The world’s top hotel brands jostle for position on the African continent
Africa is the next big thing.”
That was the bullish sentiment from Michael Wale, president for Europe, Africa and Middle East for Starwood Hotels & Resorts Worldwide, when speaking to the Financial Times in 2014. And while he was quick to temper the optimism with a caution that the hotel revolution coming to Africa won’t happen overnight, it’s clear that the hospitality industry across the continent is gearing up for a bright and busy future.
Perhaps the best overview of the sustained growth in the hotel industry on the continent comes in the annual Pipeline Report from the Lagos-based hotel consultancy W Hospitality Group, which in 2014 recorded 215 hotels in development across 54 African countries. While some developments are yet to break ground, or building may have stalled, the message is nonetheless the same: African hotel development is booming.
Sub-Saharan Africa is certainly the flavor of the month for most hotel companies, with investment from international companies in oil and gas industries spurring economic development, which in turn impacts the larger economy further downstream.
“Sub-Saharan Africa is really proving to be the hotel growth story of the 21st century,”notes the report, adding that hotel growth“is shaping up to be less about the major markets – with the notable exception of Nigeria – and more about the smaller, less developed economies.”
For instance, South Sudan has two hotels in the pipeline – including a Sheraton slated for 2017 opening – while Liberia will see a Mangalis hotel open in Monrovia. Radisson Blu leads the pack in the number of hotels under development with 17, but is edged out by Hilton when it comes to the number of rooms in the pipeline at 4,723.
“Equatorial Guinea and the DRC have also not seen any pipeline action in the past three years, but this has changed with a planned Noom hotel in Kinshasa (DRC), and two Kempinski hotels, in Oyala (Equatorial Guinea) and Kinshasa,”notes the Pipeline Report.
With only eight Kempinski properties on the continent,“Africa is now our priority for growth,”notes Ulrich T Eckhardt, the group’s president, India, Middle East, and Africa.“Economic growth across a variety of sectors continues to attract more and more investment in Africa, which will naturally increase the number of business travelers to the continent.”Kempinski’s new focus on Africa includes four hotels due to open in the next 12 months, with a new offering in Ghana, and the brand’s third property in Egypt.
“There are many countries across Africa that are showing encouraging economic growth, which in turn spurs the need for hotels of international quality,”says Alex Kyriakidis, president and managing director, Middle East and Africa for Marriott International.
And it’s precisely those two words – ‘economic growth’– that are driving the continent’s influx of new hotel developments.“Africa’s average GDP growth is somewhere in the region of
five percent, and many countries are substantially exceeding that,”according to Kyriakidis.
With its recent acquisition of the Protea Hospitality Group, Marriott currently operates 125 hotels in 10 African countries. However, the group has plans for further expansion, with over 30 hotels in its development pipeline, stretching from Algeria to Uganda. The energy boom in Nigeria and Ghana make them key destinations for Marriott’s expansion, with agriculture and copper mining driving further growth in Ethiopia and Zambia respectively.
European hotel group Accor, with 91 hotels across Africa, is also expanding, says Manoël Parrent, operational marketing director for Accor in Africa and Indian Ocean.“Our priorities are in Morocco, Algeria, Angola, Nigeria, Ghana, Ethiopia, Kenya and South Africa,”he says.
Sub-Saharan Africa has moved to the top of the to-do list for Mövenpick Hotels & Resorts as well, and that is“where we are concentrating our development plans in the next five years,”says Stephen Banks, director of sales and marketing – Africa for Mövenpick.“Africa represents the final frontier in hotel development.”
Though the hotel company is firmly entrenched in North Africa, there are still opportunities in Libya and Algeria, Banks adds.“In the East, there’s Kenya, Tanzania and Zambia, and in the West there are more opportunities with lack of inventory in Cote D’Ivoire, Congo and of course Nigeria. In South Africa where the market is more mature, opportunities still exist, however with relatively low average rates and many hotel companies being present for a number of years, the potential for development is less.”
In the influx of new international competition, those well-established hotel brands in Africa’s most developed economy see both a hopeful message and a note of caution.“Well, they’re all making their presence felt,”says Rob Collins, chief marketing and strategy officer for South African hotel group Sun International.“I think it’s wonderful and I think it’s a vote of confidence.”
However, Collins goes on to warn newcomers:“It’s not this utopia where everyone can come in. There are obstacles, and I sometimes wonder whether or not it’s the romance of developing an African strategy, because‘everyone else is getting into Africa.’Africa is the flavor of the month, probably because it had been left alone for so many years, and it’s now suddenly seen as the continent of opportunity.”
Name Your Price?
But despite the boom, supply has yet to keep up with demand – the Angolan
capital Luanda, and N’Djamena, the capital of Chad, remain among the most expensive cities on the planet for business travelers. In either capital, a decent business-standard hotel room won’t leave you with much change from $500.
With 18 hotels across the continent, Best Western is another brand seeking new opportunities in Africa. After opening new properties in Ghana, Benin, Nigeria, Tanzania and Kenya over the past two years, the chain also has agreements in place in Zanzibar, Addis Ababa and Kampala, says Karl de Lacy, international development manager for Best Western International.
Accra is another city ripe for development, with the top 12 hotels averaging 75 percent room occupancy in Accra, according to Bruce Potter, general manager of the Holiday Inn Accra Airport. With supply limited to around 1,600 rooms per night – of which one-fifth are immediately taken by the international air crews flying into the city each day –“room rates are still high,”says Potter.“We average $210 as a Holiday Inn.”
Mövenpick operates one of Accra’s two 5-star hotels – the other is Legacy Hotels & Resorts’Labadi Beach Hotel – and it currently has a stronghold on the downtown area, and will at least until Kempinski debuts its 5-star property in the same area this year.
“We have seen our hotel in Accra achieve very high occupancy numbers over the last year which is driven largely from corporate business in the banking, construction, FMCG and pharmaceutical industries,”says Banks.“Nigeria, perhaps, is an example of consistent demand due to the oil industry; however with further oil discoveries and the huge mineral deposits in West Africa particularly, demand will be driven further by the corporate market.”
While the likes of Lagos and Luanda have long been key business travel destinations, Preferred Hotel Group is focusing on new and emerging destinations such as Abuja, Kigali and Maputo, comments Caroline Daniel, account director for Africa. Preferred also plans to bolster their footprint“across Ghana and Tanzania, where we see great potential for growth. Over the next nine to 12 months, we expect to welcome up to eight new member properties from these areas,”she adds.
With eight hotels focused in subSaharan Africa, independent operator Extrabold Hotel Management is also looking to expand, with developments in Kenya, Mozambique and South Africa in the cards. And after a few years of depressed inbound figures, it’s the numbers of international visitors that are buoying the growth.
“Our hotels with exposure to international inbound travel have shown good growth in the past year, whilst the corporate and government segments in many regions have continued to be under pressure,”explains Xander Nijnens, managing director of South Africa-based Extrabold Hotel Management.
Across the border in Mozambique, Lonrho’s Hotel Cardoso has also taken advantage of the spike in business bookings in Maputo.“The number of flights coming into Maputo has increased, so there’s been much demand for doing business in the capital,”says Lonrho Hotels chief executive Brendan Gillespie.
Lonrho also operates a property in Gaborone – the Lansmore Masa Square - which has seen a surge in demand since De Beers moved their global headquarters to the Botswana capital. As a result, “there’s a lot of banking activity coming into Gaborone,”says Gillespie, adding“the Botswana government has a light touch, and is very supportive. It makes it very easy to do business there.”
Risk vs Reward
It’s a crucial observation – for while the hotel business is clearly booming, it’s not all plain sailing. A new hotel development in the Middle East will take three to four years from planning to welcoming the first guests, yet in Africa that figure is closer to seven. And amid the logistical and personnel challenges of running hotels – particularly in the luxury space – there’s no shortage of other hurdles; supply chain issues, onerous restrictions on importation of goods, corruption and bureaucratic inefficiencies.
Having the right people on the ground is key to smoothing the path, hoteliers say. “We have been very fortunate in Africa to have great partners who help us mitigate major risks and ensure that our operations run smoothly. As hotel operators, finding the right owners is a key factor in our expansion strategy,”notes Eckhardt.
Banks agrees.“Having development people who are familiar with the ways of working in Africa is an asset,”he says. “As is a local partner who can ensure the sometimes bureaucratic delays are shortened by knowing how things work.”
Nonetheless, there’s been a notable uptick in hotels catering to the middle tier of the market. Citing corporate travel as the main driver of bookings,“the mid-market segment is showing the best growth,”says Clifford Ross, chief executive of the City Lodge Hotel Group, which has 51 hotels in South Africa, two in Kenya and one in Botswana.
“In our opinion, mid-market is a great long-term positioning as you are less vulnerable during demand cycles,”says Nijnens.“There is less of an ability for your clients to‘trade down’, and you benefit from the luxury market coming down a tier.”
However, high-end hotel groups are also citing strong demand for luxury properties.
“We can’t add destinations fast enough. In fact, in many cases government leaders approach us, citing demand for luxury hotels to accommodate the increasing number of visitors or to meet future demand,”says Eckhardt.
Perhaps diplomatically, Marriott International believes“there’s significant room for development across both luxury and mid-market hotels,”says Kyriakidis.“Because in many countries we’re practically starting from a zero base in terms of properties of international standard. The same holds true for countries with more developed hospitality industries, because Africa’s economies are growing so rapidly,”he notes.
“Our experience in Accra shows there is room for both ends of the market,”agrees Banks.“Rates in the 5-star hotel market in Ghana approach $300, however 4-star hotels in the same marketplace can achieve $200 to $250 per night in peak seasons, driven by demand and relative lack of supply.”However, he notes,“as the market matures, the need for three and 4-star hotels will increase in emerging markets, however at present there is certainly a need for more 5-star hotels.”
“International travelers still prefer 5-star hotels, irrespective of price,”suggests Ross.“Local corporate travel is very much company policy-driven as to where they can stay and at what price point. This is resulting in some trading down as a result of rate.”
Time and Time Again
While the discussion continues around the health of differing ends of the market, the more subjective perception of value is motivating the hospitality industry to make sure that guests get the sense their money is – or, at least, feels – well spent.
“With the proliferation of hotel brands and concepts, I think the best value offering – price versus experience – will be one of the deciding factors for corporate buyers,”says Nijnens.“There will always be a space for the luxury segment, but the majority of corporate demand will be more value-oriented.”
A key part of the discussion around value – and what room rate constitutes good value – comes down to a common concern for corporate travelers in Africa: security.
“Comfort, safety and security are needed when traveling in Africa and these are prioritized over the rate by group travel managers and corporate travelers when selecting a hotel,”notes Daniel from Preferred Hotel Group.
While security is top of mind for many travelers to Africa, there’s another ethereal concept that’s perhaps even more valuable: time. In the new economic rush for Africa, time is in short supply for many corporate travelers. As a result, world class roundthe-clock services and connectivity are a prerequisite for opening the doors, not merely a nice-to-have.
“In many of our hotels we offer WiFi, 24-hour access to check-in and check-out services, in-room dining, spa services, a fitness center and the executive lounge,” notes Eckhardt.
Sun International has traditionally focused more on the luxury leisure travel market with entertainment and gaming as the main drawing cards. However, at the Maslow Hotel in Johannesburg the group has paid plenty of attention to business travelers with free WiFi throughout the hotel, a dedicated business meeting hub and spa treatments tailor-made for corporate travelers.
Highlighting key touch points for corporate travelers, Mövenpick Hotels & Resorts has committed to offering free WiFi in all of its hotels by 2015. And in a further bid to help travelers save time, Marriott International recently rolled out its mobile check-in and checkout service to 16 Marriott Hotels properties in North Africa and the Middle East, and“the plan is to expand this southward across the continent,”says Kyriakidis.
“Africa is a sleeping giant,”says Eckhardt from Kempinski emphatically.“And when it wakes up, the growth will be staggering. That is why were are here, and we will continue to expand our presence in Africa over the next five to 10 years.” BT