Sub-Saharan hotel sector to grow by about five per cent yearly
The hotel and hospitality industry is expected to grow by 3 to 5 percent per annum in the next three years according to an overview report on Hotel Real Estate in Sub-Saharan Africa by JLL Sub-Saharan Africa.
Speaking on the first day of the Africa Hotel Investment Forum in Kigali, Rwanda, the group expressed cautious optimism for investors with a forecast of USD 1.7 billion to be invested in hotels in Sub-Saharan Africa in 2017 and USD1.9 billion in 2018.
“…while regional players continue to leverage their first mover advantage to entrench their presence in the sector, global capital will increasingly flow into the region as markets mature and transparency increases,” said Xander Nijnens, the Senior Vice-President Hotels and Hospitality Group at JLL Sub-Saharan Africa.
According to the report, the primary challenge in the market is the lack of projects that meet minimum return thresholds for investors coupled with the lack of foreign currency. Lenders have also stayed away from the market with regard to underwriting operational cash flows with the turnaround pegged on institutional investments.
Urbanisation in Africa sits at 40 per cent as at 2015, and is expected to grow by 44 per cent in the next ten years; while tourism arrivals are expected to rise by 20 million in 2025 from the current 38 million. The report projects hotel room capacity in Sub-Saharan Africa to grow by 2.8 per cent next year.
Speaking to CNBC Africa, David Tarsh Managing Director of Tarsh Consulting, describes the inter-relationships between tourist arrivals, growth in the hotel industry, and attracting investment: “Airports want to attract airlines and airlines are thinking where to fly and risk the investment of putting planes on a particular route, hotels are wondering where to build their hotels. Airlines are more confident if hotels are going up, hotels are more confident if airlines are flying in… now there are two events that are parallel talking about the future air and hotels together.”
South Africa maintains its position as the largest hotel market in Sub-Saharan Africa, accounting for 30 per cent of room supply. Central and West Africa record the largest room supply growth of 9 per cent and 8 per cent respectively every year, as East Africa grows by 5 per cent per annum.