MADRID — The difficulties of developing hotels in Africa have been well-chronicled, but hotel developers and investors might place more scrutiny on its markets than what is deserved.
Developing a hotel anywhere takes time, knowledge, skill, compromise and a trusted partnership, but Africa’s challenges with macroeconomics, regulatory compliance and foreign-currency costs extend the distance to the finish line.
In some of West Africa's key cities, there are perception issues around security, traffic and energy, said Paul Onwuanibe, CEO of developer and owner Landmark Africa Group, during a panel on West Africa at the Atlantic Ocean Hotel Investors' Summit. He added such questions are continually asked about how these issues can be collectively made workable, whereas they would not be a concern or asked as often or at all in other markets.
Landmark has several developments in Lagos, Nigeria, across several real estate classes, including hotels such as the 18-room Landmark Hotel & Beach Resort. Its projects are intended to be mixed-use destinations, a model that is popular across West Africa, Onwuanibe said.
Charles Quao, CEO at at Accra, Ghana-based real estate development firm Quao Realty, manages numerous residential properties it intends to sell to individual owners or manage itself via home-sharing sites such as Airbnb.
“There is huge opportunity for resorts, especially in Ghana, but also elsewhere in the region,” he said.
Quao said his company is interested in the hotel industry, even potentially in launching a hotel brand.
“One hundred percent, we can find the right brand. Local brands do well, though, as it allows locals to connect,” he said.
Geoffrey Simon, chairman of Peninsula City, is going all-in, developing a 355-acre city from the ground up in Sierra Leone. He signed a long lease in late January.
“It is all planned in our heads. We’ve had beginning investors, but now it is time to bring in the big boys. There are perhaps five or six firms in the world that are capable of constructing an entire city,” Simon said, adding the project is a joint venture with the government of Sierra Leone.
So far, the project has raised $200 million through several fundraising stages, he said. The project will include luxury and business hotels.
“When an executive developer is chosen, we will hand the balance sheet to it,” Simon said.
Appetite for Construction
The appetite to develop hotels in Africa is unabated, and several active companies are new players in the continent with headquarters outside of the market.
JS Anand, founder and CEO of Dubai-based Leva Hotels, said he has six greenfield developments in Africa, including two in Nigeria and one in Zimbabwe, and a conversion project in Uganda. Additional projects in Ethiopia, Kenya, Nigeria and Tanzania are being considered, he added.
Barcelona-based Catalonia Hotels & Resorts has an owned-and-operated portfolio of 76 hotels valued at approximately €2.4 billion. Federico Holzmann, Catalonia's director of development and asset management, said the firm has bought land in Zanzibar with the potential for a 300-room hotel.
“We also have a plot in Tanzania. There is a big gap in Africa,” Holzmann said, referring to the continent’s potential.
Despite all the opportunities, getting deals across the finish line often is an uphill slog.
Landmark, which has several plots in Lagos, with branded hotels, resorts and residences, is the “most-vested development company in West Africa,” Onwuanibe said. But he admitted there are always challenges.
For Landmark's hotels, “we’re stuck in terms of management. We’ve tried everything, including third-party management, and now we manage it ourselves, although we are in the early stages of a deal with [an international branded hotel firm], which has signed dependent on a few changes. It is on ice at the moment,” Onwuanibe said.
He added Marriott International has signed a deal on the property’s one new-build hotel.
“Lagos, a city of 20 million people, explodes between Monday and Friday, and its decent hotels have between 80% and 90% occupancy,” he added.