Nigeria, which became Africa’s largest economy earlier this year, has been the focus of development activity from both domestic and international operators.
The growth comes as leaders of Nigeria’s Ebola-hit neighbours met with the UN, IMF and World Bank to discuss the epidemic amid concerns about its impact on their economies.
Alpha Conde of Guinea, Ellen Johnson Sirleaf of Liberia and Ernest Bai Koroma of Sierra Leone met with UN secretary-general Ban Ki-moon, IMF managing director Christine Lagarde and World Bank president Jim Yong Kim to discuss money for treatment centres, protective equipment and health care workers.
They also need aid to compensate for falling tax take and increased health care costs. The cost of containing the disease is rising rapidly. In August the World Health Organisation estimated that it would take nine months and cost USD490m to contain Ebola. Last month it upped the estimate to over USD1bn.
The World Bank warned this week (8 October) that the economic impact of Ebola could exceed USD32bn by the end of 2015 if the virus spreads from Liberia, Guinea and Sierra Leone to neighbouring countries. The World Bank said that fear of the disease was spreading faster than the disease itself, with the bank talking of “catastrophic” consequences, including food shortages.
The impact of fear has already been played out in the US, when the announcement of a case of Ebola in the country at the end of September sent hotel stocks down, as investors woke up to the consequences of the deadly disease. That victim has since died.
However, closer to the epicentre of the outbreak, investment in the hotel sector continues across Africa, hopeful the deadly disease will soon be contained.
Delegates at the latest conference on the African hotel market heard of expansion plans, and of the potential for substantial further growth. Liberalisation of air transport across the continent promises to substantially grow tourism, while fast growing economies are driving demand for business hotel accommodation.
In Nigeria the healthy ministry declared the country Ebola free, after the successful containment of the disease. The hotel sector has been marching ahead undented. Transcorp Hotels has tapped the local market for USD49m in an IPO, to fund the development of two further Hilton hotels. The hotel division of the conglomerate owns two hotels currently, including the Hilton in the capital Abuja, and plans to build a 300-room hotel in Lagos and 250 room property in the oil city of Port Harcourt.
“The next three to four years would see our new hotels become operational and boost profit substantially,” said Transcorp Hotels chief executive Valentine Ozigbo. The country’s economy is tipped to grow by 6.75% this year. Also busy in Nigeria is Starwood, which has just signed its tenth hotel in the country, a Four Points by Sheraton Ikot Ekpene that will open next year.
Major brands are adding across the continent. Accor has signed 11 new African contracts so far this year, and is already in 17 country markets with 93 hotels. As well as its economy brands, Accor is also committing its upscale flags, with a Sofitel scheduled for Morocco, and Pullmans recently signed for Addis Ababa, Kinshasa and Nairobi.
Carlson Rezidor, which claims the largest pipeline on the continent with 30 hotels upcoming, added two to the list by signing to open Radisson Blu hotels in Kampala and Accra, adding two further countries to its list. The 195 room property in Uganda will open in late 2016, while the 207 room Radisson at Accra airport should be ready in 2017.
Marriott, meanwhile, catapulted itself into a leading position in Africa with its takeover of Protea earlier this year, with a presence of 120 hotels and 14,000 rooms. It promises 30 new hotels by 2020, of which nine will open by the end of next year. The expansion will take Marriott’s brands from the current presence in 10 countries, to 17. “The potential of the African market is awe inspiring,” commented Alex Kyriakidis, Marriott’s local director.
Both Wyndham and IHG have recently signed properties in Ethiopia. A 128 room Ramada will open in the first half of next year in Addis Ababa as the company opts to use management contracts rather than the franchise route to expand And IHG will open a new build 210 room Crowne Plaza in the city.
One challenge faced in the developing African markets, is how to build efficiently to specification. Both Hilton and Mangalis are developing modular construction methods to speed up hotel delivery.
At Hilton, a new modular concept is to be trialled for rolling out the Garden Inn brand. “We believe that by offering this fast-paced construction solution, owners and investors will see returns more quickly whilst guests will continue to experience the quality and service of Hilton Garden Inn for which the brand is world renowned,” said Patrick Fitzgibbon of Hilton. The guest room and hallway modules are built in a factory in China, and assembled on site. Currenlty, Hilton has nine Garden Inns signed across the continent.
Mangalis has launched an economy brand, Yaas, to add to its previously launched Noom and Seen brands, and this will be delivered using off-site production methods, said chief executive Oliver Jacquin. “As owners are looking for faster ROI, costs and timeline control with more sustainable designs, modular construction is obviously a natural fit. Our solutions allow building in a controlled environment and reduce costs and waste.” The first Yaas is promised for Dakar in the first half of 2015.
David Harper, head of property services at Hotel Partners Africa, was confident of the region’s future growth. He told Hotel Analyst: “I think that there will be a very minor hiccup in hotel development in West Africa based on Ebola, assuming the outbreak runs along the usual lines, where in about three months’ time it is no longer making news. Hotels in the region are finding trading has been adversely impacted – indeed occupancies in parts of Lagos are down 15% this year compared with last, as a direct result on companies advising their staff not to travel to the region.
“The worst of course is that “West Africa” can be quite wide, and countries that are completely unaffected (Ghana & Cape Verde to name two) are still seeing business drop as people think these are affected areas. I even had someone say they could not do business in Rwanda as it was so close to the affected area.
“However we expect that overall development in the region will be largely unaffected. The usual problems of delays, finance and clean title are more significant barriers to development than Ebola in the longer term.”
HA Perspective [by Chris Bown]: Africa may be a continent with great opportunities, but right now it is the source of a big problem – Ebola. The disease emanates from one of the continent’s poorest countries, and internationally, there are accusations that the plight of Sierra Leone has been too long ignored, as it struggles to deal with the outbreak of the killing disease.
Ironically, it may be that the appearance of cases in the West that will wake the international community up to the importance of supporting the control of the outbreak in Africa. A UK conference recently revealed that practical help on the ground, ahead of pledges of cash, is needed, and fast.
With the Ebola threat contained, the continent’s economies can resume their advance. The international brands are already making headway into countries such as oil-rich Nigeria, and appear to have just cracked entry into the Ethiopian market. What will be interesting to see is how they compete with home-grown offerings from companies such as Mangalis. Brand awareness among the locals is currently low, so the first mover will have the advantage.
[Additional comment by Andrew Sangster]: There has been a significant sell-off of travel-related shares in the past few weeks as investors worried that we are facing another SARS-like episode.
The good news is that the demand for travel in West Africa is much smaller than in the Far East and therefore, if the outbreak is contained, the economic impact to global businesses will be minimal.
The wider fear is that any sign of Ebola spreading into developed countries will cause a disproportionate response from travellers and see a significant volume of trips cancelled.
A short statement by Marriott in early October that it was “reinforcing existing global protocols” regarding disease outbreak led to a further sell-off of hotel stocks. And increasing media hype is hardly calming investor fears.
History has shown, however, that the travel industry is quick to recover from short-term blips. Assuming the world does not suffer from a Hollywood-scripted pandemic, Ebola will not leave a lasting impact. There is every sign that Africa will soon be better known as one of the world’s economic growth stories.