“We would like to have a hotel in every major gateway city in Africa,” says Patrick Fitzgibbon, senior vice president of development for Europe and Africa at Hilton Worldwide. After more than 50 years in Africa, Hilton is aggressively seeking to expand its portfolio in the region, riding on increasing travel, a growing middle class and local investors willing to bet their money on the international hotel brand. [hidepost=9] [/hidepost]
According to Fitzgibbon, now more than ever, there is demand for more hotels in Africa.
“I think over recent years as travel has increased globally, there is more and more demand for travel to many parts of Africa. All of that travel leads to an increase in demand for hotels. If you take a market like East Africa particularly, we have had a presence in Nairobi for many years, we have a hotel under construction in Kampala, we have hotels opening in Dar es Salaam, and there are still many other markets where we continually look for opportunity based on demand from customers.”
Fitzgibbon says there is “a huge under supply of good product” in Africa at a time when “so many people want to travel” to the continent. The demand, he adds, spans beyond luxury hotel rooms to mid-market and budget hotel rooms.
“As a continent there are many, many opportunities in many different parts of Africa. From our perspective, we’ve got 37 hotels open today across the whole continent. We have another 17 hotels in some sort of development [in Africa] in what we call our pipeline. Just [last month] we signed a new hotel in Lagos, Nigeria which we are building with the current owners (Transcorp) of our existing hotel in Abuja which has been there for about 25 years,” he says.
The new 200 room Transcorp Hilton Lagos is expected to open mid 2016.
A number of other international hotel brands such as Marriott International, Wyndham Hotel Group, Rezidor Hotel Group, InterContinental Hotels, Hyatt International, Lonrho Hotels and Kempinski Hotels are also expanding across Africa.
However, Fitzgibbon notes that competition is not a concern just yet as the hotel room per million people ratio in Africa is still low, meaning the market is big enough to accommodate many rooms and brands.
“For us, it’s about making sure we operate our hotels to a standard that means that our travelers want to come time and time again. It’s not something that we are concerned about. I think [competition] helps grow the infrastructure of the travel and everything that sits around it.”
While there are numerous opportunities and huge returns in Africa’s hotel market, there are also challenges that make the construction of new hotels difficult.
“The challenge for investors is making sure that all the elements that they need are easy to manage… approvals and permits. It’s about making sure that for an investor those things are easy to do and easy to manage. One of the things that we would encourage government to do is to try and make sure that those processes are in place, they are very transparent and they are something that an investor can get done quickly and effectively.”
The process of importing construction materials that are not available locally should also be made possible in “a seamless manner”, says Fitzgibbon.
“What nobody wants to do is to see products sitting in a customs warehouse for long periods of time because the process is difficult to release them.”
Africa and its complexities
Hilton Worldwide’s approach of partnering with local investors has worked to its advantage in overcoming hurdles that come with operating in a continent of diverse cultures, regulations and work ethics.
“Many markets are different. Even in Europe if you are investing perhaps in the UK or France or Russia… it’s different. The reality is you need to have good local knowledge – people based locally – and that’s really where you are successful,” he said. “We tend to work with local investors who have local knowledge, understand the culture and have banking relationships.”
Risks associated with doing business in Africa can easily be mitigated he says.
“I think the risks are not African risks. I think they are risks in development anywhere in the world. I don’t think the risks are any higher or any different. In every market there are specific risks that you need to understand but most of those can be mitigated by really good planning and bringing the right people on board.”
‘It’s a great time for Africa’
Fitzgibbon is optimistic about Africa’s prospects, saying it is “a great time for Africa” and it will probably be so for “another 30 years”.
“I think there is opportunity around the world. I think there is specific opportunity in Africa at the moment really because in many parts of Africa there is a shortage of supply. I think it’s a great time for Africa. I think it’s also still a great time for other parts of the world too. We are very focused on Africa because we do see real opportunity here.”
But to fully benefit from the continent’s opportunities, certain measures need to be put in place. Michael Cooper, Hilton Worldwide vice president of development for Central, East and South Africa, says there is a need to make African countries visa friendly and open up the air space.
“There are too many countries in Africa, which even if they preach wanting tourism… they then promptly have in place visa requirement which immediately will put off travel,” he says. “I know it’s difficult for governments to give up their flag carrier to make them become profitable, but I will say this is something our industry needs.”
Fitzgibbon agrees. “If you were to go round the world and ask people the things they would like to do, Africa is almost on everybody’s list as a place they want to travel. What we need to do now in Africa is to make that easier.”