Tapping into booming economies
It’s boom time for Africa’s hotel groups – both the continent’s locally-based operators and their international counterparts, who have recognised the opportunity and potential on the continent, making for a vibrant hotel scene with multiple openings and much jostling for position. Richard Holmes takes a look at who is making the biggest moves, and where.
It’s been five years of doom and gloom, as economies falter across Europe and the Americas. But the ‘dark continent’ has bucked the trend and taken on the role of the world’s ‘shining light’, when it comes to economic performance. And the bullish economies of Africa are proving some of the richest hunting grounds for multi-national hospitality groups looking for new areas to expand.
And where’s there’s economic growth, there’s business being done and corporate travellers jetting in. With bullish economies comes a buoyant hospitality industry, and a host of African and international hotel groups have geared up to welcome the influx of business travellers.
“Africa is home to seven of the world’s 10 fastest-growing economies and there could not be a better time to expand the Starwood footprint across the continent,” says Hassan Ahdab, Regional Vice-President: Africa and Indian Ocean for Starwood Hotels & Resorts. “From a vastly improving infrastructure, major investments from China, rapid economic growth, rising personal incomes and a growing middle class – Starwood sees exciting changes that are driving the African future, and we intend to be a part of it.”
The Starwood group – which counts Sheraton and Le Méridien among its brands – has 10,000 rooms across 38 hotels on the continent, but is looking to grow its presence by an additional third.
“We have 10 new hotels opening over the next three years, adding more than 4,200 guest rooms to the continent and creating thousands of local employment opportunities,” says Ahdab, who adds that the company is looking at key emerging markets including Angola, Ivory Coast and Ghana. “Starwood doubled its dedicated development team focused on growth in Africa at the end of 2012. This included the appointment of South African hotelier Michael Devereaux to lead the company’s expansion throughout sub-Saharan Africa.”
By 2015, the US-based group plans to operate nearly 50 hotels in Africa, with new properties planned for Nigeria, Egypt, Algeria, Libya, Senegal and Mauritius.
“The major industries driving the growth in Africa are international corporate companies from the energy and oil sectors, infrastructure, mining and development groups, as well as financial services and banking,” says Jose Ventura, Vice-President: Asia, Pacific, Middle East and Africa, Business Development for the Preferred Hotel Group. “The fastest-growing cities are Luanda, Maputo, Kampala and Dar es Salaam – these are driven by the energy and oil industries.”
Preferred Hotels is a collection of 48 hotels spread across Africa, and demand remains strong, says Ventura, who makes an interesting observation about where the power lies: “The top five cities in terms of corporate business are Johannesburg, Cape Town, Nairobi, Accra and Lagos – these cities have been in this position for the past two years, with Durban dropping to the sixth position and being surpassed by Accra and Lagos.”
“We made our commitment to Africa six years ago,” adds Ventura. “We saw Africa as the most important region for our development efforts, and we continue to be committed to this region, with an office opening and establishing a team of experts in sales, marketing and revenue management.”
With 90 hotels spread across South Africa, the Seychelles, Mozambique, Nigeria, Kenya and Tanzania, Tsogo Sun is one of the major players in Africa and is equally committed to the continent; investing heavily in expanding and improving its hospitality products.
Among other projects, the group has “started construction on the $30 million expansion and refurbishment of the Southern Sun Maputo, which includes a new conference centre, expanded restaurant and an additional 110 rooms,” says Graham Wood, Managing Director of Tsogo Sun Hotels. “In Nigeria, we have acquired the Southern Sun Ikoyi hotel that we currently manage in Lagos, from the founding owners, representing a $70 million investment into this West African economy.”
“Africa represents new business opportunities in all major sectors, including but not limited to telecommunications, mining and financial services,” adds Wood. “Continued economic growth will drive ongoing demand for hotel accommodation.”
“Business travel is the lifeblood of the hospitality industry, and the industry globally is looking at Africa with appetite,” says Danny Bryer, Director of Sales, Marketing and Revenue for the Protea Hospitality Group, which operates 130 hotels in 10 African countries. “Hospitality in Africa is built on business travel. International hotel groups are increasingly looking to Africa for their ‘African renaissance’, because it is one of the few regions in the world with true development potential. As a company, we plan to at least double our number of hotels in Nigeria within five years, and we are constantly looking for new African markets to penetrate, as the continent’s economies continue to expand.”
West Africa is “arguably hospitality’s most exciting development prospect on the continent,” says Bryer, noting that Ghana is predicted to achieve seven percent growth in gross domestic product in 2013. “The development of Ghana’s 130-room Protea Hotel Takoradi, which opens in the south-west coastal city of Takoradi in early 2014, brings the current value of portfolio hotels developing across Africa to more than $100 million.”
Those developments include properties under construction in Rwanda, Nigeria, Ghana, Zambia, Uganda and South Africa. A third new Nigerian property – Protea Hotel Emotan in Benin City – opened its doors in February.
But it’s not only West Africa that is promising the pot of gold at the end of the hospitality rainbow.
“The Zambian and Ugandan economies have equally exciting growth prognoses in the medium term, which is driving hospitality development – and international interest – in those areas,” adds Bryer. “In fact, a number of countries in East Africa are also showing significant growth, despite troubled regions like Somalia and Sudan. It is certainly an expansion focus for the Protea Hospitality Group.”
International brands are increasingly seeking out opportunities on the continent, as “Africa is certainly proving to be a desirable destination for both leisure and corporate travel,” says Jan van der Putten, Hilton Worldwide’s Vice-President of Operations: Africa & Indian Ocean. “According to figures from the United Nations’ World Tourism Organisation, tourism arrivals to Africa rose by six percent in 2012 to a record 52 million. With a growing number of industries either establishing and/or expanding their presence on the continent, Africa is increasingly offering great opportunities for expansion in all sectors, particularly the hospitality industry.”
Hilton Worldwide currently operates 36 properties across Africa, but “our goal is to open a Hilton property in every key city across the continent, and our Africa development pipeline consists of 18 properties across Egypt, Tunisia, Morocco, Nigeria, Chad, Sierra Leone, Cape Verde, Uganda and the Seychelles,” says Van der Putten.
“As Africa has been less affected by the economic downturn over the last few years, there is potential for higher growth on the continent than in traditional markets,” he continues. “The continent continues to show great potential, providing consistent and sustained growth, making it increasingly attractive to investors.”
And importantly, while African economies are booming, the hospitality industry – particularly outside of South Africa, and unlike mature business travel destinations in Europe and the Americas – is often under-developed and ripe for new investment.
“Africa has strong development opportunities, given that many of the 56 countries that make up the continent are emerging travel destinations where hotel development hasn’t reached its peak,” says Emma Corcoran, Director of Brand Communications: Asia, Middle East and Africa for the InterContinental Hotel Group.
IHG also has big hopes for Africa, with plans to add 2,500 rooms to its current portfolio of 8,000 rooms in 31 properties spread from Morocco to South Africa.
“We have seven hotels in our pipeline across Africa due to open in the next three to five years,” says Corcoran. “Our luxury brand, InterContinental Hotels & Resorts, will make up the biggest portion of this pipeline, accounting for three hotels in Uganda, Libya and Senegal. We will also open a Crowne Plaza in Nigeria, two Holiday Inns in Nigeria and one Holiday Inn in Algeria.”
The French-based Accor hotel group is another major multi-national player in the hospitality industry with an eye on Africa.
“East Africa, West, and Central Africa are obviously the regions showing the best growth,” says Manoël Parrent, Accor’s Operational Marketing Director for sub-Saharan Africa, Caribbean, Indian Ocean. “We opened hotels in Nigeria, Equatorial Guinea and Senegal, and are looking for opportunities in East Africa. But no region should be left aside – there are also good opportunities in Algeria, Tunisia and Morocco.”
Accor currently operates 115 hotels in Africa, across well-known brands such as Sofitel, Pullman, MGallery, Mercure, Novotel, Suite Novotel and Ibis. With ‘asset-light’ management and franchise agreements, the group also plans to open an additional 30 hotels in Africa by the end of 2016, bringing 5,000 more rooms to the marketplace.
And those rooms certainly won’t all be booked by French travellers feeling a flush of Gallic allegiance – intra-African corporate business is taking a greater share of room occupations, says Parrent.
“Demand is definitely flourishing because of the economic growth that countries like Ghana, Kenya, Nigeria and South Africa have shown,” says Lashley Pulsipher, Regional Director of Public Relations: India, Middle East and Africa for Kempinski Hotels. “Africa’s economic pulse has quickened, and the momentum the continent is gaining has been recognised worldwide, spurring business travellers to continue to demand more flights and rooms in this region.”
Kempinski’s latest move is into East Africa. The group is preparing to announce itself on the booming Nairobi hotel scene, with a hotel property strategically-placed on the main route between the CBD and the emerging Westlands suburb. At the time of going to press, the hotel with the noticeable pink façade was expected to open in August.
Another new player in Nairobi is another of the big international chains to recognise the Kenyan capital’s potential. February saw the announcement that Best Western International was opening its first hotel in Nairobi – the Best Western Premier Nairobi Hotel. The hotel has 96 rooms, ‘modern technical amenities and fresh interiors’. There are also six luxury suites and three executive meeting rooms, which can be combined into one large conference hall, a business centre and café, fitness centre and a rooftop infinity pool with ‘spectacular views of the Nairobi skyline and Ngong Hills’.
Best Western now has 11 hotels in Africa, as part of a concerted effort to establish a footprint in the region. And it’s not done, just yet. Upcoming openings scheduled for 2013 include properties in Cotonou (Benin), Takoradi (Ghana), Mombasa (Kenya) and Makurdi (Nigeria), whilst 2014’s scheduled openings look like this: Addis Ababa (a Best Western and a Best Western Plus), Lagos and Abuja (Nigeria).
Keeping it local
So, that’s an insight into some of the international groups making a play in Africa. What about some of the African-based players?
South Africa has a few of the continent’s biggest groups, in the form of the likes of Protea, Sun International, Tsogo Sun, City Lodge, Legacy, Premier Hotels, Three Cities and Peermont.
Peermont has properties in South Africa and Botswana, whilst Three Cities has already started looking beyond South Africa’s borders, and appears intent on increasing its footprint in other African countries. Sun International is well-known for its leisure and gaming properties – most notably, its flagship Sun City property in the north-west of South Africa, whilst it also has the Table Bay in Cape Town, the Federal Palace in Lagos, and the stunning Royal Livingstone in Zambia. Interestingly, though, its latest move is to establish the Maslow in Sandton, Johannesburg – a business travel-focused 4-star property, which may just represent a slight shift in focus for Sun International.
And what about the other South African groups listed?
“We have seen significant growth in our corporate business,” says Eugene Oelofse, Marketing Manager of Premier Hotels and Resorts. “Our focus for the immediate future is to concentrate on our current business model of providing full-service, top-grade hotels within the mainstream business locations throughout South Africa. Thereafter, we will be concentrating on our bordering countries and looking further north.”
City Lodge is another South African group that has – until recently – kept its focus firmly on the southern tip of Africa. The group’s 52 hotels in South Africa are spread across its four brands: Road Lodge (1-star), Town Lodge (2-star); City Lodge (3-star) and Courtyard (4-star) – a mix of properties across the star range, catering for a variety of budget-conscious leisure and business travellers.
In addition to a newly-built 104-room Town Lodge in Gaborone, which opened earlier in the year, City Lodge acquired a 50% stake in Fairview Hotel Limited in 2012. This Kenyan company owns and operates two hotels in the Upper Hill area of Nairobi – the 120-room Fairview Hotel, an established hotel in the Kenyan capital, and the adjacent 84-room Country Lodge, which looks likely to be rebranded as a Town Lodge. This will be the foundation for City Lodge’s expansion into other African countries.
“The group is currently examining East Africa,” says Clifford Ross, CEO of City Lodge Hotels. “This includes Kenya, Uganda, Tanzania and Rwanda. West Africa is being looked at, particularly Ghana, whilst other Southern Africa Development Community countries are also being investigated, such as Namibia, Zambia, Mozambique etc.”
Those are countries that few would perhaps associate with being the pot of investment gold at the end of the African rainbow. But, while the economic powerhouses of South Africa and Nigeria often garner the column inches when it comes to the African economy, a glance at where the hospitality industry sees potential reveals a wide range of African destinations showing strong economic –and hospitality industry – growth.
“Countries like Zambia, Libya, Ghana, Angola and Mozambique have shown remarkable growth, and the industries driving such growth have mainly been mining, agriculture, oil and gas, and manufacturing,” says Van der Putten from Hilton Worldwide. “An additional, important factor is the number of new airlines opening up routes to many more key cities and destinations, bringing visitors to Africa from around the world.”
“South Africa is still a huge growth area in Africa, but certainly Nigeria, Ghana, Kenya and Angola feature on the list of places that are growing exponentially,” says Hara Jackson, Corporate Business Development Manager for Legacy Hotels & Resorts, which has 24 properties in four countries, with plans to expand to both Gabon and Malawi. “Oil and gas is a huge industry, followed by power, telecommunications and infrastructure. And recently, even the entertainment industry is making its mark in Nigeria as an accommodation spinner.”
With many parts of Africa seen as challenging – perhaps dangerous – destinations for corporate travel, it’s not surprising that multi-national hospitality companies are choosing their most tried and trusted brands to break new ground.
“Sheraton is often the first international hotel brand to enter markets, paving the way for the introduction of other Starwood brands,” says Hassan Ahdab, Regional Vice-President: Africa and Indian Ocean for Starwood Hotels & Resorts. “This holds true in Africa where Starwood first opened the Sheraton Cairo in 1971. Sheraton also led the way for Starwood’s entry into other important African countries, including Nigeria, Uganda and South Africa. While Starwood is committed to the growth of all of its brands throughout the African continent, Sheraton continues to play a critical role in its development strategy.”
Kempinski Hotels has equally carved out a niche in being an early provider of luxury hotel offerings in under-developed markets. “Kempinski has been a first mover in Africa and first to introduce true luxury into emerging destinations,” says Pulsipher. “This strategy has worked well for us, and so in addition to identifying prime locations within more established countries like South Africa, Kempinski will continue to target destinations where we can have this ‘first-mover’ advantage.”
Once the ground has been laid and travellers become more familiar with a destination, hotel groups are usually quick to bring other product offerings to further grow the market. While Hilton is certainly a strong – and trusted – brand across the globe, Hilton Worldwide is one group slowly introducing other brands to its portfolio of African business destination properties.
“South Africa, in particular, is a very popular destination among travellers, and to better service the luxury segment of the market in 2012, we launched our first Conrad hotel in the country, which is only the second Conrad property in Africa,” says Van der Putten. “We also opened our first DoubleTree by Hilton brand in Cape Town earlier this year. We will continue to introduce more brands to the continent as we expand our African footprint.”
What makes a great hotel?
As quickly as the skyline of African cities is changing with the mushrooming of new hotel properties, so the facilities and services within the four walls of the hotel are constantly evolving to suit the modern corporate traveller.
“We’re still in the business of comfy beds, pillows, breakfasts and coffee – that fundamental will never change. What is changing in terms of structure is the way hotels are being designed to work around technology,” says Danny Bryer from the Protea Hospitality Group. That structural change ranges from the number of plug points provided in the room and provision of budget-saving business breakfasts, to the layout of public areas to provide intimate break-out spaces for business meetings.
“There’s also a definite increase in MICE business across the board, as corporates and professional conference organisers look for a one-stop-shop to stay and conference in luxury surroundings, rather than hassle with daily transportation issues and expenses,” adds Bryer.
While noting that free Wi-Fi access is “fast becoming a key factor in the choice of hotels” for corporate travellers, “at the end of the day, the basics of hotel-keeping haven’t changed,” says Graham Wood from Tsogo Sun. “People want to have a memorable hotel experience and, despite technological advances, the basics of hotel-keeping remain our core focus in ensuring that we meet and exceed our guests’ expectations.”
“Some priorities don’t change, but they do evolve,” agrees Pulsipher. “Global travellers operate across time zones, and we need to be able to offer the same experience to a guest from China who wants congee at one in the morning, as we do someone visiting from a neighbouring city.”
Jetsetting corporate travellers need to be permanently in touch on the go, and “it has become increasingly important for them to stay connected during their travels. Hence, Wi-Fi access is imperative,” says Van der Putten. “Modern conveniences are essential to every corporate traveller and so is location. In addition to this, it is vital to provide world-class meeting venues, business facilities that are accessible 24-hours a day and a comfortable in-room work space.”
Connectivity and getting deals done is increasingly becoming as important as the creature comforts though, says Oelofse: “Business travellers are now interested in the Internet, business and conferencing facilities of the hotel. This has now turned into the key decision-making criteria.”
But home comforts still play an important role in offering a successful hospitality product, and for mid-range local travellers, “excellent cuisine and comfortable accommodation are definitely still at the top of the business traveller’s list,” says Karin Erasmus, Conference Sales Manager of Forever Resorts, Lodges, Hotels & Retreats, which operates the corporate-focused Forever Hotel @ Centurion and Forever Hotel @ White River in South Africa.
“I am a business traveller myself, with more than 100,000 miles per year, and for me the bed and the shower are still fundamental,” agrees Jose Ventura from the Preferred Hotel Group. “But free Internet, meeting rooms, loyalty programmes and assistance with visa arrangements, are the extremely important priorities moving forward in the region.”
That said, there is also no magic formula that applies across Africa, continues Ventura, and savvy hotel operators will tweak their value-add propositions according to the needs and desires of their region’s corporate traveller: “Our portfolio in the region varies, and each property really does have its own set of products and services that suit the corporate traveller. From pick-up-and-drop limousine services from Cape Royale Hotel in Cape Town, to complimentary Executive Lounges at the Sarova Stanley in Nairobi, to a safe and secure meeting environment in Luanda at the Hotel Talatona. All our properties understand the corporate traveller’s needs in their cities.”
It’s a balancing act of innovating and improving, without alienating regular customers, suggests Clifford Ross of City Lodge Hotels.
“We are always fine-tuning our service offerings across our four brands, but we also make sure that our regular guests know what to expect when they stay with us. We modified the coffee shop menus at our City Lodge-branded hotels earlier this year, taking into account the needs and tastes of our guests. Over the past few years, we have introduced more meeting/mini-conferencing facilities at some of our hotels, such as City Lodge Fourways, City Lodge OR Tambo Airport, City Lodge Hatfield and Town Lodge George. Last year, we introduced 15 minutes of free Wi-Fi access per day at all hotels.”
All of the above makes the hospitality industry in Africa seem like an easy place to make money, but the economic downturn has certainly had an impact – even if muted, compared with Europe and the USA – on demand for corporate travel.
While cities like Luanda, Lagos and Accra continue to demand high room rates, cities to the south are relaxing rates or throwing in added value offerings, to attract corporate travellers that are more value-conscious that ever before.
“With the global downturn, organisations have downscaled staff travel, and demand for competitive rates is more prominent now,” says Rosemary Mugambi, Regional Sales and Marketing Director for Serena Hotels, who adds that free Wi-Fi, business lounges and conferencing services, are all crucial added value.
“Travellers and companies are just not as flippant with their travel. They negotiate the best rate within their budget, and ensure that the value-adds are part of the deal,” says Jackson from Legacy Hotels & Resorts. “However, Africa is still a market where location, quality and safety of travellers is not compromised, especially when entering a country for the first time.”
“Value and location would be at the top of my check list as a business traveller,” suggests Kobus Botha, Managing Director of Urban Hip Hotels. The South African boutique hotel group manages eight properties across South Africa, with operations in Johannesburg, Port Elizabeth and Mpumalanga focused heavily on corporate business. “There is no question in my mind that in recent years, business travellers have become more concerned about looking for value, when booking hotel accommodation, rather than specific bells and whistles.”
There’s certainly space for everyone on the continent, says Accor’s Manoël Parrent, and after a successful 2012, he sees plenty of potential in Africa. “We want to develop more hotels to match the demands. The emerging, larger and larger middle class is asking for more hotel rooms, at the right rate, but including full services. Hotel chains just have to make sure they propose the right offers for the different markets. There is obviously room for economical, mid-scale and upper-scale hotel development on the continent.”
Regardless of whether the development is in high-end luxury properties or no-frills accommodation aimed at budget-conscious executives, the future of the hospitality industry in Africa has perhaps never been brighter.
“Africa is a sleeping giant, and when it wakes up, the growth will be staggering,” says Lashley Pulsipher from Kempinski Hotels. “Economic growth across a variety of sectors continues to attract more and more investment in sub-Saharan Africa, which will increase the number of visitors to the continent. The millions of people travelling to the region will be looking for places to stay, places to eat, places to hold meetings and events, and places to relax.”
That all adds up to a pretty compelling proposition.
Expert view: Nikki Forster, PwC
With African economies still showing strong growth and largely outperforming global markets, the hospitality industry across the continent is bullish off the back of continued demand from globetrotting corporate travellers.
“There is considerable interest in the African continent. Most of the major global players are looking for a footprint in Africa, along with China and other BRICS countries. These are seen as the opportunities of the future,” says Nikki Forster, a Director at PwC Southern Africa and Southern Africa Hospitality Industry Leader. Forster is also an author of the firm’s publication Destination Africa: South African hospitality outlook 2013-2017, which this year additionally analysed the hotel industries in Nigeria and Mauritius.
With the leisure travel industry worldwide still relatively depressed, it is corporate business in particular that is driving growing demand for hotel rooms in Africa. No surprise then that the African economic powerhouses of Nigeria and South Africa are showing strong growth, while leisure-focused Mauritius is lagging behind.
“Hotel revenue in South Africa grew the most in 2012 at 11%, albeit off a depressed base, Nigeria grew at 10.3%, but Mauritius at less than one percent,” says Forster.
According to the PwC report, South African hotel properties saw overall spending on rooms climb 13.4% in 2012 to R15.2 billion, with a 5.3% rise in the average room rate. Furthermore, it forecasts “total room revenue in South Africa to grow at a compound annual rate of 9.2% by 2017.”
South Africa has long been an important leisure destination, popular with visitors from the United Kingdom, Germany and the United States. But, is increasingly attracting corporate visitors from new markets in the East.
According to Destination Africa: South African hospitality outlook: 2013-2017, “the number of non-holiday foreign visitors to South Africa more than doubled between 2009 and 2011, and nearly doubled again in 2012,” a year when the country attracted over 200,000 visitors from India and China for the first time, showing an 18.2% and 55.9% hike, respectively.
“We expect ongoing growth in business travel from abroad and increases from the other BRIC countries, to sustain growth in the number of foreign visitors. While we do not expect double-digit annual increases to be sustainable over the long run, we do anticipate mid-single-digit advances averaging five percent compounded annually to 11.8 million in 2017,” suggests the report. “The jump in visits from China is especially lucrative, since the average Chinese visitor spends R15,000 per trip, compared with the overall average spend per visitor of R9,000.
The report goes on to say that, “the increase in foreign visitors has been led by an upswing in business travellers to South Africa for events, meetings, exhibitions and conferences. South Africa has become a popular destination for international conferences, and there are more than 200 major conferences scheduled in the country over the next five years.”
Yet, while meetings, incentives, conferences and events (MICE) travel will certainly fill up existing hotel rooms, it’s unlikely to spur a flush of new hotels in South Africa.
The country’s hospitality industry is already highly developed, and expansion is likely to be fairly subdued after the building boom experienced in the run-up to the 2010 FIFA World Cup. As the world comes to Africa, the lion’s share of new hotel development is expected to be in the rest of the continent.
“If you look in particular at Nigeria, growth in the hotel industry in the past few years has been at 45.7% from 2009 to 2012. This is corporate business, as the Nigerian economy expands and investors need hotel accommodation,” notes Forster.
Although constrained by inadequate infrastructure and unreliable power supply, Nigeria “will be the fastest-growing market over the next five years, far outpacing growth in South Africa and Mauritius,” suggests the Destination Africa: South African hospitality outlook report, which acknowledges that “the government is taking steps to improve the situation and a number of international hotel operators, including Rezidor, Sheraton, Tsogo Sun, Protea Hotels, Sun International, Best Western, InterContinental and Golden Tulip, have hotels or have recently opened hotels in Nigeria.”
Nigeria’s energy-based GDP has surged by nearly 40% in the past five years, buoyed by strong international investment, and over 40 hotels are currently under construction or in the pipeline in the country. When they open their doors, they will add over 7,000 rooms to the country’s stock of available bed nights.
That’s in addition to the available hotel rooms that have grown by more than a quarter in the past three years. PwC’s report says it expects the number of available Nigerian hotel rooms to almost triple over the next five years, from 8,000 in 2012 to 21,000 in 2017.
“Hotel operators are flocking to Nigeria,” says the report. “Hawthorne Suites is in the process of building 49 hotels in Nigeria, with a total of nearly 7,500 rooms. Marriott is building the Lagos Marriott Hotel with 150 rooms, which is scheduled to open in 2016. Starwood is planning to open three new hotels, which will raise its total in Nigeria to nine. One of Starwood’s new hotels is a ‘7-star’ hotel planned for Lagos, at a cost of $350-million.”
Crucially for hotel operators – and corporate travellers watching their budgets – a slew of new hotel rooms won’t necessarily see average room rates falling either.
PwC reports that “the average room rate in Nigeria was $275 in 2012, three times the average rate for all hotels in South Africa and 43% higher than the average rate for a 5-star hotel in South Africa,” and room revenue is expected to grow at a compound annual rate of 31.9% per year.
“The hotel market in Nigeria is almost entirely corporate driven, as companies around the world seek to do business in Nigeria, Africa’s most populous country,” suggests the report.
With a slew of new properties promising strong returns for hospitality investors and top-notch accommodation for corporate travellers, the buoyant hospitality sector seems to be a win-win for both hotel and guest.
“The market is definitely still competitive, with travellers looking for value-for-money. And it’s not just about price, but the whole service package,” concludes Forster.
Expert view: Wayne Troughton, HTI Consulting
Hospitality and Tourism International (HTI) Consulting has been advising investors, owners and financial institutions on the hospitality industry across Africa for over a decade. With offices in Johannesburg, Cape Town and Barcelona, HTI operates in 33 countries across the continent, so Business Traveller Africa asked CEO Wayne Troughton, a veteran of the African hotel industry, for his opinion on…
Has the hotel industry in Africa seen growth in the past year?
Each country is a completely unique market with its own macro-economic sectors, so it’s tricky to talk about Africa as a whole. But generally, the continent has seen phenomenal growth over the past year, as there are a number of countries with high GDP growth figures, driven by oil, gas and minerals. These industries are especially good for the hospitality sector. They require more international expertise, especially during the early stages of development, and so they generate more demand for accommodation than other industries. Because of that, most of the growth in the hospitality industry is coming through the corporate market.
Which regions in Africa are showing the best growth?
We’re seeing exceptional growth in East Africa, a shift that has happened in the past 18 months to two years. Tanzania has found gas and is prospecting for oil, whilst Uganda found oil in 2010. Mozambique used to be a poor cousin with its small leisure-focused tourism industry, but that started changing when they found coal in Tete. Then of course, in West Africa there are the likes of Nigeria and Angola.
Where is the hotel investment coming from: abroad, or within Africa?
What is encouraging is that we’re seeing major brands, and luxury brands, coming into the market. Five years ago, the major hotel management companies didn’t even have an interest in entering the African market. But now, Starwood has a team here, Rezidor has a team, Wyndham is moving into the market, Taj Hotels has set up a development office in Johannesburg, Four Seasons has signed The Westcliff and a property in Tanzania, and I believe they will also be opening a hotel in Zanzibar. We’re also starting to see a lot of activity from brands like Accor – it’s all very encouraging. Most management companies have an ‘asset-light’ policy though, so they’re investing very little cash. If you look at where the investment is generated, 90% is from within the particular country. The majority of our consulting clients are in other sectors and are first-time hotel investors.
For these multi-national companies, is there an increased appetite for expansion in Africa, compared with other global regions?
Absolutely. We’ve seen a lot of interest from abroad, as Africa is seen as a new growth market. I particularly see the Middle East as a key new investor on the continent. We’re seeing a big push from the Middle Eastern airlines in Africa, and as they push more and more, you’ll see more investment flowing into those destinations.
But African markets have their own idiosyncrasies…
Some markets are more mature than others. Some are post-conflict, where there are no hotels whatsoever. We’re seeing a lot of growth coming out of places like Sierra Leone, Gabon, Cameroon, Côte d’Ivoire. In these markets, there are hardly any decent-quality hotels. And the big constraint in those cases is the development cost. The cost of building the hotel can be 40, 50, even 100% more than building somewhere like South Africa. Banks and contractors are becoming more flexible and innovative though.
With the global downturn not yet forgotten, are corporate travellers downscaling to more affordable hotels for business travel?
The initial wave of investment in Africa focused on four and five-star hotels, but now – with rising development and operational costs – we’re starting to see a focus on three and four-star properties, due to increased demand for these categories. Also, with the improved quality of three and four-star properties, companies are quite comfortable with downscaling. You also see it in the brands being brought to Africa: Hilton’s biggest growth is looking at the Garden Inn brand, and Accor with Ibis.
There is no shortage of exciting new entrants on the African hotel scene. Business Traveller Africa scouted five hot properties to bookmark for your next business trip:
Park Inn by Radisson; Tete
With the discovery of massive coal reserves in north-western Mozambique, the city of Tete has recently become a resources hotspot. But, until the Park Inn opened, there was a dearth of suitable accommodation for the corporate traveller. That’s all changed with this modern 117-room hotel from the respected Radisson stable. It also bucked the Carlson Rezidor trend of establishing a hotel property in a country’s main business travel city, before moving out to surrounding areas. That’s how big the demand was.
Located just three kilometres from the airport, with an airport transfer service available, the hotel is conveniently located close to the main business district of Moatize. For self-drive visitors, there is secure on-site parking and a concierge service.
As you’d expect, there’s free high-speed wireless Internet in all of the rooms, with a well-equipped fitness centre and outdoor pool for winding down at the end of the day. There is only one restaurant on-site, but the RBG Bar & Grill is a modern, stylish setting suitable for hosting clients. For larger gatherings, there are conference facilities available.
+258 25 22 79 00
Southern Sun Elangeni & Maharani; Durban
Multi-national hotel operator Tsogo Sun is pouring R220 million into revamping two of its iconic beachfront hotels into one integrated resort complex. The Southern Sun Elangeni and Southern Sun North Beach hotels are being refurbished and re-launched as the ‘Southern Sun Elangeni & Maharani’, with the first stage of the transformation already complete.
Situated in a prime beachfront location, the hotel complex is close to Durban’s International Convention Centre, which will make it a popular choice with the thousands of conference delegates that visit the city each year.
When the ongoing renovations are complete, the new complex will offer over 700 rooms, two breakfast venues, two fully-equipped gyms, three swimming pools, 15 conference venues, 11 restaurants and bars, and a Camelot Spa.
+27 11 461 9744 (central reservations)
Slated to open – eventually – in July, the stylish InterContinental is the newest hotel on the Lagos skyline – and an unmissable one at that. With 23 floors stretching 100 metres skywards, it is the tallest hotel in the city and one that is sure to find favour with well-heeled international travellers. InterContinental Lagos is the sixth InterContinental hotel in sub-Saharan Africa, and will be joined by properties in Senegal and Uganda over the next five years.
Pascal Gauvin, Chief Operating Officer, IHG: India, Middle East and Africa, commented: “We are excited to debut our first hotel in Nigeria. With its thriving economy and abundant natural beauty, Nigeria is an ever-growing business and tourism destination. We look forward to further expanding our presence in the region as part of our continued growth.”
Situated on Victoria Island, it is in the heart of the central business district and well placed for avoiding the city’s notorious traffic. The 358 rooms – including 34 spacious suites – boast views of Lagos Creek or the Atlantic Ocean, and come kitted out with all the mod-cons, including high-speed Internet and satellite TV. The hotel offers four modern restaurants, from casual all-day-dining options through to the fashionable Chinese restaurant ‘Soho’, which is sure to become a sought-after destination for business dinners.
There’s a business centre on-site, and meeting facilities range from simple boardrooms, all the way up to the 1500m2 Grand African Ballroom, which can seat 1,400 people. If you’re planning a visit, remember that the standard Internet service is free for all IHG Rewards Club members.
+234 1 23 66 666
Radisson Blu; Lusaka
Carlson Rezidor opened its first Zambian property in late-2012, with the Radisson Blu Hotel in Lusaka. It was the group’s 22nd hotel on the continent, and – as the closest hotel to the airport, yet within easy reach of the capital’s commercial district – is well placed to cater for international travellers.
Rooms start from just 38m2, and are decorated in a colourful modern style that will appeal to corporate travellers. There is both a health club and swimming pool available within the hotel. There is only one restaurant on-site, but an international menu at Filini Restaurant and Bar is at least available from morning until night.
The hotel offers free high-speed, wireless Internet access to all guests, and conference facilities include both meeting rooms and a large ballroom.
+260 211 368900
Town Lodge; Gaborone
South Africa’s successful budget and mid-level hotel group City Lodge spread its wings even further in May, with the opening of the group’s first ‘built-from-scratch’ property beyond the country’s borders.
The 104-room Town Lodge Gaborone is conveniently situated midway between the Botswana capital’s airport and the central business district. Double, twin and inter-leading rooms are available, with wireless Internet through the property (guests receive 15-minutes access complimentary per day). With many travellers to Botswana opting to self-drive, there is plenty of secure parking on-site. Other facilities include a breakfast room, boardroom, 24-hour vending machines, sundowner bar and outdoor swimming pool.
The brand has an excellent reputation within South Africa for clean, comfortable accommodation that places value above frills, and this outpost is certainly a good bet for corporate travellers on a tight budget.
+267 316 0490