> Prospects

Prospects

It’s an exciting time to be in Africa, and 2008 is going to be even more fun!

Never before has there been so much interest in the development of new, internationally branded hotels in sub-Saharan Africa, fuelled most recently by an inflow of finance from the Middle East, as investors there seek new destinations to place their petrodollars.

Where are they heading for in 2008? The biggest opportunities in Africa are still for business hotels.  Tourism, particularly on the east coast, is booming, but bigger booms are in the oil and mineral capitals in west and central Africa.  Granted, there are some high priced safari lodges out there, but the highest rates, and the highest returns to shareholders, are to be found in Lagos, Luanda and other oil and mineral cities.

It is normal in developing countries for the initial focus to be on developing five star hotels, and there are some outstanding properties bearing the Sheraton, Kempinski and other luxury brands to be found, one of the newest being the Kempinski in Djibouti.  These brands, and others such as Taj, Hilton, InterContinental, Marriott and Hyatt are all pushing for increased system coverage in Africa.

But I believe that in 2008 we will see increased expansion of midscale hotels, taking advantage of high demand levels whilst at the same time mitigating the effects of rapidly rising construction costs.  Like everywhere else, African countries are feeling the effects of rising commodity prices – steel and cement particularly.

Expect more Four Points, Courtyards, Holiday Inns and Novotels to enter, or announce new developments, in the key business markets in 2008.  As economies grow, we are seeing increased numbers of regional and domestic travellers, who aspire to the internationally-branded product, but do not have the budget for a five star product.  These midscale properties fit the bill perfectly.  Four Points are building in Lagos, and Ibis have projects in Addis Ababa and Nouakchott.

Where else are there opportunities for midscale hotels?  Business destinations predominate – Luanda, the oil capital of Angola is one, where rooms have to be booked (and paid for) months in advance.  Look also at secondary cities such as Soyo, in the north of the country, where a US$5 billion LNG plant is about to “hit town”, creating up to 8,000 construction jobs.  A Sofitel has recently opened in Malabo, Equatorial Guinea’s

first branded hotel, and expect to see African Sun following closely behind, in the capital and also in Bata.

Accra is experiencing high occupancies, with increasing room rates.  The discovery of oil in Ghana’s Western Region will contribute to further growth in Accra, as well as in Takoradi, the closest city to the oilfields.  Golden Tulip are opening in the early part of 2008 in Kumasi, which will put that ancient city firmly on the map, already a major trading and mining centre.

Addis is seeing a building boom, with a joint Novotel/Ibis under construction, and there are plans there for a Marriott, Hilton, InterContinental and, in the midscale, a Holiday Inn.  Expect to see new Holiday Inns opening in Arusha, Kano, Accra, Port Harcourt and Dar in 2008, and the reintroduction of the Holiday Inn Express to South Africa, in Cape Town, the first of 25 planned for the country.

Of course there are leisure opportunities in Africa as well, with Zanzibar high on many chains’ lists for development.  A new daily flight direct from Addis Ababa further opens up the destination to the main European markets, and Fairmont are at the forefront of brands entering the market.  Conferencing is, I believe, an essential element if a leisure destinations is to bring enhanced returns to shareholders, and to mitigate the seasonality and other risks.  Destinations such as Ghana’s Cape Coast, Arusha in Tanzania, and southern Mozambique, with good road and air access from major population centres, are therefore prime locations for combined leisure and business resorts.

The UNWTO is forecasting an increase in international arrivals in sub-Saharan African countries of 8 per cent in 2007, way above the world average of 5 per cent, and second only to the Asia Pacific region.  Forecasts for 2008 are likely to above this figure, as more hotels open, and more international and regional carriers develop their routes – Delta are making major inroads into the West African transatlantic market, and Kenyan Airways are covering the continent more and more.  Domestic airlines are thriving, with new entrants typically creating more demand, which means more opportunities, particularly in the mid market, for the branded operators.

Trevor Ward

W Hospitality Group, Lagos

trevor.ward@w-hospitalitygroup.com

 

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Impact of COVID-19 on Hotel Performance in Abuja and Lagos

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