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          Pacts worth over OMR 33 million signed to establish agricultural, fisheries projects

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              Fitch revises Saudi Aramco’s outlook to positive from stable

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              Checking in to Africa’s hospitality revolution

              ArabianBusiness

              June 12, 2017
              in Hospitality, Infrastructure
              0

              African leaders striving to develop their economies without relying on resources are turning to tourism, and international hoteliers from Wyndham and Marriott to Hilton, Rezidor and AccorHotels are not only getting in on the action, but picking up their pace of investment.

              With population growing by 30 million people each year, and projected to increase to 40 million per year by 2050, plus rapidly increasing income levels, hoteliers are announcing multiple new properties at a time.

              “It is hard not to see the potential in Africa purely based on population growth,” says Africa analyst Lars Christensen.

              Hilton Worldwide says it will double its presence on the continent to more than 80 hotels in less than five years. Earlier this month it announced it would manage a 255-key hotel in Kenya’s capital, Nairobi, in what would be the tallest development in Africa. It also plans to operate what will likely be the most extravagant airport hotel on the continent, in Lagos, Nigeria.

              France-based AccorHotels made an unprecedented commitment in 2015, announcing 50 new hotels in Angola in partnership with local firm AAA Activos Lda. The 6,200 rooms will span economy to luxury and gradually open by 2017, despite the country’s commodity bust.

              Its mammoth investment in the southern African state is on top of existing properties across 15 African countries. Chief operating officer for Africa, Antoine Guego, says three of Accor’s Novotel and ibis hotels in Africa are among the brands’ best performers across a region spanning southern Europe, the Middle East and Africa.

              The company believes so strongly in the continent’s profitability it is not only managing hotels but buying into them, and there are plans to invest in 18 key cities over the next five years. They include Johannesburg, Cape Town, Nairobi, Abuja, Abidjan and Dakar.

              “Africa is definitely the continent of opportunity for the 21st century,” Guego says. “We have an ambition to reach 200 hotels by 2020. We have 106 under operation, it will be 110 by the end of the year.”

              Meanwhile, Marriott International was so eager to get its foot holding in Africa in 2013 it bought South Africa’s largest hotelier, Protea, instantly giving it control of more than 23,000 rooms in 138 hotels from Morocco to South Africa. Overnight it jumped from the 13th largest hotel company on the continent (with only ten hotels in North Africa) to number one.

              Having also acquired more than 60 hotels in Africa through its acquisition of Starwood in September, Marriott has moved to open self-branded properties, with the first in Kigali, and now has more than 40,000 rooms in total across the continent.

              But while international brands are spreading their footprint across Africa, few Gulf hoteliers have shown interest. Qatar’s Retaj owns a resort on Comoros Islands, while Katara Hospitality has signed agreements for one hotel each in Sharm El Sheikh, Egypt, and Tangier, Morocco, and Dubai’s Jumeirah Group is understood to be considering the continent.

              Christensen says “foreign investors are largely unaware of the potential in Africa”, while Xander Nijnens, from consultants JLL, says the difficulty in developing scale in Africa can deter international investors, especially smaller players.

              “How can they build a meaningful-sized enough portfolio to make all the effort of coming into Africa worthwhile?” Nijnens says.

              “Traditionally, Middle East outbound investors have been into mature markets, rather than emerging markets. [In Africa], there are very specific markets that have inbound Middle East investment: the Seychelles, Mauritius and Tanzania. You’ll find a lot more Middle East money on the east coast than the west coast.”

              GCC airlines have cautiously expanded into Africa, helping to draw inbound tourists as well as wet hotel investors’ appetite for new markets south.

              Political risk seems to be a factor for them.

               “[Investors] need to focus on one specific market [when assessing feasibility] and avoid lazy analysis. Look at not only headline numbers but get locals to give you a view of the nuanced perspective. Too many investors take snapshots. It’s not a snapshot, [it’s] more of a video.”

              Rezidor Hotel Group regional security manager Tony Johnson says while he often assess the risks to be higher in Africa they rarely make a hotel unfeasible.

              “I never say no, I just advise … it will cost a lot more to cover security,” he says. “But the cost of physical security is not expensive [in Africa, due to cheaper labor]. London, for example, has an outside company come in for daily or weekly checks, they don’t have permanent security men because of the cost.”

              AccorHotels’ Guego says political risks in Africa are generally short-term.

              “Most observers were predicting terrible aftermath of elections in Nigeria [in 2015] and everything went smooth. So we can have short bursts [of tension] but in the long run I think Africa is on the right path of stability,” he says.

              Christensen says contrary to the media reports, investors look beyond political risks. “I’m much more worried about politics in the US and Europe than in Africa.”

              Instead, investors currently in Africa argue that building strong local relationships is more valuable when doing business in Africa.

               “The long-term fundamentals in Africa are extremely positive but what you need to actually make things happen is better governance, better education, better frameworks for people to be able to work together and get these pipelines moving,” W Hospitality Group managing director Trevor Ward says. Even Nigeria, where the economy fell into recession in the second quarter of this year, the currency is in freefall and inflation has skyrocketed 20 percent since the oil price decline, remains a long-term prospect, according to Ward.

              Kenya, Rwanda and Uganda have created an East Africa Visa, and neighboring states are expected to join, too. The African Union announced in July it would introduce a pan-Africa passport by 2018. But it faces a series of enormous hurdles: Few African countries have the smart technology required; dozens of governments would need to agree to remove current visa restrictions for fellow Africans; and in the more developed states there is a fear that citizens of neighboring countries will take their jobs.

              Raphael Kuuchi, vice president Africa for the global airline body IATA, says a pan-Africa passport will eventually happen but not in the way it is currently envisaged.

              “To assume that all 54 countries will wake up one day and all agree to open up their markets, it will take a long time to realize that,” he says.

              “Market liberalization among African states that are willing and able to do so is the fastest way to get liberalization in Africa going. If we do that you’ll see the traffic flows will begin to converge around those countries that have opened up their markets, hubs will generate in those markets; the countries that are left… that haven’t opened up their markets will realize they’re losing traffic, they’re losing business and they will want to join.”

              The same could be said for investors. Africa is a place to be, it is only a matter of where, not if.
              Arabian Business
              12 June
               

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