> Hotel Chain Pipelines

Hotel Chain Pipelines

Each year the West Africa-based W Hospitality Group carries out a survey of the main hotel brands’ development activities in Africa.  Based on information supplied by the chains themselves, this research tracks signed and confirmed deals for management contracts and other deals (management contracts are by far the majority of agreements signed) in the 53 countries of Africa.  We are aware that many other deals are being discussed (and are privileged to be working on many of them!), and we will include them in future surveys just as soon as the ink is dry.

We estimate that the hotel chains in the survey currently have over 92,000 rooms operating with their brands in Africa, with around 40,000 in North Africa and 52,000 in sub-Saharan Africa.  But when one considers that there are only five countries in North Africa (Morocco, Algeria, Libya, Tunisia and Egypt), the opportunity in the other 48 countries on the continent is obvious.

At the beginning of 2011, the hotel chains reported a total of 156 hotels, with just over 31,000 rooms, in their development pipelines.  This means signed deals, but as we comment later, not necessarily cement being poured!

2011 Hotel Development in Africa

Regional Summary

  2011 2010 2009
  Hotels Rooms Hotels Rooms Hotels Rooms
North Africa 75 17,038 72 16,909 61 15,611
Sub-Saharan Africa 81 14,101 80 15,223 90 15,753
TOTAL 156 31,139 152 32,132 151 31,364

Compared to the contractions in pipelines in other parts of the world, particularly Europe and the USA, the pipeline has been quite stable for the past three years.  And note, of course, that a reduction in the numbers is not wholly a bad thing – the objective is to get new hotels open and making money, and that has been happening, with several new openings in North Africa, South Africa and Nigeria.

North Africa still dominates the development effort, especially in the hotspots of Morocco and Egypt.  This research data was, however, collected before the turmoil hit the region, particularly in Libya, and we know that there will be delays and cancelled projects.  Two hotels in last year’s pipeline, the JW Marriott and the Four Points by Sheraton, had opened in Tripoli, Libya – and promptly closed again when the conflict erupted there.  And work has

been suspended on many projects in Egypt, pending the elections to be held there later this year

The top brands by number of hotels and rooms in their pipelines are as follows:

Hotel Development in Africa 2011

Top 10 Brands by Number of Planned Hotels and Rooms

Rank by Hotels Rank by Rooms
1 Radisson Blu 16 1 Radisson Blu 3,327
2 Ibis 14 2 Hilton 2,807
3 Novotel 11 3 Ibis 2,150
4 Hilton 10 4 Mövenpick 2,053
5 Etap 9 5 Novotel 1,955
6 Park Inn 7 6 Holiday Inn 1,900
7= Holiday Inn 6 7 InterContinental 1,532
7= Lonrho 6 8 Etap 1,294
7= Mövenpick 6 9 Kempinski 1,000
10 Sofitel 5 10 Le Meridien 965

This analysis tracks only branded hotels, and therefore does not capture all hotel projects in Africa.  But it probably captures the majority – in Lagos, two thirds of the new supply under construction is branded, so one can surmise that at least that proportion of the new hotel pipeline is included.  And in many smaller cities around the continent, the branded hotel under construction is the only serious game in town.

Some companies, like African Sun and Southern Sun, operate with multiple brands, some owned by them (Southern Sun have Stay Easy and Garden Court for example) and others as franchisees (both companies operate hotels under franchise from IHG), as well as managing unbranded hotels, but only those new deals that are confirmed by the brand owner are included.

There are some interesting movements in the rankings when one moves from a consideration of hotels to one of rooms.  Whilst the more hotels the merrier, the economic unit on which profits are made is the letting unit.  Hilton have fewer hotels in the pipeline than Novotel, but they are, on average, larger properties.  And whilst Rezidor have been steaming ahead with their Radisson and Park Inn brands, vying with Accor for first place in the development stakes, the average size of a new Park Inn in Africa, at 137 rooms and suites, is way below Le Meridien’s average size of 320 (in three hotels), and who just pip Park Inn by 6 rooms to take the Number 10 slot.

One thing to be wary about, however, when looking at signed deals, is that not all those rooms are under construction, and therefore their realization, especially in many of the very difficult business environments that typify Africa, cannot be certain.  We have analysed the deals reported by the chains as to whether they are on site or not, and the ranking looks different.

2011 Hotel Development in Africa

Top 10 Brands by Pipeline Status

Rank Brands Hotels Rooms Rank – All Deals
Total Onsite Construction
1 Hilton 10 2,807 2,269 80.8% 2↑
2 Radisson Blu 16 3,327 1,737 52.2% 1↓
3 Ibis 14 2,150 1,310 60.9% 3 ↔
4 InterContinental 5 1,532 1,276 83.3% 7↑
5 Holiday Inn 6 1,900 1,168 61.5% 6↑
6 Novotel 11 1,955 1,005 51.4% 5↓
7 Le Meridien 3 965 965 100.0% 10↑
8 Marriott 4 851 851 100.0% - ↑
9 Sofitel 5 803 708 88.2% - ↑
10 Crowne Plaza 2 693 693 100.0% - ↑

Hilton and Radisson Blu change places, and InterContinental moves up the ranks, closely followed by its stable mate Holiday Inn.  Etap, Kempinski and Mövenpick are replaced by Marriott, Sofitel and Crowne Plaza, with more rooms actually under construction.  Le Meridien and Marriott have 100 per cent of their signed rooms on site – but a relatively small pipeline compared to the other global giants.

The above analysis is of brands – many of the hotel companies are multi-brand players, so it is relevant to look at it per group as well:

Hotel Development in Africa 2011

Top 10 Companies by Number of Planned Hotels and Rooms

Rank by Hotels Rank by Rooms
1 Accor 41 1 Accor 6,371
2 Rezidor 23 2 Rezidor 4,286
3 Marriott 12 3 IHG 4,125
4 IHG 13 4 Hilton 2,967
5= Hilton 11 5 Starwood 2,784
5= Starwood 11 6 Marriott 2,503
7= Lonrho 6 7 Mövenpick 2,053
7= Mövenpick 6 8 Kempinski 1,000
9 Kempinski 5 9 Lonrho 913
10 Rotana 3 10 Rotana 700

2011 Hotel Development in Africa

Top 10 Companies by Pipeline Status

Rank Company Hotels Rooms Rank – All Deals
  Total Onsite Construction
1 Accor 41 6,371 3,728 59% 1↔
2 IHG 13 4,125 3,137 76% 3 ↑
3 Marriott 12 2,503 2,503 100% 6↑
4 Hilton 11 2,967 2,429 82% 4↓
5 Rezidor 23 4,286 2,271 53% 2↓
6 Starwood 11 2,784 1,727 62% 5↓
7 Wyndham 3 676 676 100% - ↑
8 Mövenpick 6 2,053 661 32% 7↓
9 Lonrho 6 913 608 67% 9↔
10 African Sun 2 396 396 100% - ↑

All the majors are there, dominated by Accor, which has such a large pipeline that, although only 59 per cent is on-site, the number of rooms under construction still exceeds IHG’s by around 20 per cent.

Where is all this activity taking place?

2011 Hotel Development in Africa

Top 10 Countries by Number of Rooms

Hotels Rooms
1 Egypt 19 5,967
2 Morocco 30 5,297
3 Nigeria 23 4,811
4 Algeria 14 2,575
5 Libya 6 1,937
6 Ghana 7 1,346
7 South Africa 8 1,009
8 Tunisia 4 762
9 Equatorial Guinea 4 661
10 Ethiopia 3 482

All of the five North African countries feature in the top ten destinations for branded hotel developments – driven either by the booming tourism industries in the likes of Morocco, Tunisia and Egypt, or by the opening up of the oil-based economies in Algeria and Libya.  Over half of Accor’s pipeline is in Morocco and Algeria, underlining their commitment to North Africa.

The availability of finance in North Africa has historically been greater, sourced domestically, from Europe or from the Middle East, with foreign investors perceiving less risk there than in the more volatile sub-Saharan Africa.  How times change!

Nigeria, Africa’s largest country by population and the power house of West Africa, has almost 5,000 rooms under contract, with thousands more in the “almost” category – it seems that every hotel operator is seeking a presence there.  New openings recently have included Radisson Blu and Four Points by Sheraton in Lagos, and many groups have hotels under construction there, including Accor, Legacy, IHG, Protea and Hilton.

As before, signed deals is one thing, actual activity is another:

2011 Hotel Development in Africa

Top 10 Countries by Pipeline Status

Rank Company Hotels Rooms Rank – All Deals
Total Onsite Construction
1 Egypt 19 5,967 4,579 77% 1↔
2 Nigeria 23 4,811 3,086 64% 3 ↑
3 Morocco 30 5,297 2,658 50% 2↓
4 Algeria 14 2,575 2,135 83% 4↔
5 Ghana 7 1,346 1,028 76% 6↑
6 Tunisia 4 762 762 100% 8↑
7 South Africa 8 1,009 754 75% 7↔
8 Equatorial Guinea 4 661 661 100% 9↑
9 Kenya 3 540 540 100% - ↑
10 Rwanda 2 529 529 100% - ↑

Nigeria and Morocco change places, and one of Africa’s brightest stars, Rwanda, joins the list, with a Radisson Blu and a Marriott under construction in Kigali.

Equatorial Guinea, one of Africa’s smallest countries, has 4 hotels under construction, 3 by Accor - a Sofitel (their second) and an Ibis in Malabo, and another Ibis in mainland Bata – and a Hilton close to Malabo airport.  South Africa remains at a surprisingly low 7th position, but with several companies now locating developers there (Hilton, IHG, Accor, Rezidor and more to follow) we can expect more activity there, as well as elsewhere on the continent, in coming years (as this was being written, Hilton announced the opening of their first hotel in Cape Town, included above in their pipeline).

On average, the global hotel brands have less than 2 per cent of their total rooms in sub-Saharan Africa, and with rapid expansion of their existing and upcoming hotels in China, India and other developing and developed countries, this percentage is likely to drop further.  But the rewards in Africa are high, and with growth rates of 6 per cent and above, it is regarded by many as the most profitable place to do business – just oftentimes slower than “normal”.

For those in the know, the opportunities in Africa are as vast as the continent itself.

Trevor Ward

W Hospitality Group, Lagos



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