By Moses K Gahigi

Africa’s hospitality industry is showing a bullish outlook as experts project hotel supply to grow by 11% at the close of the year, as countries opt for high end tourism and others position themselves as MICE destinations.

Latest data from STR a firm that aggregates global hotel data indicates that as of August 2017 Africa has up to 301 hotel projects in the pipeline, accounting for 57,011 rooms, and 11.0% of the continent’s existing room supply, marking one of the most progressive years in the continent’s hotel investments.

This comes to find thousands of other hotel rooms newly added to the market as local and foreign investors finally open their eyes to the potential in Africa’s hotel sector and other business opportunities tied to the expanding hospitality industry ecosystem.

“50% of all African countries saw hotel value rise at a greater rate than any other property investment class over the last 2 years”.

75% of all countries have seen increases in the value of hotels over the last two years, while the average growth in hotel values across the continent over the last two years was 6.4%.

Although Africa still has a shortage of branded bedrooms with only 134 bedrooms per million people, compared to 4,325 per million across the Americas or 2,533 across Europe, with the current growth rate and the investment potential in the industry it is just a matter of time for the continent to make the leaps.

Much as it will not directly substitute what has been lost in depressed growth as a result of the fall in commodity prices, earnings in the hotel industry will help cushion some African economies in the short to long term.
Other market dynamics like the depreciation of local currencies against the US dollar and the very increase in hotel rooms, have however shuffled things in the industry affecting performance differently in the various markets.

“Across Africa, we’ve seen mixed performance results to date, in local currencies rates are up in several countries, including Egypt, Morocco and South Africa, but in many instances, you need to consider exchange rates to see the full picture”

“Some other markets are already experiencing performance declines as a result of supply growth, such as Nigeria, Ethiopia and Algeria, so it will be very interesting to see how these markets respond as more rooms continue to come online.” Said Thomas Emanuel, STR’s director of business development.

Nigeria, the country with the most valuable hotels on the continent has pipeline hotel projects that are more than half of the existing hotel rooms, with analysts saying they expect supply growth to pressure the country’s occupancy levels in the near future.

August year-to-date data shows a 1.2% decline in occupancy it also indicates a 6.8% increase in Average Daily Rate (ADR) to NGN47, 819.53, however when measured in US dollars, ADR declined 23.3% to US$149.58 which shows the impact of depreciation.

Egypt’s hotels posted a 70.1% increase in ADR to EGP1,185.53, although the country’s ADR has remained above EGP1,000 each month since November 2016, the devaluation of the Egyptian pound has significantly inflated figures, when reported in US dollars, Egypt’s ADR declined 17.2% for the January to August 2017 time period, dropping to an actual level of US$66.54. Occupancy, on the other hand, rose 17.2% to 52.7%.
Hotels in Ethiopia have also experienced mixed performance levels in 2017 so far, with occupancy down 6.7% to 51.6% and ADR up 8.0% to ETB4, 914.13. STR analysts note that the country’s number of room nights available increased 4.2% compared with the first eight months of 2016, which has affected occupancy levels.

The current disruptions and developments in the hospitality industry are expected to take center stage as all top players in the industry meet tomorrow in Kigali in the annual Africa hotel investment forum where among other things they will come up with an investment road map into the industry, and also address key challenges like the high employee turn-over and discuss how to easily repay hotel loans to avoid being auctioned off by creditors like what happened in Rwanda a few years ago.

Under discussion will also be issues around brand operation, hotel asset management, management agreements, hotel investment opportunities and how Mid-Market Hotels can make it in a fast-paced sector hospitality industry.