Africa View

How Africa is getting ready to welcome more travelers

Thomas Page, for CNNPublished 13th November 2015
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(CNN) — Is there room at the inn?
There might not to be in some parts of Africa, but that is set to change.
The continent's hotel industry may account for less than 5% of sector transactions globally, but demand is on the rise -- and with it investment.
The sector is expecting an injection of $2.7 billion by 2018 according to a recent report from consultancy firm JLL, and over 42,000 new hotel rooms are expected to be built across Africa between 2014 and 2017.
As it stands, there are approximately 581,000 hotel rooms across the continent according to a new report from Hotel Partners Africa. That equates to approximately 106 rooms per million people.
57% of the continent's rooms are north of the Sahara -- or 435 per million people. Egypt, Morocco and Tunisia contain the lion's share, whilst South Africa also joins the club of nations with in excess of 30,000 rooms.
Sub-Saharan Africa may trail behind in the statistical head-to-head with 76 rooms per million, but the region expects an average growth of 9,000 new rooms per year, with supply expected to grow to 4% annually by 2017. This compares to a relative slow-down in the north, where 5,000 new rooms are anticipated between 2015 and 2017. According to JLL political instability is at least partially to blame, with the same reason ranking second highest in its survey of barriers to investment in Africa.

A better climate for investment

"The investment market in Africa is improving almost daily," says David Harper, head of property services at Hotel Partners Africa.
"More and more people [are] reviewing options more seriously than ever before... In eight countries growth averaged over 6% [in the last six years]... To set that in context, average hotel prices in Europe went up less than 1.5% per annum in the same period."
One factor behind the surge in demand is a resurgent tourism industry, expected to increase 5.7% yearly between now and 2030, significantly higher than the 3.6% anticipated globally.
This, paired with the draw of progressively diversified economies, perhaps explains the increased influence of global hotel brands, whose presence accounts for 22% of total rooms. Such hotels are mostly operated via franchises and management contracts according to JLL, with very few leases.
That being said, approximately 75% of investment in hotel real estate in Africa currently comes from local and regional sources, among them sovereign wealth groups, particularly in the northern region.
Daily room rates may be down in Sub-Saharan Africa from their 2010 peak of $145, but JLL claim the average rate in the first half of 2015 of $118 is due to the appreciation of the dollar in the global currency market.

Diversifying the market

These prices are an attractive prospect for travelers. As fears surrounding the Ebola outbreak dissipate, monitoring company ForwardKeys noted a 6.4% increase in international arrivals to Sub-Saharan Africa in September. Flight bookings from October 2015 to March 2016 are also up 4% on the same period last year.
Development of the sector is an attractive prospect for both investors and customers, and as the spectrum of travelers widens, so too is the variety of accommodation.
"Opportunities are available across various segments, with upper-scale hotels, mid-career hotels and serviced apartments leading the way," according to Harper.
"Hotels outperformed an average of other property investments in 76% of Sub-Saharan countries over the last six years -- and there's no reason to think this will change."