I attended a hotel investment conference last week in Abu Dhabi. Focused primarily on the Gulf and Indian Ocean, I did manage to steer some of the conversations around to Africa, seeing as we have a very, very long coastline on the Indian Ocean!
The delegates were primarily investors from the Middle East, as well as from some of the island nations such as the Maldives, Mauritius and the Seychelles. There were also operators, again from the Middle East, as well as some of the global players such as Starwood, Wyndham and Trump. Rotana, based in Abu Dhabi, showed the most interest in Africa – data released by them recently shows that whilst they have only two hotels in operation in Africa currently (Sharm el Sheikh and Khartoum), they have a pipeline of deals signed for them to manage new hotels in no fewer than 10 locations with over 2,400 rooms between them. That’s a far bigger pipeline than many of the international chains.
Here in West Africa, they will be opening in Nouakchott and Lagos, with other cities such as Kinshasa and Luanda on the list. Interesting that they have succeeded to sign a deal in Luanda, where virtually every other chain has tried, and not succeeded, to get a foot on the ground.
Rotana are not investors, but they can mobilise funds for hotel construction from the Middle East, and it is noticeable that investors from there are showing more interest in Africa. East Africa has received most interest, due to proximity and historical ties – did you know that Zanzibar was once part of Oman?! The Saudi-owned Aujan Group, through Rani Resorts, has several investments in Mozambique, UAE-based Albwardy Investments is in Tanzania (3 hotels), Ethiopia, South Africa and the Indian Ocean, and Kingdom Hotels, Dubai-based and Saudi-owned, has invested throughout the continent, in Kenya, Tanzania, Zambia, Morocco and others.
In West Africa, they developed and own the Mövenpick Hotel in Accra, which they have recently put on the market, seeking to exit that investment. Why? According to David Harper of Hotel Partners Africa, an expert in hotel transactions in Africa, “Kingdom are a very experienced investor in hotels, and have identified that the time is right to realise their gains from this asset, a time when interest from buyers will be high. The agents (JLL) have indeed confirmed that they are receiving interest from around the world”.
Eagle Hills, a UAE-based private real estate investment and development company, with close links to Emaar, is investing in Centenary City in Abuja, the capital of Nigeria. Centenary City, which is located between the city centre and the airport, is described by Eagle Hills as a “premier lifestyle free zone development”, and is to include of a 200-room The Address Hotel Abuja, a luxury property. The brand is owned by Emaar, and this will be their first location in Africa.
Apart from Kingdom and Eagle Hills, however, Middle East interest in investing in hotels in West Africa has been muted, certainly compared to their interest in East Africa. I put that down to perceptions of risk, as well as, perhaps, language. East Africa has a much more mature tourism industry, with Kenya, Tanzania and Mozambique three of the leaders on the continent. West Africa is more “fragmented” with a large number of French-speaking countries, which perhaps can be a deterrent to investors from other parts of the world? Interesting that Kingdom’s one and only foray into the region was to Ghana, long seen as one of the “Africa-lite” countries, easier to do business in than Nigeria, and with impressive economic growth even before the discovery of oil. Many countries in West Africa, small and not-so-small, are just too – well, small(!) for major investments, particularly from another continent.
I believe that there can be more interest from Middle East investors in the future, most likely in mixed-use developments, and most likely in Lagos and Abuja. Eagle Hills are paving the way in that regard in Abuja, and there are several planned mega-projects, such as the Abuja City Centre, and the Heart of the City project, which can be planned to as to be attractive to foreign investors, with sufficient scale to enable mitigation of their risk.
At present, however, attracting foreign investment from anywhere is extremely difficult. There is risk and there is risk. With their experience of investing throughout their own region, as well as globally, Middle East investors are extremely savvy, and whilst the level of risk is most often dependent on which angle it is perceived from, the risks in (mainly) Nigeria are presently very high, particularly relating to the uncertainty regarding the exchange rate. Will they, won’t they devalue? Until that is known for certain, investors will not take the plunge.
But devaluation or not, the opportunities are ever-present, throughout West Africa, and I believe that we will definitely see more Eagle Hills-type projects, sooner or later.
Trevor Ward
W Hospitality Group, Lagos
As one of the smallest countries in Africa, both by size and population, it rarely features in any of those “African top 10” lists. And for some reason, the IMF classifies it as a Middle Eastern country in its World Economic Outlook. But the Republic of Djibouti is indeed in Africa, strategically located in the Horn of Africa, bordered by Eritrea, Ethiopia and Somalia. It sits there at the southern end of the Red Sea where it joins the Gulf Aden, and just 35 kilometres from the coastline of Yemen. That’s the busiest waterway in the region, and one of the trouble spots, less affected these days by piracy, but the threat is still there, with one of the main problems these days being the conflict in Yemen.
So what Djibouti has done is massively expand its seaports, catering to various navies’ vessels, and also the main entry point for goods heading to and from Ethiopia. With no coastline of its own, Ethiopia is dependent on neighbouring countries for its access to the sea, mostly Djibouti (some supplies come through Somalia), from where a rail line runs to Addis Ababa. As a result, the ports in Djibouti are busy, and massive investment means that they are highly efficient.
Other commercial activity in Djibouti includes the new free zone, new shopping malls, anew airport for the capitalas well as one at Ras Siyyan, a planned new resort in the north of the country, new seaports, all with the potential of improving the physical, economic and social landscape of the country. And a project of extremely high importance is the revival of Air Djibouti, in partnership with a UK company, which will improve access to the country. Destinations in the first phase of operation will include London and Dubai.
In the tourism sector, Djibouti is virtually unknown, with some adventurers attracted primarily by the country’s natural attractions, which include Lake Assal, the lowest point in Africa with the second saltiest lake in the world, and the Day Forest national park. Maritime pursuits include game fishing and scuba diving, with the Red Sea offering some of the best diving sites, including the opportunity to swim with (totally harmless!) whale sharks.
Currently, Djibouti – that’s the country, not just the eponymous capital city – has just 1,000 rooms in 23 hotels, with high occupancies (80 per cent in 2014, 83 per cent Jan-Oct 2015) generated by business visitors, the army bases, NGOs, air crew and others. There are only two branded hotels there, the Sheraton and the Kempinski, which together accommodate 75 per cent of international visitors (there is virtually no domestic demand); as yet there is nothing in the chains’ pipelines in the country. The Ayla Hotels Company from the UAE has a 100-room hotel under construction in the capital, and a Chinese company is planning a hotel there and a resort in Ras Siyyan. Completion dates for these hotels are unknown – if they happen at all.
There is a huge need for new hotel investment in Djibouti. The lack of quality accommodation is a constraint to the government, and to the international investors that they are working with, in the achievement of their objectives. And at the end of the day, it is all about making money for the shareholders, and (essentially the same thing, because a country’s people are shareholders in the country) it is about creating jobs. To date, much of the investment has been in high capital investment projects, with a low labour requirement. There is the so-called Djibouti Paradox, with high economic growth, and considerable development activity underway, but with unemployment estimated at over 50 per cent.
A recent study identified the need for several new hotels, located in different regions of the country, not only to cater to the existing demand, but also to create demand, from MICE activity (Meetings, Incentives, Conferences and Events), and from vacationers. Whilst Djibouti City is the main location proposed for new hotel development, as that is where much (but not all) of the existing and new commercial activity is taking place, places such as Ras Siyyan, Lake Abbe, Lake Assal and Moucha Island are also identified, creating a circuit for leisure travellers. In Ras Siyyan, the government is seeking to attract investors to create a new destination resort, with multiple lodging establishment, and improved facilities for the diving activity – the nearby Seven Brothers’ Islands are well-known in the diving community.
Improvements in infrastructure will be required, and the government is tackling this in various ways, such as the revival of Air Djibouti, construction of new airports, including the one which will serve the proposed Ras Siyyan resort, and upgrading roads. The investment regime in Djibouti is generally fairly liberal, the political and economic scenario is stable, and incentives to investors, especially those creating jobs, include tax holidays. Companies can be wholly foreign owned, with no obstacles to repatriation of profits.
Djibouti is not on many people’s radar right now, but watch this space – the government is undertaking a massive investment promotion campaign, which will include seeking investors for new hotels and resorts throughout the country. That in turn will further improve the profile of the Republic of Djibouti.
Trevor Ward
W Hospitality Group, Lagos
It’s no secret that hotels in West Africa are seen as being expensive, particularly if you are “travelling with Rand”. I have written before about why the prices are high – here in Nigeria we have to provide our own power plants, bore holes and treatment plants for water, sewage tanks, and even some times our own approach roads. Top that off with the fact that we import virtually everything required to construct a hotel, and our prices work out sometimes double or more what they are in South Africa.
Throughout West Africa, the “parallel” currency is either the dollar or the Euro, and that tends to be the benchmark against which room rates are measured. When African currencies like the Naira, the Kwacha and the Rand are falling off a cliff, hotel rooms seem to get more and more expensive.
You will no doubt have noticed that in most markets it is the top quality hotels that get built first, with developers and brand owners both wanting to make a statement, and to take advantage of the lack of any alternatives in a market with tired old, badly managed properties, in some cases rejects which were previously branded. Travellers on a budget were forced to stay in those hotels, many of which really should have been demolished by now!
Over the last few years, as the hospitality space in these cities gets more developed, I have seen a noticeable increase in development in the branded budget space, as developers accept the argument that not everything has to be 5 star, and that there is money to be made from the budget/economy chain scale.
Accor, who have been operating in West Africa for many years, have been one of the pioneers in this space, with their Ibis brand. Originally a single brand, with hotels in Dakar, Abidjan, Lomé and Douala, it is now a “super brand”, with different categories, from the economy level “blue”, through the original “red” to the upper budget level Ibis Styles (green). According to their website “Whether you’re here with loved ones or on business, your hotel should be a place where you feel good. In the Ibis family, it is this feeling of well-being that is felt in every detail, right as soon as you come through the door of one of our hotels.”
There are two Ibis red hotels in Ikeja, and a newly opened Ibis Styles hotel in Accra’s Airport City.Looking at the OTAs shows prices at least US$100 per night below the branded competition.
Of course, pay less, get less – the rooms in an Ibis (red) hotel are in the order of 17 square metres, including the ensuite bathroom, which is half or less what you will get in one of the major US-branded hotels. Small, but always clean, with TV, internet, hot water – the basics. Don’t pack your cat, you won’t be able to swing it! Forget multiple restaurants and bars, and be prepared for the barman to ask you to wait for your drink whilst he checks in another guest – multi-skilling of the staff is one of the secrets of success.
Of those big hotel chains, Accor is the only one majoring in the budget sector in Africa – Holiday inn Express are in South Africa, but have resisted spreading the brand elsewhere. Equally Hilton’s Hampton is not yet dipping its toe in the African waters. But there are two African chains, Mangalis and Onomo, making their presence felt. Mangalis, with its origins in Senegal, is developing its Yaas brand, with the first hotel due to open in Dakar this year. On their website Yaas claim to be “smart and economy hospitality……brilliantly designed to be inspiring, intuitive, playful, colourful, easy and democratic”. I look forward to finding out what a “democratic” hotel is! From what I read, the rooms are around 14 square metres, but the TVs are BIG!
Then there’s Onomo, founded by former Accor executives, with hotels in operation in Abidjan, Bamako, Dakar, Libreville and Lomé, and opening soon in Conakry. Onomo Hotels are “Fusing economicaland ecological hotels…..offering the best of modern technology….giving priority to locally-flavoured dishes…..a platform for African art and creativity”. They certainly get the award for funkiest website! And interesting that a budget hotel concept gives a headline for its food and beverage offer – certainly the meals I have had at the Onomo in Libreville were excellent (if more French than local!).As with Ibis, the rooms are small, the facilities limited but the prices are around US$100 or more below those of other branded hotels in the same locale. For a traveller on a budget, that’s a significant saving, whatever currency you are travelling with.
Trevor Ward
W Hospitality Group, Lagos
