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.
W Hospitality Group, Lagos