Nigeria witnesses growing confidence in hospitality real estate
In commodity-based economies, like Nigeria, the growth of the hotel real estate is an indicator of how well a country is developing its tourism infrastructure especially with the slow recovery from falls in oil prices and production.
Ranks top in West Africa hotel development
Despite the huge influence of the economic downturns on Nigeria’s real estate, investments in the hospitality real sector soared high, accounting for 49.6 percent of the total planned hotel room developments in West African region in the year.
Nigeria’s dominance in the hospitality development is contained in the W Hospitality Group’s 2017 Hotel Chains Pipeline report released last week, showing signs of growing investors’ confidence in hotels development in the country.
According to experts, the growth of the hotel real estate sector is an important indicator of how well a country is developing its travel infrastructure especially in commodity-based economies, like Nigeria, which is slowly recovering from the fall in oil prices and production.
The report highlighted that as many of the countries continue to stabilize politically and economically as well as achieving better integration, it raises the need for quality travel and accommodation infrastructure.
West Africa, the report noted, has a pipeline of 114 hotels and 20,790 rooms, accounting for 42 percent of the Sub-Saharan African hotel pipeline.
However, of these hotel deals signed and planned, only approximately 9,875 rooms, or 48 percent have moved to construction.
In addition, projects in the region have longer than average development periods of approximately six years, compared to the two- to three-year development program that is usually planned. Some of the reasons for these delays are high capital investment required, lack of access to adequate financing options, limited access to raw materials, high construction and material costs, a heavy reliance on importation, inadequate technical capacity to manage the development program, and other barriers to entry.
Of the hotel pipeline for West Africa, Nigeria contributes 49.6 percent or more than 10,000 hotel rooms (in 61 hotels). Nigeria is also the top market in Africa for planned rooms. The other substantial markets in West Africa include; Cape Verde with 11 hotels and 3,478 rooms, and Senegal with 14 hotels and 2,164 rooms.
These three markets contribute a total of 15,955 hotel rooms, or 77 percent of the West African hotel pipeline. Although about 57 percent of the pipeline in these countries has moved to site, however some of these projects have been stalled for some time.
For instance, while 40 percent of Nigeria’s pipeline was signed between 2009 and 2014, a large portion of these projects is still in the “planning” phase.
In Senegal only approximately 44 percent of the deals signed have moved to site. The report noted that although the pipeline of hotels to the sub-region is encouraging and indicative of strong investor interest, the low completion rate of projects could be troubling for the development of the hotel sector.
It is also difficult for the hotel chains whose expansion plans in these markets rely on partnerships with local and foreign investors to develop these hotels. All the major global hotel chains have strong expansion plans to increase their operating presence on the continent, and in West Africa.
The growth strategy for these hotel chains, the report noted, have traditionally relied on their development teams signing deals for new build hotels, primarily with their flagship brands, with local owners.
For instance, Hilton recently announced a plan to support the conversion and rebranding of 100 existing hotels through its Hilton Africa Growth Initiative, by committing US$ 50 million to supporting these conversions.
The Guardian learnt that senior representatives from major hotel groups such as Hilton, Carlson Rezidor and Mangalis, and other key hotel experts will be discussing growth strategies in the ever-changing West African economic environment at the upcoming West Africa Property Investment (WAPI) Summit to held ending of November at the Eko Hotel, Lagos.
Commenting ahead of the conference, Vice President Development Sub-Saharan Africa, Hilton, Mike Collini, remarked on the opportunities presented by the inadequate hotel supply thus: “to overcome this we are looking at rolling our focused service brands in key markets with a focus on our Hilton Garden Inn product. We are also pioneering the use of modular construction with a new Hilton Garden Inn in Accra, which is a fast and cost-effective build model for owners and developers.”
This development was further highlighted last week by the signing of a strategic agreement between Marriott International and Landmark Africa Group for the development of iconic 25- floor hotels in Lagos at the cost of $50 million.
The agreement with a global power brands such as Marriott International, the chief operating officer of Landmark Group , Deborah Nicol-Omeruah said, has a positive outlook on continued investment in Nigeria despite the recent economic downturn.
Nicol-Omeruah noted that Marriott international reviewed over 20 deals in Nigeria this year, and the Landmark deal was the only one they signed.
Landmark, she stressed, has made quite a significant investment into the project already and typically seek to partner with institutional local and international financiers that understand our business and share our vision of a dynamic property development business.
According to her, the estimated cost of constructing the 200 room Renaissance Hotel and 45 room Marriott Executive Apartments is approximately $50Million, while Landmark has already invested $30Million into the project, which includes land acquisition, infrastructure development including protection of our shoreline, international design team fees, world class engineering and local approval fees.
She stressed that the hotel is being developed within the vibrant mixed- use community of the Landmark Village, and no other Hotel in Nigeria offers this unique experience.
Energized by the rapid pace of urbanization that saw more guests looking for the value, convenience and the vitality that mixed-use offers, the project will be a significant addition to the nation’s hospitality real estate sector.
Slated to open in 2021 with ground breaking expected towards the end of 2018, the hotels feature the 216- room full service Renaissance Lagos Hotel and 44- room Marriott Executive Apartment, where guests can relax and unwind on the beach, shop within the retail boulevard, dine and dance the night away at the Hard Rock Café or Shiro restaurants, enjoy a movie at the Filmhouse, or take their kids to play at the Family Entertainment Centre, all within one secure location.
Speaking at the signing of the agreement in Lagos, President and Managing Director Middle East and Africa, Marriott International, Alex Kyriakidis, said there is a growing need for high caliber short and extended stay lodging in Nigeria and expressed belief that the two hotels together will help bridge this gap.
He expressed excitement with the partnership with the Landmark Africa Group on the project, saying that the hotels will offer a wide range of amenities, including local and international restaurants, spa facilities, a fitness center, and an infinity pool with access to a 100-meter-long boardwalk overlooking a vibrant beach club offering exciting watersports.
For Chief Executive Officer Landmark, Paul Onwuanibe, “the Renaissance Lagos Hotel and Marriott Executive Apartments will be a significant addition to our strong Nigeria portfolio”.
He stressed, “Marriott International is synonymous with quality and unique lifestyle experiences globally, which we, at the Landmark Africa Group continuously strive to align ourselves with.We look forward to bringing Marriott’s hospitality and passion for excellence to the Landmark Village setting a new benchmark for mixed-use developments in the region”, he added.