11 May 2015
Hotel Industry Leaders Highlight Ten Priorities for Growth in Africa
Date: 11th May 2015
Following a meeting of hotel industry leaders, convened to discuss hotel development in Africa, Bench Events, the organiser of the Africa Hotel Investment Forum (AHIF) has produced a list of ten priorities to facilitate the growth of the sector, under five headings: Long-term Planning, Finance, Development, People and Culture.
The participants in the meeting included senior executives from several global hotel chains, a number of major hotel investors and a raft of expert advisors to Africa’s hospitality industry. The recommendations are as follows:
Long Term Planning
1. Make Long Term Plans
African governments need to make long-term strategic development plans covering wide geographical areas. When they do so, there can be a greater degree of certainty about the local environment for a new (or refurbished) hotel. This reduces the inherent risk of investing in a particular location.
2. Invest in Infrastructure
African governments need to invest in infrastructure with a vision to become a ‘destination’ in their own right. In doing so, they will attract tourists, businesses and investors who are excited by the vision. One very important element of transport infrastructure is an airport and at present five major new airports are coming to Africa in Angola, Kenya, Nigeria, Rwanda and Senegal.
3. Look Abroad for Finance
Governments and entrepreneurs need to look outside Africa, as well as within the locality of their project for finance because many international investors are attracted by the relatively high growth rates of many African countries. Prospective investors are expected to originate from the Middle East, which has good air links and from China, which already has many established businesses on the Continent.
4. See Hotels as an Asset Class
Hotels have not traditionally been seen as an asset class in their own right but this is changing. Hotel ownership can be an excellent way to make a long term bet on the success of a destination and managed correctly, with reinvestment of profits during the lean years of an economic cycle, can be highly tax efficient.
5. Accelerate the Development Process
The more rapidly an investor can move from the point of signing an agreement to purchasing a property and opening for business, the more commercially successful the venture is likely to be. At present a time horizon of 7 years is not unknown in Africa. In response, hotel chains are experimenting with modular construction solutions that would enable them to be up and running from scratch within months.
6. Open Air Routes
Develop more air connections as they are essential to the prosperity of a destination. A wide range of research has demonstrated that air transport is a major driver of economic prosperity.
7. Engage Local Players
Many investors won’t pursue a new hospitality venture in Africa without strong local partners, so facilitating contact between these two groups must be a strategic priority.
8. Bring the Industry Together
Support events that stimulate dialogue about new hotel projects, provide introductions to useful new people and so enable investors to walk through the whole process.
9. Promote Stable Politics
Political unrest of the type that has been seen in North Africa is extremely detrimental to the hospitality industry and has caused several hotel development projects to be put on hold. Serious international investors will only commit funds where there is a stable political environment.
10. Build Trust
Unfortunately, in certain parts of Africa, there are too many stories about things disappearing and commitments not being honoured. That makes all business people wary. So finding ways to build trust is a huge issue that needs to be addressed as a culture change challenge.
Jennifer Pettinger, Managing Director, Bench Events, concluded: “All these recommendations and more will be on the table for debate at AHIF, where we expect strong participation by government ministers and officials as well as the hospitality industry.”