SA lays out welcome mat as hotel growth picks up
FOR the first time since before the Fifa World Cup in 2010, South Africa has reappeared among the top 10 countries in Africa in terms of the number of hotel rooms in the pipeline.
“South Africa has not featured much in previous years, but it has come back into the top 10 as the development from the 2010 boom has been absorbed,” said Trevor Ward, author of a report from the W Hospitality Group, which surveys hotel chains’ development activity each year in Africa.
Ward said several factors had inhibited the expansion of hotels in South Africa. They included oversupply caused by the mushrooming number of hotels for the World Cup, and that international chains have had difficulty getting into the local market partly because of the dominance of local chains such as Southern Sun, City Lodge and Protea (now part of the Marriott group).
There has also been a change in how the banks look at hotel deals — they are now prepared to accept management agreements, where before they had demanded a lease.
Ward said hotel chains did not want the liability of leases on the balance sheet. “They want to offer management and marketing services.”
There are 11 hotels in the pipeline in South Africa, with 2 058 rooms coming on stream in the next two years. Three of these are in Cape Town, two in Johannesburg, one in Pretoria, one in Durban, one in Polokwane and one in Kruger National Park. Some have not been officially announced, but include Radisson Red at the V&A Waterfront in Cape Town.
The number of rooms coming online in South Africa is about a fifth of those in the pipeline in Nigeria, which takes top spot in terms of new hotels being developed.
Although the “Africa rising” narrative appears to have been undermined by low commodity prices, exchange-rate problems, political challenges and poor infrastructure, there continues to be increasing demand for accommodation and hospitality products.
The growth in new hotels in Africa is due largely to strong growth in sub-Saharan Africa, which continues to surpass North Africa. Last year, the pipeline in North Africa (Morocco, Algeria, Tunisia, Libya and Egypt) was just over 18 500 rooms, which for this year has risen 7.5% to just under 20 000 rooms. The pipeline in sub-Saharan Africa has increased by 42.1%. There are 354 hotels in the pipeline for Africa, compared with 177 in 2012.
The biggest deal in the sector on the continent was AccorHotels’ mega-deal in Angola. In July last year, it signed with AAA Activos LDA to manage 50 hotels with more than 6 200 rooms throughout the country, all under construction and many ready to open.
Having battled it out with oth- er groups to get the deal, Accor will bring its Ibis Styles, Mercure and Sofitel brands to the country in the next two to three years. Angola has the secondhighest number of hotels and rooms in the pipeline this year.
Although in previous years West Africa has represented more than half of the total, and is still the largest single region, Southern Africa has increased in importance.
Last year, the region was the smallest of the four, at only 11% of total pipeline rooms, but is now 26%. Two groups, AccorHotels and Hilton, have contributed to this regional growth.
With 17 782 rooms between the two countries, Nigeria and Angola account for almost 30% of the total pipeline and 40% of the signed rooms in sub-Saharan Africa.
Lagos, the largest city on the continent, continues to lead the top 10 cities by number of planned rooms, with more than 4 000 planned rooms. Abuja, the capital of Nigeria, has the second-highest number of planned rooms in the pipeline by city.
The survey relates only to deals signed by the international and regional (African) hotel chains, so it does not include projects being developed by domestic chains, nor independent, non-branded hotels.
Angola has the second-highest number of hotels and rooms in the pipeline
Although it makes it tougher for locals to travel overseas, the weaker rand gives visitors more bang for their buck. Given the significant decline in the value of the rand against the major world currencies, “we have seen a trend in terms of which foreign and local travellers are opting for more luxury accommodation and are willing to spend more on food and experience, and our five-star hotels are doing well as a result”, said Danny Bryer, director of sales, marketing and revenue management at Protea Hotels.
The luxury accommodation segment struggled during and shortly after the 2010 World Cup because of oversupply. The weaker rand also means that, in some instances, South Africans who would have travelled internationally have chosen local travel instead.
Marriott International, the global parent of Protea Hotels, is opening two Marriott-branded hotels in 2018 in Melrose Arch in Johannesburg.
Bryer said four- and five-star hotels tended to open only in the biggest cities; three-star hotels were opening in smaller cities.
Marriott International plans to expand from 19 countries across Africa to more than 26 countries during the next few years.