An eye on West Africa

Last month I wrote about the brands with new hotels planned in West Africa. Since then I have been looking at the existing hotels in the region, specifically those with an international or regional (African) brand. The analysis shows that West Africa, despite having the largest number of countries in any sub-region, lags behind Southern Africa which has 613 hotels, North Africa 288 hotels and East Africa with 192 hotels – West Africa has a headcount of “only” 117 hotels. But this could be considered encouraging compared to just 33 hotels in Central Africa.

South Africa, Egypt, Kenya and Nigeria top the list as countries with the highest number of branded hotels. Whilst Egypt, Kenya and Nigeria each have fewer than 200 branded hotels, South Africa has by far the largest number, over 440 hotels (plus a lot more in purely domestic chains, which we haven’t finished counting yet). Drilling down further, Nigeria, Ghana and Cape Verde are the top three countries in the West Africa region, with a combined total of 72 hotels, of which approximately 60% are in Nigeria.

The existing branded hotels in Nigeria are found mainly in Lagos (16), Abuja (5) and Port Harcourt (3). This makes a lot of business sense as these cities represent the three capitals in Nigeria, being the commercial capital (Lagos), the administrative capital (Abuja) and the oil capital (Port Harcourt).

In Ghana, branded hotels are found mainly in Accra (10), with one each in Takoradi and Kumasi. Cape Verde, famous for its beaches, has 12 branded resort hotels spread across Sal Island (6), Boa Vista (4), Praia (1) and Santa Maria (1).

Now that we have a sense of the scale and spread, who are the players? Overall, there’s a total of 47 brands present in West Africa, ranging from economy up to luxury (in this analysis we use the STR chain scales, as we’re not very keen on star ratings). But neither end of the scale is proving to be particularly popular with developers, with just one a piece. The Yaas Hotel in Dakar, Senegal (a Mangalis brand) is the only hotel with an economy brand in the region so far.

There are 18 midscale brands (15%) which include Icon, Laico, Tulip Inn, Seen, Hawthorn Suites by Wyndham and Ramada. Upper midscale brands account for 31 out of the 117 branded hotels (26%). The brands include Best Western Plus, Mercure, Bon, Golden Tulip, Mantis, Protea and Park Inn by Radisson.

There are 37 hotels (31%) with upscale brands such as Mövenpick (although the Mövenpick Hotel in Accra would definitely be considered to be upper upscale), Sol, Club Med, Iberostar, Noom, Four Points by Sheraton, Melia, Onomo, RIU, Swiss International and Swiss Spirit.

Upper upscale brands are Fraser Suites, Curio, Hilton, Marriott, Sheraton, Pestana, Radisson, Radisson Blu, Sun International, Southern Sun and Warwick Hotels, approximately 20% of the branded hotels in West Africa. And the Kempinski in Accra, Ghana is the only luxury-branded hotel in West Africa to date.

Why only one economy hotel and one luxury hotel in the whole of West Africa?

The landscape of brands shows a 90% spread of midscale to upper upscale hotels, with upscale brands representing 30% of this total. We know that there are viability issues in the luxury sector, with the high costs associated with building a luxury hotel that meets brand standards typically being way out of kilter with the rates you can charge for the rooms, and therefore resulting in a weak business case.

But that’s not the case in the economy sector, so are there negative perceptions about economy brands in the region? Is it that investors don’t see that sector as appealing enough? There is no doubt that there is demand for economy-priced accommodation from the travelling public – as intra-African travel increases, along with GDP growth and greater connections between economies, that is what the demand will surely be for.

We continue our search for investors willing to ‘do’ economy.