African groups are competing with international chains as the continent’s economic growth, improved stablity and ease of travel boost demand for high-end business and leisure hotel rooms.
Good news for the inn-keepers: tourism arrivals to Africa nearly doubled between 2003 and 2010, from 37m to 63m, with international receipts reaching $44bn in 2010 alone. In 2011, Africa saw the biggest growth, with international arrivals up by 7% (United Nations World Tourism Organisation Barometer).
“Never before has the continent offered so much in terms of political stability and economic growth,”comments Arthur Gillis, CEO of South African Protea Hospitality Group. As a result, new opportunities in the hotel sector have revitalised international chains; they have also encouraged local entrepreneurs who are keen to break into the high-end boutique hotel market.
According to W Hospitality Group, a Lagos-based consultancy, Africa (excluding South Africa)’s 54,600 rooms operated by international hotel chains are set to increase by 42% this year. Nigeria has almost 7,000 rooms under contract, the group says – up 2,000 on last year’s figures. W Hospitality Group’s figures do not include South Africa which, with a hospitality industry that’s been highly developed for several decades, is “a completely different market, a different world”, according to Trevor Ward, the group’s CEO.
Protea recently announced a $130m investment in Nigeria, Uganda and Zambia, which is among the biggest projects planned for 2012. Geneva-based Kempinski has made similar investments. It will open properties in Ghana, Kenya and Angola this year, with five more in the pipeline.
Kempinski’s announcement in mid-June about the opening of its tented facility in the Masai Mara game reserve in Kenya pitches it against local luxury accommodation experts like the Heritage Group, which has been operating in East Africa for three decades.
African groups are showing re- markable tenacity despite tough competition from international chains.This year, a multimillion-dollar investment deal between Nigeria’s Grand Towers and South Africa’s Mantis Collection saw the latter agreeing to manage a string of boutique hotels in Nigeria, the leading country for hotel development on the continent in 2012.
Home Grown Success
Three other African chains appear on both the Top 10 Brands and the Top 10 Chains (by number of planned hotels and rooms) compiled by W Hospitality and released this year. Protea, Azalai and Onomo Hotels sit with lead- ing groups such as Accor, Radisson Blu, Mövenpick, Hilton, Park Inn, Intercontinental, Kempinski and Starwood.
International groups are coming off better in the fight worldwide, as they are “endowed with immediate brand recognition and therefore a higher attractability,” says Vincent Guérin, Starwood hotel group’s head of sales and marketing for French Polynesia.
Domestic groups such as Heritage in East Africa and Azalai in Francophone West Africa are vulnerable to competition from international brands, which can leverage “their longstanding policies and procedures of how to run a hotel, their experienced management, their sales and marketing strategies, and more importantly, their distribution channels,” says Ward.
Another strength for international companies, according to Guérin, is that they run franchises, “which tends to ease headaches in the areas of property management, asset review and occupancy rates”.
In Africa, as in many parts of the world, there has been a split between ownership and management, thus global chains now own little real estate. “Sometimes there are four parties split in a single deal: the land owner, the asset owner, the management company and the brand.”
South Africa’s Southern Sun hotel group and Johannesburg airport’s Inter- continental hotel use this model.
Things can be done to help local groups survive the competition. “African governments need to support us, and build up both the infrastructure – roads, airports – but also the necessary schools to train staff “, says Azalai Group’s CEO, Moussadeck Bally.
“And as the investments in this sector are so big, we should be looking at tax breaks.”
Both international and local brands agree the boom has been underpinned by the opening of more direct international and intracontinental flights, which has energised a host of airlines to enter the African market.
This is a far cry from a few years back, when a trip from Nairobi to Accra required a connecting flight in the United Kingdom.
“Direct African flights have changed everything,” says Dunwell Eku, senior partner at ACME Consulting in Ghana