DUBAI, United Arab Emirates — There remains a glaring undersupply of branded hotels in Africa, and the pandemic has broadened that gap as owners cannot meet operators face to face, which is a critical component of brand growth.
Panelists at an Arabian & African Hospitality Investment Conference session focused on Africa's hotel outlook said recovery in Africa will be choppy with many challenges still to come post-pandemic and also due to a lack of vaccinations across the vast continent.
The bottom line is that African needs a huge reset, but if things come together, it has both demand and opportunities, although not every country has a rising middle class.
“Africa was complicated by COVID-19, but it was complicated before,” said moderator Philippe Doizelet, deputy managing director of hospitality and real estate at business advisory Voltere by Egis.
Comprehension Reset
Hamza Farooqui, founder and CEO of Johannesburg, South Africa-based Millat Investments, said owners are asking more interested in franchise brands amid a growing number of mismanaged hotel management agreements.
“The quicker brands understand owner requirements and thinking, the more they will see a serious proliferation of capital,” he said.
On the other side of the equation, Farhan Charaniya, director of CHIC Sarl — based in Kinshasa, the capital of the Democratic Republic of the Congo — said there are owners who simply do not understand the hotel industry, which increases the length of time to develop assets.
Andrew McLachlan, managing director of development in sub-Saharan Africa at Hilton, said building relationships takes time.
“Structure and reporting should top lists of concerns," he said. “Sometimes you are dealing with a chief with three or four mobile phones, or you are working with institutions and government where things can fall into a black hole. They speak differently, but both take time. Also, the post-opening two years can be difficult."
Farooqui said brand executives often charge in with arrogant attitude fresh off planes from their big corporate offices.
“Then there are consultants often too closely connected with procurement, and there are mismatched risk alignments, too,” he added.
Ramsay Rankoussi, vice president of development for Africa and Turkey at Radisson Hotel Group, said COVID-19 has made the overall picture in Africa more transparent, which he hopes will help ease challenges such as over-valuations that often make assets not viable from the beginning.
Brand Breadth
Now is a good time for owners and operators to come closer together in outlook, as well as meet up now that airlines are starting to reinstate routes, McLachlan said.
“There is opportunity [for us] with Hampton by Hilton, Hilton Garden Inn, brands with scalability, and with conversions that can help my 20-year-old hotel get back into the market,” he said.
Collaboration leads to the greatest success in the hotel industry, in Africa or anywhere, Farooqui said.
“If alignment, shared interests and transparency come together, great results can be realized, and, yes, conversions provide great opportunities for ownership,” he said.
Other challenges felt in most global markets, Africa included, include lack of human talent — especially professionals with experience in design and construction — and continued red tape, notably a lack of information about the ease of doing business in individual countries.
Additional issues are the cost of capital and a lack of ownership depth in the industry.
“Some developers are moving away from traditional banks, as those banks see hospitality as a risk,” Rankoussi said.
Farooqui said in Africa many hotel owners are single-asset owners.
“Hotel development growth usually parallels gross-domestic-product growth, but this is not so much the case in Africa,” he said, adding his firm is “super-focused on South Africa.”
“Distraction is the biggest cause of failure, but if we’re successful we’ll repeat the process 10 times or more,” Farooqui added.
McLachlan said barriers to entry differ across Africa, and things are likely to always take time, but that if a market can be cracked open there are lots of opportunities.
“Cameroon is one example. We have been there for 30 years,” he said.
McLachlan announced the signing of the 141-room DoubleTree by Hilton Douala, a conversion with owner Société Nouvelle des Cocotiers that is due to open in 2023 and be Hilton’s second property in the West African country.
Charaniya said there are also opportunities for hotel development in the Democratic Republic of the Congo, sometimes referred to as Congo-Kinshasa to avoid ambiguity with neighboring Republic of the Congo, or Congo-Brazzaville.
“There is more political stability there now. Of the world’s 31 principal minerals, 28 can be found in the country, including 20% of the world’s cobalt. There is a lot of domestic growth and demand,” he said.