Africa’s hospitality industry has seen huge growth around rising commercial centres and natural resources extraction, with many international brands – such as Radisson Blu, Four Seasons, Marriott and Protea Hotels – growing their footprint across the continent. [hidepost=9] [/hidepost]
According to Wayne Troughton, founder and CEO of hospitality and property consulting firm HTI Consulting, hot markets for hospitality expansion include Ghana, Mozambique, Tanzania, Kenya, Ethiopia, Nigeria and Angola – many of which are developing around resource extraction.
However, he added that frontier markets in Africa that have recently emerged from conflict situations are also seeing potential for investment in hospitality.
“Frontier markets, post-conflict states… a lot of them don’t even have one decent hotel. So there are a lot of opportunities,” Troughton told How we made it in Africa.
For over 10 years HTI Consulting has been providing financial and development consulting for the hospitality industry in 35 countries in Africa and the Middle East. With many hotel management companies and investors becoming more positive about the potential in Africa, Troughton said he has seen the appetite for post-conflict markets increase.
“These are markets that they typically didn’t want to look at five years ago but now, because their footprint has increased in some of the other major markets, they are now looking at these frontier markets and there is good opportunities for them because these markets are crying out for one or two good hotels,” he continued.
“And their first mover advantage is quite important because if you get in with a new hotel development it can often stop the development of others until demand picks up. [These markets] are coming out of conflict and some of them have found oil but the GDP growth is in the very early stages of growth, so they are in their infancy in terms of economic lifecycle.”
He explained that generally the first hotels to be developed in these post-conflict markets are four and five star international hotel brands, while more mature markets like South Africa are seeing a demand trend towards three to four star hotels.
“Nigeria is sort of moving towards that maturity… You start to see segmentation [in the hospitality industry] where you see the biggest opportunities in Nigeria [now] are actually in the three or four star market… and what you also see coming with that is the growing middle class and more local business travel, and they want to stay in the three and four star [hotels]. So that is driving growth.”
Demand for conference facilities in Africa
Troughton said Africa’s hospitality industry is also seeing a huge demand for conference facilities.
“It’s one of the markets in Africa – what we call the MICE market (meetings, incentives, conventions and exhibitions) – which is largely untapped… I think it’s a hot topic that governments and countries are looking at developing international convention centres as a means of attracting, and also stimulating, hotel demand. In Mozambique they are looking at it at the moment. In Rwanda they are busy constructing a large international convention centre.”
He added that there is also a demand to develop these conference facilities close to airports, such as in Lagos and Accra.
Demand for mixed-use developments
Another major trend being seen in Africa, according to Troughton, is mixed-use developments in which a hotel is attached to a shopping mall, for example. He added that very often mixed-use developments can generate anywhere between 15%-20% more revenue than a stand-alone hotel.
“In Africa it’s even more important because you have a lack of infrastructure… there are security issues and people don’t want to travel at night, or restaurants are not available elsewhere. So if you can keep it all in one particular node [it is an advantage].”
Furthermore, Troughton said there is trend of converting and developing old, distressed buildings, often owned by governments. He highlighted that these developments usually offer good opportunities for investors who can get them at lower prices and convert them profitably. “We are seeing a lot of this happening in Africa at the moment,” he emphasised.