The changing face of hospitality
As the Sub-Saharan region experiences unprecedented economic growth investors are looking at the hospitality industry with curiosity and heightened expectations.
Africa is currently experiencing a boost in the hotel industry due to the continent’s positive economic performance and rapid tourism growth says David Green, Director of ProAfrica Property Services, an affiliate of global property consultant Cushman & Wakefield. “The continent has around 90,000 international standard hotel rooms, half of which are in just three North African countries (Egypt, Morocco and Tunisia). Therefore, the potential opportunities for the hotel sector expansion are substantial.”
Sub-Saharan Africa (SSA) is one of the least developed hotel regions on the African continent with less than 50 hotel rooms per one million people, says Green. However, it is growing at a steady pace, and opportunities are abundant.
“The number of branded hotel rooms planned for Sub-Saharan Africa has risen to 23,283 rooms in 2014, from 13,700 in 2011. The number of hotel deals increased sharply from 77 hotels in 2011 to 142 hotels in 2014, signifying that the demand for hotels in the region will continue to outpace supply due to regional growth,” says Green.
The growth in the hospitality markets across Sub-Saharan Africa signifies rapidly growing economies buoyed by strong business and a plethora of resources. With hotels sprouting up across Africa, from Nigeria to Kenya, Ethiopia to Mozambique, it’s a sign that the face of the African hospitality sector is changing.
While tourism is one of the key industries driving the current change in the market, business opportunities and a growing middle-class are also contributing to change across the region.
According to W Hospitality Group, investors are looking closely at Sub-Saharan Africa. 140 hotel deals have been signed with international chains in Africa in 2013.
According to the World Bank the potential for growth in tourism in Sub-Saharan Africa is significant and compelling. “Global hotel chains are poised to spend hundreds of millions of dollars in Africa over the next few years to meet increased demand from both international tourists and the continent’s own fast growing middle-class,” says the World Bank in its report on the hospitality and tourism sector in SSA.
Xander Nijnens, Senior VP for Sub-Saharan Africa at JLL Hotels & Hospitality Group agrees. The region has incredible hotel development potential and a lot of investors are treating the region with curiosity and looking at where they can establish a presence on the continent.
“What we have seen in the last few years is an increase in Sub-Saharan Africa and most of this interest is being channelled into high-growth countries,” says Nijnens. He segregates the continent into mature markets which include South Africa and the Indian Ocean region, semi-mature markets which incorporate Kenya, Tanzania, Nigeria and emerging markets such as the Democratic Republic of Congo and South Sudan.
According to Nijnens economic growth is one of the biggest drivers contributing to growth.
“Traditionally economic growth has come from resources, and while this is still largely the case we are now seeing a lot more diversification in some of the major economies. The demographics are also positive in the region, along with a growing middle-class and an increasing young and educated population,” says Nijnens.
Nijnens says the region is starting to see more formalised travel with an increase in international and inter-regional travel along with business tourism as opposed to leisure.
“A trend in the market shows us that a lot of the operator interest is on the business side and while leisure is still important the big upsurge in demand is for business,” says Nijnens.
“Countries such as Nigeria, Ghana, Kenya, Tanzania and Ethiopia are the high-growth countries for potential scale and then there is South Africa and Mauritius which are much more secure, but these countries have a different type of nature to the more developing countries.”
Another driving factor, adds Nijnens, is the entry of multinational companies into the continent to set up regional headquarters in business hubs such as Accra, Nairobi, Lagos and Johannesburg.
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