Announcing a new hotel opening in Chad recently, Hilton stated that their ambition is to have a hotel in “every major city in Africa”.  This is an advance on a previous announcement that they wanted to be in every capital city (54, at the latest count!), and is a recognition that there are many opportunities “off the beaten track”.

Take Nigeria, for example.  The country is a federation of 36 States plus the Federal Capital Territory (FCT), so really 37 in all.  Each State has a capital city, plus Abuja in the FCT.  The Big Three are Lagos, the commercial capital of the country and the official capital of Lagos State, Abuja the business capital, and Port Harcourt (Rivers State) the main centre of the oil and gas industry.  All three now have internationally-branded hotels, including a massive Hilton in Abuja (670 rooms and suites), and Starwood and Protea have a presence in all three.

As well as these capital cities, there are some important urban centres such as Warri and Eket, both oil towns, which warrant attention.

So far, only Protea and African Sun have ventured outside of the Big Three, the former with a recently-opened hotel in Warri, and African Sun operating hotels in Enugu and Benin City.  More are coming, there’s a Park Inn under construction in Abeokuta, a Protea opening shortly in Benin City, and I am working with several State governments to get professional management and brands into hotels which they own.

But, as usual, Nigeria is different from other countries!  Outside of South Africa, it is the only country in sub-Saharan Africa to have so many major cities (something in the order of 45 to 50, by my reckoning), and therefore so many opportunities for development.  And South Africa is already pretty well developed, and therefore with fewer opportunities currently, especially given the building boom that was triggered by the FIFA World Cup.  Angola is, probably, the next most attractive country, with 18 Provinces, each with a capital city, and a few other cities such as Soyo in the north, where massive investment is taking place in the LNG sector.  MITC, a Luanda-based developer. is working on a roll-out programme of mid-market, branded hotels in many of the Provinces, with international management engaged to operate and brand them.

At the other end of the scale, there are several small countries which have few (if any) major cities outside of the capital – Benin, Togo, Guinea Bissau, for example.  No wonder the major chains are focusing much of their efforts on Nigeria and Angola.

Not all “secondary” cities are suitable for hotel development, though.  Prerequisites are a growing economy (or a significant tourism potential), good air and road access, and an environment conducive to private sector investment and operations.  The trouble is, information about many of these locations is sparse, to say the least.  Whilst that may be an indicator in itself that there is little opportunity, I don’t believe that is necessarily a forgone conclusion every time.  I am a firm believer that a modern, well-managed, well-presented and well-located hotel product can create demand – if you build it they will come.  Obviously, the risk is higher, relying more on gut instinct than empirical evidence, but there are several examples of where this works – take Starwood’s Le Meridien Hotel in Uyo, Akwa Ibom State in eastern Nigeria, for example, where virtually all the demand is created, attracted by the beautiful setting, the top-class golf course and the conferencing facilities there.  But there is a fine line between successes like that, and white elephants driven by ego – the huge hotels built by government because the neighbouring state built one, and they think they must have one too.

My studies in secondary cities, especially in Nigeria and Angola, using adapted Lodging Market Penetration tools, reveal that the main opportunities are for mid-market hotels, typically with a maximum of 100 to 120 rooms, which can cater to three main markets, i.e. business visitors during the week, residential conferences, and weekend leisure traffic – there are several cities in Nigeria which have “reverse seasonality”, enjoying their highest occupancies and average daily rates at weekends when indigenes return home to party.  But however high the demand, I have found that there is always a cap on what people are prepared to pay for hotel accommodation – you just cannot charge as much in Soyo or Sokoto as you can in Luanda or Lagos.  The costing of the hotel therefore needs to be very carefully controlled, to ensure that returns are acceptable.

I think it will be some time before we see Hiltons at every turn – but then Africa never ceases to surprise us!

Trevor Ward

W Hospitality Group, Lagos

trevor.ward@w-hospitalitygroup.com