Cape Town - Global hotel chains are poised to spend hundreds of millions of dollars in Africa over the next few years to meet increased demand from both international tourists and the continent’s own fast-emerging middle class.
Africa was the only region in the world to show growth in tourism in 2009, according to the World Tourism Organisation. In 2010 international arrivals rose by 6% to 49 million, slower than Asia or the Americas but double the growth rate for Europe.
Industry executives say that as consumer spending stalls in developed markets, more multinationals are betting Africa’s growth will eventually translate into meaningful revenue - if they can negotiate the considerable regulatory and infrastructure challenges of doing business there.
InterContinental Hotel Group, Accor, Starwood and Rezidor Hotel Group, the group that operates the Radisson Blu chain, are among those looking to capitalise on the continent’s urbanisation and build up its underdeveloped hotel industry.
“In the last 48 months we’ve added 33 hotels - some already opened and others under development - to the African continent,” Andrew McLachlan, Rezidor’s vice-president for business development Africa and Indian Ocean islands, told Reuters.
“If we don’t have any curve balls, we should open another eight hotels in 12 months across five countries,” he said, adding that almost all developments were being undertaken by local owners.
Among the projects planned was a $40m Radisson Blu upscale hotel in Maputo and a 120-room R300m lodge in the Kruger National Park, expected to open in 2013.
“When looking for growth it’s only natural to look at Africa, (which is) not as badly affected by a slowdown. There is potential for higher growth for hotels here than in traditional markets,” said Martin Jansen van Vuuren, a director at consultancy Grant Thornton Strategic Solutions.
Sub-Saharan Africa’s economies are expected to grow at an average of 5.5% in 2011 and just under 6% in 2012, according to the International Monetary Fund. While that’s still short of China’s blistering expansion pace, it handily outpaces most of the developed world.
Hurdles and challenges The market for higher-end accommodation is woefully underserved on the continent.
“We consider that there are a large number of capital cities in this continent where we either have no representation or insufficient, and if you ask me what my objective is for the next five years, it is to begin to redress that imbalance,” said Michael Cooper, InterContinental’s vice-president development for sub-Saharan Africa.
Encouraged by the economic and political outlook, InterContinental is looking for opportunities in Cape Town, Dar Es Salaam and Addis Ababa as well as Africa’s west coast, Cooper said.
IHG is currently building three new luxury InterContinental hotels in Kampala, Luanda and Lagos.
But expansion in the world’s poorest continent does not come easy. Many of the hotel developments come up against the ubiquitous challenges of infrastructure constraints, corruption and regulatory hurdles, which combine to cause higher costs and lengthy delays.
In the Angolan capital of Luanda - the world’s most expensive city - Rezidor is expecting to import everthing except cement for its flagship Radisson Blu, already delayed for 15 months after local authorities decided to build a road through the site after initial plans were agreed, McLachlan said.
“Sometimes, even when you are a city centre hotel, you’ve got to design your hotel as if it was on an island with your own water purification, sewage plant, and even generate your own electricity.”