W Hospitality Group's Trevor Ward and Vernon Page share insights on the business of hotel development in Africa.
Which cities do you feel have been ignored by international hotel groups and which markets are in danger of over saturation?
I don’t think any cities are being ignored! Remember that the international hotel groups don’t build hotels, they brand and manage them, so they are looking for investors and developers to build their hotels for them. Cities like Luanda have no branded hotels, but the big chains have all visited there several times, hoping to find someone who wants them, so far without any luck. There seems to be a cultural angle to that, for some reason – Intercontinental had a signed deal there, but it seems to have withered and died, with the owners intending to run the hotel themselves.
South Africa has very few internationally-branded hotels (as opposed to those branded and managed by Protea, Southern Sun and other indigenous groups), because of the nature of funding there (lenders and investors demand leases from the brand, which the internationals are very unwilling to give) and because the local hotel groups can ‘freeze’ them out of deals.
There is the potential of oversupply in several markets, although that statement is based on what is planned on paper, rather than what is under construction. Accra and Lagos, and to a lesser extent Nairobi, face potential oversupply, but it is unlikely to happen, as demand grows and as planned projects don’t materialise.
In terms of developments in the pipeline in Africa (outside South Africa), South African hotel groups seem to be in danger of getting left behind. Why do you think that is?
They have focused on their home territory, and neighbouring states, for a very long time, where there was plenty for them to do. Protea are one exception, entering the Nigeria market in 2001, and now with 11 hotels open and several others under development. Southern Sun have a few hotels outside SA, but compared to their home-portfolio, it is very small. Having said that, they invest in other countries, unlike Protea and virtually all the international chains. They are bolder, but of course their expansion is more limited because of their desire to be owners, rather than management agreements. Protea have expanded through franchise agreements in countries like Namibia and Uganda.
