Kasada Capital Management is an independent investment platform within the Kasada group, dedicated to hospitality in sub-Saharan Africa. The group owns hotels that are operated under its strategic partner Accor’s brands, which include Ibis, Pullman, Novotel and Mövenpick. To date, Kasada has invested in Côte d’Ivoire, Senegal, Cameroon and Namibia.
In a recent interview with the African Private Equity and Venture Capital Association (AVCA), Kasada Capital Management CEO, Olivier Granet, and CIO, David Damiba, discussed opportunities in Africa’s hotel sector. Here are excerpts from the interview.
What makes hospitality an attractive sector for investment?
Our goal is to transform the hospitality sector in Africa from an industry with limited hotel supply built often many years ago and focusing predominantly on international travellers coming from Europe. We believe this is the time to invest, focusing first on the emerging African middle class, representing 80% of guests, to provide them with a new, modern and attractive offer at an affordable price while bringing internationally recognised brands and standards to Africa.
Africa’s growing middle class will drive the demand to the sector. Over the next 10 years, thanks to the African Continental Free Trade Area (AfCFTA), we can expect domestic travel within Africa to increase, and Kasada is well-placed to supply this growing trend with suitable hotel destinations.
Weekend travel has been somewhat limited in Africa, but this is likely to change as the leisure market develops in the region. Some destinations such as Dakar, Senegal have already seen growth in weekend tourism, and we expect to see additional growth over the short to medium term.
Hospitality is an attractive sector for investment because it is a long-term play on real estate with an overlay of tourism, which means the asset class has a real estate asset value supported by recurring cash flow driven by tourism.
In your view, how competitive is the hospitality industry?
The sector is considerably under-serviced, with sub-Saharan Africa having 10-times fewer hotel rooms per inhabitants than developed markets. The presence of international brands is also lower in sub-Saharan Africa compared to other markets with 10–15% in the region vs 75% in the US and 25% worldwide, meaning there is space for international brands to enter the sector and bring their global expertise.
The hospitality sector is correlated to GDP growth both in Africa and globally, so if you accept that in the medium term both will grow, you begin to understand the scale of the opportunity. Apart from Morocco and South Africa, there is a lack of financial platforms involved in the sector, which means there is limited support to help them grow. Kasada is an answer to this market fragmentation to fill the gap to supply suitable financing, management expertise and international standards.
What are some of the trends you’re seeing in consumers’ attitudes towards travel and tourism in Africa?
We are confident in the sector, based on the fact that for the last 30 years, the tourism sector grew on a global basis by 4-5% per annum, driven by the growing global population and growing middle class. There is no reason for this trend not to continue post-Covid.
As some countries ease travel restrictions, we have seen an immediate pick-up in occupancy rates, so there is evidence of a strong appetite for people to travel for business or leisure, as long as conditions are suitable for it.
There will be some new trends as a result of the pandemic that hotels will need to adapt to. It is likely the number of business trips will reduce as people use video conferencing more, but at the same time there will be more requests for flexible working, meaning hotels which traditionally focussed on travellers, will now likely see an increase in the number of guests who visit to work remotely from that location.
Hotels will need to adapt their offering to cater more to flexible workers.
Healthy offerings are also a big driver, with guests more likely to demand locally sourced food from businesses with sustainable practices, especially around waste management, and well-being facilities for example, to ensure they have an experience that is consistent with their values and expectations.