Africa in recent years has become a growing focus for development by major international hotel companies. While North Africa long has been the primary focus in such development, many hotel companies now are turning more attention to sub-Saharan Africa. Lagos-based research firm W Hospitality Group earlier this year reported that, for the first time since it began surveying African hotel development in 2009, the number of international and regional hotel chain deals signed for 2014 outpaced those signed in North Africa. The number of branded hotel rooms planned for the region has grown about 13 percent each year since 2011, according to W Hospitality Group. Tourism Business Council of South Africa CEO Mmatšatši Ramawela spoke recently to Business Travel News senior editor Michael B. Baker about the growth of local African hotel companies in both developing and mature markets on the subcontinent.
Who are the major players to watch locally in African hotel development?
Our big five has been Protea; Tsogo Sun, which is the group that used to be called Southern Sun; the City Lodge Hotel Group, which is the specialist hotel group in the select-service market; Sun International; and Peermont Hotels. With local brands, there’s Three Cities, and that’s pretty much it. The other guys are very small. Marriott buying the Protea stake changed the landscape of the ownership and landscape of the hotels in South Africa and the continent, because Protea had the biggest footprint of hotels on the continent, and they’ve got hotels as far as Ghana, Nigeria, Uganda, Tanzania and Zimbabwe. Marriott has bought that marketshare domination that Protea has, and they can only improve as far as deals they can have across the continent. Sun International has offloaded their hotel component in international operations. Sun International, outside of South Africa, doesn’t own or operate hotels anymore, which will largely affect the hotel presence in places like Zambia and Victoria Island in Nigeria. Anything outside of South Africa, they’ve divested themselves of the hotel component and have sold it to the [Thailand-listed] Minor Group.
What are their current expansion plans?
South African hotel groups are expanding, but mostly the expansion is outward. You are seeing groups like City Lodge that have almost limited their presence within the South African market because of the model—they wholly own the land and wholly operate the product—now, that allows them to do that within the South African space. That whole model is beginning to change when they get out of the country. They just opened a hotel in Botswana and acquired 100 percent of two properties in Kenya. So, they are extending into the other [parts of the] continent, into East Africa: Kenya, Ethiopia and some of the smaller countries, as well as Mozambique, Botswana and Namibia. Angola is a big focus. Nigeria is in the forefront. They’ve got the largest hotel pipeline in sub-Saharan Africa, with Ghana and Senegal coming in. A lot of our guys are exploring opportunities there. There’s a lot of activity as well in Ethiopia. A lot of the international brands have entered the Ethiopian market. I’m not finding a lot of local brands enter that market. Our local brands, if they’re going to East Africa, the farthest point is Kenya, because there are a lot of similarities between us and Kenya and we have a history of doing business with each other over the years.
What’s driving the growth?
There are a lot of resource discoveries in various parts of the continent, especially in West Africa, like oil discovery in Ghana, and there’s the whole rehabilitation of the Ivory Coast and Sierra Leone, despite Ebola putting the brakes on a lot of development happening in that part of the world. Right now and for the foreseeable future, business travel will be the major segment driving travel on the African continent, both intra-Africa travel and people coming from other parts of the world. Also, the middle class picking up means the standard of living is improving and people are being curious, looking beyond their own countries and borders, and that’s driving this activity. When you look at the International Monetary Fund and the top 20 fastest-growing economies to watch, several of those are on the African continent. The buzz is in Rwanda, Angola, Mozambique, Tanzania, Nigeria, Ghana and Ethiopia in terms of economic development and hotel development. Mauritius also is right there. The island is quickly carving a niche for itself as the Cayman Islands of Africa.
Angola’s one of the most expensive countries in the world in hotel terms. Why is that?
Angola is the second-largest producer of oil in Africa, so there’s a lot of activity and interest. There’s money to be made in Angola, and there’s not enough infrastructure. The frustrating thing for a lot of people is while they have this need, a lot of people are not finding it easy to get into that market, so things happen slowly. There aren’t many things in place to support international investment in the country. There’s a little protectionism the Angolans are putting into place. The visa regime in Angola is one of the most onerous, and when you ask the Angolans, they’ll tell you they’re trying to protect their country, because they don’t want to be flooded with undesirable people that end up damaging a fragile market. Angola has almost the same profile as Nigeria: The returns are huge, and you don’t have much supply on the ground, and the Angolans have money. Everybody is clamoring to be in that market.
What about hotel development within South Africa?
Within South Africa, people talk about it being saturated, but there are plenty of opportunities. We like to talk about the triangle, which is Johannesburg, Cape Town and Durban. Cape Town is filling the other market segments, not just putting an emphasis on the four- and five-star hotels but working on good one-, two- and three-star properties. You hear talk about Cape Town wanting to become the business hub for the meetings business, because they know meetings bring a lot of people. The Durban market has a huge plan where it’s reinventing itself, and Tsogo Sun is one of the major investors in the city. In Johannesburg, their focus is on looking into how do they harness, complement and enhance their position as Africa’s business center. There’s a focus on medical tourism, with people coming to take advantage of the private healthcare facilities. There’s also a focus on secondary cities. The focus there is really extending the facilities and hotel space for the business traveler. They are finally finding when they go to those secondary cities, those cities have been served by smaller accommodations and guesthouses. There are business travelers looking for a hotel experience.
How is this affecting Africa’s aviation industry?
South Africa has a small population, relatively, so over the years, we’ve always been struggling with harnessing our low-cost airline model here. There have been airlines starting up and going bust, and that whole development is continuing. We have a couple of airlines starting up, focusing on South African markets in particular but working on the big goal of getting Africans to travel. Air connectivity within Africa is an issue. The state owns South Africa Airways, which is international as well and has feeder airlines locally. It is pleasing that, in South Africa, you can fly not only to secondary cities, like Port Elizabeth, but you can even fly to the tertiary cities. You can pretty much fly anywhere. When you go outside of the country, air connectivity becomes an issue, and that’s the big challenge that Africa faces.