Nigeria has been revealed as being the country with the largest number of hotel projects in the pipeline in Africa.
This was made evident in the recent 2014 Hotel Pipeline report, published periodically by the W-hospitality Group, a hotel, tourism and leisure industries advisory services firm.
The report includes 27 international and regional African hotel chains, covering 38 countries.
According to the advisory firm, Nigeria boasts the most hotel rooms in the pipeline, with 6,614 rooms in 40 hotels. Five North African countries take up the second through sixth positions, and other high-ranking SSA countries in the report include South Africa, Ghana, Ethiopia and Senegal.
While North Africa is a relatively more developed market that SSA, unrest in the north, particularly in Egypt have hampered investment in existing projects and curtailed the number of new hotel deals.
This has led to SSA leading the continent in hotel growth. “Of the 215 hotels in the pipes, 142 (or 72%) are in the sub-Saharan region, a 23 percent increase from the previous year in the region”, the report noted.
Despite the good picture the above fact paints, the SSA region is still plagued by poor project completion rates. Nigeria in particular, records the worst performance in hotel project completion.
An analysis of the project pipelines revealed that, “Nigeria had the least percentage of new rooms under actual construction of any of the countries on this top 10 list. This reflects the slow pace of getting projects started in the country.”
Only 38 per cent of the hotel rooms that are reported to open in 2015 are under actual construction. This most likely means that most of the hotels planned for 2015 will not open on schedule and will be delayed by one or more years.
“This unfortunately is the norm in the African business environment, where development programmes tend to have much longer durations than are originally planned”, says Damilola Adepoju, a senior consultant with W-Hospitality.
The delay in programme execution in Nigeria has been linked to the difficult operating environment, and the unavailability of funds. Where funds are available, they have come at high costs.
Speaking at a press briefing on Thursday while officially launching a new brand in its hotel chain, The Nucleus Group, Splendour Hotel Chief Operating Officer Dimeji Okewale revealed that funding for the project came from sister hotels within the conglomerate.
Project Consultant, Sagbohun, in echoingher comments says “commercial banks are reluctant to lend to long-term projects, and are friendlier towards short term projects like trade and merchandising”.
Okewale also revealed that business challenges faced by the hospitality outfit include the burden of a multiple of taxes, and an absence of basic infrastructure such as water, drainage and power. “Our overhead costs declined by as much as N1 million in two weeks when electricity supply was stable”, she says.
The sub-Saharan Africa region is clearly underserved with quality hotel rooms but increased supply is however hampered by these business challenges.
In spite of the challenges plaguing the African market, international hotel chains still regard the region very highly as a source of future growth.
Carlson Rezidor, Hilton Worldwide and Marriott International still have plans to expand their operations within Africa.
Marriott increased its pipeline from the previous year by 34 per cent and plans to open hotels in 11 countries on the continent. With Marriott’s recent acquisition of Protea, the Washington D.C. based hotel chain has now become the largest hotel chain on the African continent.
For the 2014 pipeline survey, the story is the clear focus that the hotel chains have on sub-Saharan Africa. Also the chains are introducing new brands in the market as they have established their flagship brands. Hilton is building on its brand recognition and introducing its mid-scale Hilton Garden Inn, while Carlson Rezidor, building on the success of its Radisson Blu brand is keen on developing new Park Inn by Radisson hotels on the continent.
According to Transcorp Hotels Managing Director Valentine Ozigbo, “Lagos is multiple countries put together. Its GDP is greater than Kenya’s, Ghana’s and Uganda’s.” “Domestic tourism is on the increase and more people are deciding to take hotel breaks in Nigeria instead of going abroad. At the same time, international traveller numbers are on the increase.” This is a view shared by Okewale.
EDOZIE IFEBI
