Introduction
The development of a country partly depends on the expansion of their hotel and tourism industry. Africa is facing a tough time economically and they are trying their best to fight back this economic crisis. They focus on the hotel management sector and try to develop this industry. A hotel is not only a place of accommodation, it is always more than this. Building a hotel means creating opportunities for new jobs and it boosts the regional economic activity in general.
History
The history of African hotel industry is not very old. It was started back in 1960 with the declaration of their independence. However, the development of hotel industry comes to a standstill due to the lack of investment. Another reason behind this standstill is the investors moved their businesses to other emerging markets like the Middle East and Asia. Later on, the continuous rising of oil prices made the investors unhappy. They were in need of a new continent to invest in. Suddenly, they notice the raw materials and the cheap labor cost of Africa. Thus, Africa becomes their center of attention again. Moreover, Accor offers the world’s first eco-lodge innovation hub by Mantis at AHIF (Africa Hotel Investment Forum) 2019. Mantis is pushing the boundaries to create a tourism hub for the experts.
All these are now in the history books only. The present scenario has changed a lot. The famous Radisson RED group is going to open their second branch in Africa and it is scheduled to open in 2021. The previous one is a huge success. Besides, their upcoming Radisson RED will be located in Johannesburg, Rosebank and it will have a setup of 222-room. It will offer their famous food and beverage concepts and social scenes like ‘all day dining’, Oui Bar & Kitchen, etc. Thus, it put an end to the above mentioned history.
Relation between Tourism and Hotel Industry
You will be surprised to know that 21 million jobs were offered in Africa by tourism and hotel industry back in 2016 according to the United Nations Conference on Trade and Development (UNCTAD). That means, the tourism and hotel industry offers jobs to 1 out of every 14 people in Africa. Besides, Africa is very popular among the tourists. Nearly 62 million international tourists travelled to Africa in 2016. It is 8% higher than the number of tourists of 2015. Apart from the governments, several development finance institutions like AFD Group and Proparco are trying their best to promote African hotel industry. Proparco has been supporting the hotel arena for more than 200 years. They invested more than €80 million in seven hotel projects in Africa since 2015. According to the CCFA (Community Conservation Fund Africa) deal signed in May, 2018, both parties main focal point is sustainable development.
To cope up with the competitors, Radisson Hotel Group, one of the world’s largest hotel groups in the world boosts their African development signing 11 new hotels in Africa. Thus, they become the owner of almost 100 hotels in Africa with a number of 17,000+ rooms in operation in 32 different African countries. Their aim is to reach the milestone of 130+ hotels and 23,000+ rooms within 2022. Their portfolio is getting heavier day by day like their group revenue increased by 14%, Radisson Rewards Meeting revenue increased by 30%, they won more than 50 awards, etc. There is a reason behind this massive popularity as 90% of Radisson hotels in Africa secure a ‘Safehotels’ certification. You will be glad to know that Radisson Blu Hotel & Conference Center Niamey got the highest level of ‘Safehotels’ certification.
Population as a Trump Card
Population is an asset if you know how to use it. Countries like the Democratic Republic of Congo, Ethiopia, Nigeria, etc. have more than 80 million citizens right now. The population growth of other African countries like Burkina Faso, Mali, Niger, etc. are expected to increase by a factor of over 2.5 by 2050. Similarly, the growth rate of Zimbabwe and Mozambique are 5.4% and 5.6% respectively. This population density is huge and perfect for any kind of businesses. All you have to do is ensure investor-friendly law and maintain political stability. The hotel developers know their risk factors and they are also aware of the higher returns. Thus, Mantis introduced new room model known as Innovative Hospitality Units containing two tents, a pod, a log cabin and a tree house. This eco-lodge innovation hub is the combined brainchild of Paul Gardiner and Craig Llewellyn-Williams.
To deal with his heavy population, Aleph Hospitality announces their expansion in AHIF 2019. They are going to open two boutique resorts named the Moja Tuu and Hakuna Majiwe in the Tanzanian market. Here, Moja Tuu located in Kiwengwa is a 35-key beach resort including 10 luxury beachfront villas with individual infinity pool. Similarly, Hakuna Majiwe located in Paje offers a mesmerizing white sand beach. This is a 21 room hideaway including 16 beach rooms and 5 garden rooms.
Statistics
Let us have a look at some important statistics of hotel development industry in Africa. The tourism export revenue was $14 billion back in 1995-1998 and it was $47 billion in 2011-2014. Similarly, there were only 24 million tourist arrivals back in 1995-1998 and the number was 56 million in 2011-2014. Besides, the number of international tourist arrivals in Africa is going to be 134 million by 2030 which is five times higher than the number of 2010. Moreover, Africa made a record by holding a 4.4% share in worldwide tourism arrivals in 2015. These things are happening because of the revolution in the hotel development industry in Africa. Therefore, the CCFA following the Accor’s conservation platform Planet 21 has donated nearly USD $500,000.
Now, let us look at the other signing of Hampton by Hilton Sandton Grayston took place at AHIF. They signed an agreement with Afrirent Pty through its Indalo Hotels and Leisure. Indalo will operate 158 guest room Hampton by Hilton hotel in Sandton. This property will join Hilton’s flagship called “Africa’s richest Square Mile”. This is going to open by the middle of 2021 hopefully. They open their hotels in three new African countries in 2019 and they are- Hilton Garden Inn Gaborone, Botswana, Hilton Garden Inn Mbabane, Eswatini and Hilton Garden Inn Kampala, Uganda.
Barriers
If you look at the hotel development industry of Africa closely, you will definitely see some serious issues. There are two dynamics in whole Africa, one along the Indian Ocean and another around the Gulf of Guinea. Central Africa, Southern Africa, East Africa and Western Africa- all four of them reflect these two dynamics. They also share common features like economic issues, political issues, tourism activity, demography, etc. From Mauritania to Somalia, we see political instability to all over Africa. However, countries like South Africa (62% of Southern Africa) or Nigeria (70% of West Africa) are in good condition for doing business.
Developing an industry is always risky and it becomes more dangerous when the industry is the hotel industry. The first and foremost barrier of hotel development industry in Africa is access to land. There is practically no land register in certain cities. If you find a land registry office somehow, the transfer process is full of difficulties. Then, every business requires sponsors and the sponsors there are often lack of liquidity. Therefore, the local commercial banks are not familiar with the hotel development industry, so most of the banks are of no use to the investors. Additionally, you have to face the slow progression of work, constructions related problems, importing issues of unavailable materials, etc. Usually, these troubles can be easily solved on a mature and stable market.
DRC is the world’s largest cobalt ore producer, a main producer of diamonds and copper. They have approximately USD $24 trillion in untapped mineral deposits. Despite the above barriers, CHIC (Compagnie Hôtelière et Immobilière du Congo) taking the help from DRC is focused on developing numerous hotels in Africa. Thus, you can understand how vast the African tourism industry is.
Present Scenario
There are more than 72,000 international standard rooms in sub-Saharan Africa according to Horwath HTL. Half of these rooms are running under a brand name and the others are managed locally with satisfactory standards. Usually, these local hotels do not stand a chance against a branded hotel. However, the branded hotels are facing a tough competition here in Africa due to the imbalance between supply and demand rather than their level of services. Only the southern part of Africa, more specifically, South Africa has an above-average brand value of famous hotels. Outside Southern Africa, like Abidjan, Addis Ababa or Kinshasa- all of them are marked by a single dominant market. Moreover, Accor is operating their business more than 40 years and the Mantis partnership has strengthen it. They have a number of 25,826 rooms in 164 hotels across 22 African countries at this moment and other 13,642 keys from 61 new properties are on its way.
On the contrary, the shortage of hotel bedrooms is the reason why Africa is popular among the hotel developers. Let us give an example of the room shortage in Africa to make it even clearer. There are approximately 15,000 branded hotel rooms per million people in the USA. At the same time, there are only 89 hotel rooms per million people in Africa. It is 168 times less than the number of the USA. However, a total of 75,155 branded rooms in 400+ hotels are in the development process in Africa. Also, Currently Mantis operates 19 properties in South Africa and they are going open new seven projects by the end of next year across five destinations- Ethiopia, Ghana, Nigeria, Rwanda and Zambia. Similarly, Accor is going to open more 8555 keys within 2021. If you look at Ethiopia alone, Accor has seven new contracts with Mantis, Mercure, MGallery, Mövenpick, Novotel and Pullman brands.
Types of Visitors
You can divide the travelers into four major categories. The first type of visitors are business clients and so far they are the dominant group. A number of officials have to pay a visit to Africa and they need a place to stay overnight. They do not stay for a long time but they pay a visit to Africa regularly. Then comes the tourist group in the second category. The number of tourists depends on the attractive places and other necessary commodities. Their main destination is Southern and East Africa. Sometimes, they want to visit less explored cities which are not so popular among the tourists. However, it is a matter of sorrow that the tour operators only offer a limited number of destinations. The fact that 4% of total GDP of Botswana and 18% of total GDP of Cape Verde comes from tourism. As a result, governments of different African countries are trying their best to ensure a tourist-friendly atmosphere. If they can guarantee safety to the tourists, this tourist group can give a fight to the first group in the near future.
There are some other visitors frequently seen in Africa for MICE activities. Here, MICE stands for meetings, incentives, conferences and exhibitions. These programs are happening because of the increase number of conference halls, meeting rooms, etc. in the hotels. There was a time when only the branded hotels offered these facilities. The scenario has dramatically changed and the local hotels are also offering these amenities nowadays. Last but not least, the clients from airline crews are high in numbers, thanks to the increasing number of domestic and international flights to Africa.
Now, you must need some companies like Accor to deal with various types of tourists. Accor has 4900 hotels across 110 countries. Besides, they are in hospitality sector for more than 50 years. They offer new ways to live and enjoy leisure, traditional food and beverage with nightlife, etc. They are enlisted as Accor SA on the Euronext Paris Stock Exchange (ISIN code: FR0000120404 and on the OTC Market (Ticker: ACRFY) in the United States of America.
Interesting Facts
There are some interesting facts you should know about the hotel development industry in Africa. I believe you are familiar with the famous American hotel group named Hilton. Hilton is currently running 44 hotels in 17 African countries and you can easily book Hilton in South Africa. You will be glad to know that they are going to double their presence with more than 90 hotels across this continent within next three years. Besides, Marriott International offers the largest number of rooms available in whole Africa which is 23,000+. Then, Accor takes the second place with 162 hotels and the Radisson Hotel Group is in the third position with 47 hotels. According to Top Hotel Projects database, there are more than 400+ new hotel construction projects going on throughout the African continent.
On the contrary, Marriott International is going to open 40 new properties across Africa within 2023. They are also going to enter into Cape Verde soon. This whole new projects offer more than 1200 jobs to African people and an engagement of USD $2 billion. Currently, they have 24,000 rooms across 14 brands and 20 countries and territories. Their recent deals are- Four Points by Sheraton São Vincente, Laginha Beach (Cape Verde), Four Points by Sheraton Mekelle (Ethiopia), Protea Hotel by Marriott Kisumu (Kenya) and Residence Inn by (Marriott Lagos Victoria Island (Nigeria).
Conclusion
There are two types of investment options for the hotel investors- buy an existing hotel or develop a new hotel. Usually, most of the investors like to develop a new hotel. However, the situation is completely different in Africa. The typical delays in opening a hotel are a common issue in the African continent. These delays mean more money and that is why the investors focus on buying an existing hotel. Purchasing an existing hotel minimizes the risk factors and overall costs if everything goes right. The simple conclusion is that Africa is full of opportunities for the hotel investors if they can understand the local marketplace. Business and risks are two inseparable words. However, if you can make the correct decision at the right time, then the result will be extraordinary. This is the reason why many investors are interested in the African hotel development industry.