March 12, 2020 |
Africa has been heralded, for a while, as the last bastion for the hospitality industry. Branded hotel companies are stumbling over each other to put their names to new developments, with 400 new hotels in the pipeline in 2019.
So, what data do we have that supports this confidence and where should hotels be focusing their efforts?
The top five countries in Africa that had the strongest hotel pipeline in 2019 were Egypt, Morocco, Nigeria, Algeria and Ethiopia, with an expected total of 189 planned hotels.
According to Lagos-based hospitality consultancy W Hospitality Group, the number of hotels being planned or under construction for each country are:
Therefore, it would be safe to assume that the hotel operators have been focusing their African efforts on these markets and must have enough statistical data to support these decisions.
The north African market, along with South Africa, is quite established and so we can remove these countries from the list and compile a top five with these exclusions. Again using the data from W Hospitality Group’s Hotel Chain Development Report 2019 we can create the following table for cross-analysis.
There are 130 hotels in development across these countries, which is a substantial amount of hotel real estate and one can surmise approximately 400 new F&B outlets, if one makes the guestimate of one all-day diner, one bar and one speciality restaurant as an average across all types.
By now correlating the economic performances of these countries let us see whether these countries have enough domestic purchasing power to support these efforts.
We have used GDP PPP (Gross Domestic Product adjusted to an international dollar using their Purchasing Power Parity multiplier) to create a level of equality from which to compare the data. Nominal GDP does not take into account the standard of living in a country, whereas GDP PPP does, accounting for the buying power of its population.
By creating a relationship between the adjusted GDP and the number of hotels in the pipeline, we are able to see whether the domestic standard of living supports the number of developments.
We can clearly see that the confidence in Nigeria is merited by a higher GDP PPP, meaning higher investor confidence in the population’s ability to deliver a higher return on investment, (especially foreign investment). The average attributable GDP PPP to a hotel in the pipeline is considerably higher than the other countries on the list.
Ethiopia, which has attracted a lot of Chinese investment, and Kenya both lag a long way behind Nigeria and in fact Kenya has more potential than Ethiopia, despite some high-profile terrorist attacks in its recent past.
Cape Verde and Ghana are interesting in that they rank highly on the 2019 pipeline list but have significantly less purchase power than the other three.
Whilst the traditional split has been Saharan and sub-Saharan, the split above is more geographical with three countries in the west and two in the east. If we were to make a comparison in GDP PPP, we would be able to see where investor confidence should be best placed. The tope five countries by GDP PPP are:
By using the calculations above and creating a pipeline based upon the country’s GDP, adjusted to its standard of living, cost of local goods and services as well as inflation and therefore a clearer indicator of potential investor confidence, we can see that the top five countries with a double-digit pipeline are:
Interestingly, only Nigeria and Kenya appear on both the actual pipeline list and the one above, ranked by GDP PPP. If we look at this from a humanitarian as well as a sustainability angle, it can be supposed that hiring local labour and sourcing local produce for the approximately 350 restaurants created from the above would make financial sense.
Kenya, which shows a dramatically lower standard of living compared to the other four countries, is one that has traditionally attracted hotelier attention. There are currently 68 branded hotels in Kenya and so the addition of these 27 will create an even greater reliance on overseas tourists visiting the country.
February 27, 2020
February 13, 2020
January 29, 2020