During the Africa Hotel Investment Forum hosted in Rwanda in October, delegates from across Africa’s hospitality sector were toasting a bumper year for African tourism and travel.
In the plush Kigali Convention Centre, which features a spiralling dome inspired by traditional Rwandan culture, representatives from 45 different countries were bullish about the direction and speed of travel of the hospitality sector.
Shortly before the forum, two of the largest multinational hospitality companies, Hilton Worldwide Holdings and Hyatt Hotels & Resorts, had announced ambitious plans to expand their operations across the continent. Hilton announced plans to invest $50m over the next five years to add 100 hotels to its portfolio, while Hyatt plans to develop six new hotels in Africa by 2020.
The decision by the American firms to invest comes at a time when the travel and tourism industry in Africa has experienced growth despite sluggishness in the economy. The industry contributed $165.6bn – or 7.8% – to Africa’s GDP in 2016 and this figure is set to rise by 2.9% this year, according to the World Travel & Tourism Council.
Tourism and travel also directly supported 8.8m jobs, or 2.4% of Africa’s total employment. Meanwhile, the number of planned hotel chain developments has doubled since 2009 from around 30,000 rooms in 144 hotels to 73,000 rooms in 417 hotels.
Africa’s hotel industry has proven to be durable in the face of low growth because demand has continued to surge, according to Patrick Fitzgibbon, senior vice president of development at Europe, Middle East and Africa (EMEA) at Hilton Group.
“Some of the driving forces for increased activity in sub-Saharan Africa are the strong GDP growth in parts of the continent, and a rapid growth of both domestic and international travellers into the market,” says Fitzgibbon. “There is also a shortage of quality hotels in the continent, and as the middle class grows, we are seeing higher demand for the quality hotels.”
Around 69% of all travel spend in Africa last year was made by leisure travellers, with the remaining figure being business. The travel and tourism industry received $28.5bn of investment during the same period, which is equivalent to 6.2% of all investment into Africa.
The growth potential for Africa is enormous because of the development seen across the region, according to Tejas Shah, Hyatt’s director of acquisitions and development for sub-Saharan Africa.
“The hotel industry has proven to be resilient because Africa starts from a low base when it comes to supply of high-quality hotels in the continent,” he says. “And Africa also has the right demographics for growth in the middle class.”
The increase in intra-Africa travel is of particular interest for the hospitality sector because at least four out of every 10 travellers in Africa are from within the region, according to Shah. This untapped domestic market has helped drive development policies towards Africa for some of the large multinational firms.
“So there is a lot of demand and we expect continued growth as the continent experiences better connectivity, access to low-cost airlines, and more countries embracing visa-free travel within the region,” he says. “These factors will be major drivers for growth in the hotel industry across the continent.” However, as in any other region in the world, there still exist challenges to the expanding travel and tourism sector.
One of the main challenges facing travellers within the continent is the ease of securing visas for visitors. For example, Nigerians travelling to South Africa have to deal with the laborious task of filling in countless pages of red tape, then attend an interview at the South African embassy nearest to them. But a UK tourist travelling to the same location can simply collect a visa on arrival.
However, some nations, such as Ghana, have made great strides to improve the ease of getting a visa on arrival or have even implemented visa-free travel for Africans. The African Union has also mooted the introduction of a single African passport that mirrors Europe’s frontier-free Schengen area. Currently, the Seychelles is the only nation on the continent that offers visa-free access to all Africans.
Another challenge, which is also prevalent in most emerging markets, is the weak infrastructure and interconnectivity that predominates outside the capital cities in some countries. However, most African countries have invested significantly to try and improve infrastructure in areas beyond their central economic hubs.
“There is a misperception that Africa has more challenges than other markets,” says Fitzgibbon. “There are issues just like in more developed markets which you have to work around. For example, it’s still really challenging for Chinese visitors to get a UK visa, so every market has its challenges.”
Meanwhile, some analysts have highlighted political instability in places such as Kenya as a reason for the chronic shortfall in supply of hotels across Africa. However, this view is disputed by Fitzgibbon.
“Instability, like we are seeing in Kenya, does not dent our confidence or plans in the country,” he adds. “Hotels are long-term investments and we have to adapt and work through each cycle and, by the way, instability is not only an African challenge – look at Brexit or Trump and you can see that there is no perfect market.”
Despite the challenges in Africa, hotel chains are popping up across most markets across the continent. The potential for long-term growth remains positive in the future.
The travel and tourism industry is set to continue its trajectory of growth, with the total share of Africa’s GDP rising year-on-year to reach $170.5bn. The tourist hubs of Tanzania, Kenya and South Africa are forecasted to see significant growth in visitors.
Meanwhile, commodity-export countries such as Nigeria and Algeria should also see an increase in business travellers. There will also likely be a proliferation of branded hotel chains across Africa as the large companies expand their businesses.
“Africa is an exciting market because it is still in its infancy and there is plenty of room for growth. People want to travel to the continent and once they do they will more than likely return,” Fitzgibbon says. “We expect to see sustained growth overall and because there is a shortage of quality hotels, I think that the market will prove to be resilient.”
from African Business Magazine http://ift.tt/2kKtimL