Opportunities in investing in Africa’s hotel industry substantially outweigh the threats, says Philippe Doizelet

AFRICA – Today, Africa is seen as one of the most promising regions for hotel developers.

Aside from small chains and independents, four global hotel groups dominate signings and openings on the continent.

Over the last four rolling quarters, as of September 2019, Accor, Hilton, Marriott International and Radisson Hotel Group have opened 2,800 rooms and signed deals for 6,600 rooms.

Across Africa, hotel development remains important in most advanced economies, such as Morocco and South Africa; and projects are multiplying in East Africa, especially in Ethiopia, Kenya, Tanzania and Uganda.

In West Africa, Nigeria is back on the development scene thanks to emerging regional destinations beyond Abuja and Lagos.

Francophone Africa is also moving fast. The Ministry of Tourism of Ivory Coast has launched an ambitious national plan for tourism development, Sublime Cote d’Ivoire, and already announced over US$1bn investment in the sector.

Senegal is the other regional star, with local programmes such as Diamnadio, Lac Rose near Dakar and Pointe Sarene.

Other countries showing active hotel development include Benin, Cameroon, Guinea, Niger, and Togo

Philippe Doizelet, Managing Partner, Hotels, Horwath HTL, attributed this increased investment in the hotel industry to four factors: Air connectivity, Better economic growth, Currency and Demographics.

Air Connectivity

In the past few years, additional flight connections have transformed travel to and from West Africa, which, according to Doizelet, has been a game changer.

It is now possible to fly direct from New York to Abidjan and to Lomé, thanks to the rapid growth of Ethiopian Airlines and other carriers, such as Emirates, Kenya Airways and Turkish Airlines.

His claims were supported by a UNWTO report which showed that international tourist arrivals in Africa grew by 7% in 2018 making the continent one of the regions with fastest growth rates in the world.

Flight data analyst, ForwardKeys, also recently confirmed that trend continuing. In 2019, African aviation experienced 7.5% growth and it is the stand-out growth market for Q1 2020.

As at 1st January, international outbound bookings were ahead 12.5%, 10.0% to other African countries and ahead 13.5% to the rest of the world.

Doizelet noted that with increased travel comes increased commerce and demand for accommodation which in turn makes investment in hotel development very lucrative.

Better Economic Growth

The second factor is the superior economic growth of many West African countries, which are expanding substantially faster than many of the world’s most advanced economies.

According to World Bank data for 2018, several countries in the region including Benin, Burkina Faso, Gambia, Ghana, Guinea, Ivory Coast and Senegal are growing at 6% per annum or better, more than double the world average, 3%.

That is a potent attraction to international investors. However, that’s not all; as prosperity grows domestically, so too does the local financial services industry.

As financial institutions grow, the next thing that they would want to do according to doizelet is invest client monies; and a good proportion of that capital gravitates towards real estate projects and, in turn, new domestic infrastructure.

Dozelet notes that as those projects come to fruition, more prosperity is generated and so a virtuous cycle is stimulated, which acts as a catalyst for further economic development.

Currency

Currency is the third factor. Later this year, the CFA franc, which is pegged to the euro, is planned to be dropped and 15 countries in West Africa (ECOWAS) will adopt the Eco, a new, free-floating, common currency, designed to reduce the cost of doing business between them and so increase trade.

Demographics

The fourth factor is demographics. The population in the African continent is young and the fastest growing of any major world region.

According to Philippe Doizelet, it is also characterised by a hunger to learn and confidence about the future.

“People are seeing their standards of living improve and they are keen to seize opportunities.

We are seeing that mindset reflected throughout the hospitality industry; it’s incredibly refreshing and it’s attracting business.” He said.

Challenges

However, the picture is not all rosy. Horwath HTL also identifies four factors which threaten economic progress; they are security issues, political agenda, governance and increasing public debt.

The firm notes that although Africa today experiences much less conflict than it did three or four decades ago, when most African countries experienced war, some parts of the Sahel are still subject to security threats.

On the political front, although democracy is continuing to spread, it is not yet the general rule everywhere, especially when come the times of major elections.

Third is governance. Philippe Doizelet says: “When people are poor and the state is weak, there will be corruption, but I’m not convinced that it is much worse than in other parts of the world.”

The fourth concern is rising public debt, much of which has been incurred as long-term loans from the Chinese to build infrastructure.

That said, the debt to GDP ratio of many West African states is still less than many highly developed nations.

Opportunities outweighing the challenges

Despite the challenges witnessed in doing business in Africa, stakeholders in the hotel industry are of the opinion that the continent is still attractive to local and foreign investors due to the immense opportunities that it offers.

Matthew Weihs, Managing Director, Bench Events, which organises FIHA, says “Africa is not the easiest place to do business, but it is an incredibly exciting place because the opportunities substantially outweigh the threats.

Every time we organise a hotel investment forum, I see more hotel openings being announced and I meet new players keen to enter the market.”

Horwath HTL is the world’s largest and most experienced hospitality consulting brand, with 45 offices around the globe.

 Founded in in New York in 1915, it has been providing impartial, specialist advice to its clients for over 100 years and is recognised as the market leader in all areas of hotel, tourism and leisure consulting.

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