There were several openings of branded hotels in sub-Saharan Africa in 2013, as the previous years’ efforts by the developers, investors and operators to “cover the map” started to come to fruition. Remember that the opening of a hotel is a joint effort – the international and regional chains very rarely put any money on the table, relying on developers and investors to build hotels for them. They, the operators, then provide their management and marketing services to generate profits for the owners of the hotel, in return for a fee.
Openings last year included Best Western in Benin, Kenya and Nigeria, Radisson Blu in Mozambique and South Africa, Kempinski in Kenya, City Lodge in Gaborone, easyHotel in South Africa and, the largest of them all, the Lagos InterContinental in Nigeria. Several others, including the Hilton in Uganda and the Kempinski in Ghana, did not open, delayed again, as are so many hotels in Africa.
At the end of 2013, two of the industry’s global giants announced new deals. Starwood, the owner of the Sheraton, Westin, Four Points and other brands, revealed that they will be managing hotels in Conakry, Nouakchott and Juba, the last-named the first branded hotel in Africa’s newest country, South Sudan. And Hilton announced that they will be managing a 350-room Hilton in Lagos, to be built by Transcorp, the owners of their Abuja hotel.
In the middle of 2013, we saw one of those rare events, a management company investing in a hotel property – Tsogo Sun, owner of the Southern Sun brand, purchased 75% of the shares in the owning company of their Lagos hotel, thus gaining both management and ownership control. The price, US$70 million, appeared “full” at the time, but it included the head lease of a large parcel of land, and the ability to exploit the potential for expansion of the hotel. Not to mention the benefit of gaining control of their own destiny, which itself has a value for a company which desires such control.
Looking forward, whilst I believe that we will still see the single-city deal such as Conakry and Juba appearing on the pipeline analysis, the majority of development is likely to be in 7 or 8 of the 49 countries in sub-Saharan Africa. North Africa is something of an unknown right now, as the region works through the impact of the Arab Spring. But in sub-Saharan Africa, the opportunities are huge, specifically, in my opinion, in Angola, Nigeria, Ghana, Ethiopia, Kenya, Tanzania and Mozambique. That’s seven countries, with some potential also in South Africa, but to a lesser extent due to an already well-developed industry there, and sluggish economic growth.
Of these 7 or 8 countries, Nigeria has the greatest potential of them all.
Why? Because of scale. Take Juba, for example. Quite apart from the tragic civil conflict that erupted in December 2013, the size of the city, and the country, the low economic growth, the mono-sectoral economy and the lack of airlift all point to a hotel market that is likely to be completely satisfied by the planned Sheraton hotel. Of course, there will always be niches to fill, such as the boutique hotel and the economy spaces, but it is difficult to see the city sprouting Hiltons, Holiday Inns, Radisson Blus and the like to compete – it is just not big enough. And once Juba is “full”, where else in the country can developers, investors and operators go?
The same applies to so many other African countries, which have a single city, the capital, and in a few cases another commercial city, where hotels could be developed. But even the capital of several countries has very little airlift to bring in guests for the hotels.
My 7 “picks” are those countries which have the elements necessary for multi-site hotel development – multiple cities with hotel demand, a large(ish) population, a diversified or diversifying economy, higher-than-average economic growth, sufficient and growing airlift into and within the country, and increasing urbanisation.
Nigeria has 36 States, each with a State capital, plus the Federal Capital Territory (FCT) where the country’s capital Abuja is located. In addition, there are some other large urban centres, such as Warri and Eket, that are not State capitals. Many of the State capitals have an airport, with international flights operating to 5 of them. Potentially, therefore, there are 40 or more locations for hotel development, ideal for mid-market brands such as Park Inn, Hilton Garden Inn, Best Western etc. – all three of which already have hotels operating or under development in these secondary cities, with more in planning.
Angola has 18 provinces, also with capital cities, but doesn’t have the scale of Nigeria – around one tenth of the population, for example. The regional and international hotel chains have had very little success with their development ambitions in the country – certainly not for want of trying – and there is still not a single internationally-branded hotel in the country (Sana, a Portugal-based chain, have a hotel there, and also operate in Berlin). Angola is not the easiest place to do business, and developers have preferred to go it alone, with several mid-market hotels locally owned and managed throughout the country. But the potential is there.
Ghana has four or five cities outside Accra, such as Takoradi, Kumasi and Tamale, with Best Western and Protea making inroads into those locations. Ethiopia, Kenya, Tanzania and Mozambique complete the list, with such developments outside the capitals as Four Seasons in the Serengeti, Serena in Arusha and Zanzibar, Doubletree by Hilton in Zanzibar, and Park Inn by Radisson in Tete.
I remain totally confident about the prospects for the growth of the hotel industry in sub-Saharan Africa. As consultants to the various players in the hotel development process (developers, investors and operators), we are experiencing new highs in the number of enquiries we receive for our services. And these are not all in the “Top 7” – Burkina Faso, Cape Verde, The Gambia, Botswana and others are all on the list, and our studies typically identify profitable opportunities to develop new hotels and resorts there.
As markets grow, so do investment opportunities, and whilst the tragic stories from the Central African Republic and South Sudan at the turn of the year suggest that little will happen in our industry there for some time, never say never. Sierra Leone was a failed state not that long ago, whilst currently both Hilton and Radisson Blu have hotels under construction in Freetown.
W Hospitality Group, Lagos