African hotel pipeline remains resilient despite unprecedented challenges
The African hospitality investment experts, Wayne Troughton shared unique insights in the first ‘Virtual Hotel Club’ held in early July, a dynamic and informal Pan-African platform for hospitality industry stakeholders to the way forward within the industry at this time of crisis.
Data was gathered from a survey that covered 14 regional and international operators active in the African hotel space (covering 41 hotel brands and 219 projects currently under development). These included the likes of Hilton Worldwide, Marriot International, Radisson Hotel Group and Accor Hotels, amongst others.
According to Troughton, whilst the African hospitality industry is facing unprecedented challenges and obstacles in light of the global pandemic, he noted that development sentiment remains optimistic amongst the majority (57%) of hotel owners as reported by operators on the continent.
“Despite closures and significant performance declines, long-term investment fundamentals for the Sub-Saharan region remain positive, despite significant short to mid-term challenges currently impacting the sector,” he said.
“Of a total 219 hotel projects currently In Sub Saharan African pipeline a large proportion (68%) of these projects are proceeding as planned, with only 18% currently on hold for a limited period, and 13% on hold indefinitely,” he stated.,
“Concerns amongst hotel owners are, of course, still apparent and, for several, a ‘wait and see’ approach relates to factors such as uncertainty around travel ban lifts in various markets, how to restore guest confidence and the impact of Covid-19 on hotel valuations. However, the optimism displayed by many owners generally relates to the understanding of the sector and adoption of a longer-term outlook,” explained Troughton.
Despite the current environment, construction related businesses in several countries resumed development activity as early as possible after lockdowns eased commented Troughton.
“Encouragingly, this has resulted in 21 projects (representing 2946 hotel rooms in 15 African countries) still expected to open in 2020, with 52% of projects expecting short-term delays of 3 – 6 months,” he said.
“Longer-term delays are typically being seen on those projects that were in earlier (or planning) phases of development,” he stated. “These delays can generally be attributed to uncertainty around how long travel lockdowns will continue. However, around 30% of projects under construction don’t expect COVID-19 to cause any delays to their ongoing development,” he said.
Of the overall Sub Saharan Africa Development pipeline, there are 219 branded hotels (representing 33 698 hotel rooms) across 38 markets.
“East Africa remains the region with the strongest hotel pipeline, followed by West and then Southern Africa. East Africa has 88 branded hotels currently in the pipeline, West Africa 84 branded hotels and Southern Africa47 hotels,” stated Troughton.
Of the 21 hotels expected to open doors in 2020, East Africa (40% of total supply) will see 1,134 rooms come on board, with the top cities being Antananarivo (22%), Dar es Salaam (20%) and Addis Ababa (20%).
West Africa (47% of total supply) sees 719 rooms planned to enter in 2020 across major cities including Accra (28%), Bamako (28%) and Cape Verde (24%).
Southern Africa (23% of total development pipeline) sees 963 rooms planned to enter in 2020, with South Africa – Johannesburg (71%) and Durban (21%) – seeing the predominance of activity, followed by Zambia.
As several economies slowly start to open, so too have many hospitality businesses who are remaining positive, committed to the industry and demonstrating the determination necessary to overcome the current adversities.
“Despite pressured economic environments and tough decisions, many hotel operators have been able to successfully conclude and sign deals with owners during the lockdown period. A total of 15 new hotel deals were concluded by 7 operators in 8 countries, from the period March – June,” stated Troughton.
Feedback indicates these deals were close to fruition prior to the COVID crisis, with owners showing strong sentiment to continue with the projects. Further feedback from operators indicates these deals were also typically signed in primary African cities such as Abidjan, Accra, Lagos, and Durban that boasted strong, and diverse hospitality markets prior to the crisis. These locations are also likely to recover at a quicker rate than secondary nodes, believes Troughton.
“Select operators who indicated that no deals were signed during this period pointed out that opportunities remain rife and that new inquiries have still been coming through,” he continued.
“In several instances, feedback from large operators indicates a distinct shift towards conversions over greenfield development going forward, with a more flexible approach to the renovations and PIP costs.”
“Whilst lockdowns have placed many hospitality businesses and investors in a stalemate position, we’ve noticed a positive change over the past few weeks as more and more hospitality businesses resume activities and we begin to see a significant uptick in the commissioning of hospitality advisory assignments,” he noted.
“It is reasonable to assume that a more cautious approach will be taken by hotel owners and investors in evaluating their investment strategy,” he said. “Additionally those markets that are strongest in the area of domestic business travel (and then domestic leisure) should be amongst the first to recover. Indeed, focusing on the local market is what helped Asia recover from the SARS epidemic in the early 2000s.”
“For those owners and operators taking the time to understand the changing markets we are facing, and willing to adapt to drive new demand, the medium to long-term outlook remains good,” stressed Troughton. “At HTI Consulting we continue to believe in the tourism potential in the region and strongly encourage further support from governments and brand managers to allow owners to minimize further losses and support recovery,”
“Despite current challenges and the overall uncertainty that trouble us all, there will be better times ahead and the travel market will eventually emerge stronger and more resilient. As governments slowly roll back travel restrictions and prepare to reopen society, the future winners are those that build a future based on a strong risk mitigation approach and display flexibility and innovation,” he concluded.
Source: HTI Consulting