospitality Group Hotel Chain Development Pipeline Survey paints a broad picture of hotel development across the continent. In 2016, there were 64,000 planned rooms in 365 hotels, representing 36 hotel chains and 86 brands on the continent.

In the inaugural survey in 2009 there were 19 international and regional hotel chains contributing, with a pipeline of 144 hotels and just under 30,000 rooms, demonstrating that for business, trade and capital investment, the continent remains an attractive proposition, leading to continuing demand for accommodation and other hospitality services.

“The evidence from our survey is clear - investors remain confident about the future of the hospitality industry on the continent. Even when pummelled daily by low commodity prices, exchange rate problems, political challenges and poor infrastructure, Africa remains resilient,” said Trevor Ward, W Hospitality Group managing director.

What is remarkable is the diversion between North Africa and the rest of the continent– five years ago, the number of planned rooms in the five countries of North Africa was about 25% higher than in sub-Saharan Africa. Today, it is less than half.

“There are two reasons why development activity in North Africa is now subdued. Firstly, the markets there are more mature and have already seen much development, so there are fewer opportunities for new hotels. Secondly, there is the political turmoil – in Libya, which has seen a 40% drop in the pipeline, and also Egypt, parts of which are experiencing drastic reductions in the number of tourists,” said Ward.

Nigeria tops the African rankings, with 10,222 rooms in the pipeline, in 61 hotels.

Angola’s growth has been particularly impressive – the country, never before listed in the top 10, pushed Egypt out of second place in the 2016 rankings, due to a major deal signed there by AccorHotels.

In July last year, AccorHotels signed with AAA Activos LDA for the management of 50 hotels with around 6,200 rooms.  All are under construction and several are ready to open, the survey indicates, even as Angola’s economy is struggles to cope with Brent crude prices below $50 per barrel.

Angola is Africa’s second-largest oil producer and third- biggest economy; the commodity accounts for the bulk of government revenue and almost all export earnings in a country that imports most of its goods and services.

Countercyclical

But hotel investors are unfazed.

“We plan to have 200 hotels in Africa by 2020; hotels are built to last, and we are not afraid to be countercyclical and invest in a down cycle. We are actually looking at the potential of cities, not just countries or regions,” Antoine Guego, COO of AccorHotels Africa and Indian Ocean told Mail & Guardian Africa, in an interview during the Africa CEO Forum in Abidjan last month.

Elewana, a hotel collective in Kenya and Tanzania. (Photo/ Flickr/ Roderick Eime)

AccorHotels is known for its business hotel brands, such as Sofitel, Pullman, Novotel and Ibis; Guego said that the main challenge is finding the right partner who that has the right long-term view.

“We really believe the 21st century is the time for Africa, that’s why we are putting our money down. What we need is macroeconomic stability, and an attractive tax and business climate.” 

The IMF forecast for economic growth in sub-Saharan Africa is an increase of 4% this year and 4.7% in 2017, up from 3.5% in 2015. Overall this is down on the 5-6% increase enjoyed over the past decade, but it’s still double or more the forecast for the world’s advanced economies, such as Europe, the USA and Japan.


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