African hospitality. No room at the inn – Africa needs decent hotels, but building them is not easy
Apr 23rd 2016 Economist
Those who have spent years travelling in Africa have learned to do so with good humour. A decade ago, when Angola’s economy was booming, one businessman remembers being forced to share his posh hotel room with a total stranger. More recently, another tells how the water dried up at his smart lodging in Lagos, Nigeria’s heaving commercial capital, leaving him to shower using soda from the minibar. A third recalls inquiring about gym facilities at a big-brand hotel in Ethiopia’s capital, Addis Ababa, only to have an ancient exercise bike dumped at his door.
Bills can be even scarier than the service. Low supply, high construction costs and power problems push charges at international hotels above $500 per night in certain cities. Even at those prices, the lights can go off.
Other than housing bigwigs, hotels create employment (more than two direct jobs for every room, one World Bank study reckoned) and support local industries. Africa badly needs more of them. Khaki-clad tourists have been washing up on its shores for generations, but with fewer wars breaking out their numbers are increasing. The UN’s World Tourism Organisation says that 56m holiday-goers visited the continent in 2014. Within 15 years, it predicts that figure will more than double. And although overall regional trade measures a tiddly 12% of the total, airlines now link east and west Africa, so more locals are travelling internally, too.
Hoteliers are trying to keep up. W Hospitality Group, a Lagos-based consultancy, counts 365 hotels in the African pipeline this year—an increase of almost 30% on the number planned or under construction in 2015. The Hilton is doubling its presence in Africa and AccorHotels, whose brands include Sofitel and Ibis, recently signed a deal to open 50 properties in Angola, which is currently negotiating an IMF bail-out. Nowadays only a handful of Africa’s poorest countries are without big-name hotels. International chains are investing in lower-cost brands, not just watering holes for the rich and famous. Local groups are moving over borders, helped by online booking sites which raise their profile. Azalaï, a Malian company, has bought a string of government-ownd hotels across west Africa. Kenya’s Serena Hotels has 35 destinations in the east and south.
Occupancy rates are reasonable—and so are profits. But getting a hotel up and running is not easy. There are few acquisition opportunities for existing hotels south of the Sahara, so most chains rely on local investors to work with them to build new ones. Often those are fat-cats or families who lack experience and underestimate the costs, which can stretch as high as $350,000 per room, according to Jones Lang LaSalle, a property group. Because profits are slow to materialise, getting finance is a perennial struggle. Starwood, which runs Sheraton and Westin hotels, reckons it takes twice as long to complete a development in Africa as in the Middle East. Andrei Tomilin, who invests in hotels for the International Finance Corporation, thinks that a “very small fraction” of the promised hotels will ever see a cocktail sipped by their pools. In Lagos’ smartest district, the hulking shell of what was supposed to be a Meridien hotel testifies to the trouble. Work on the huge project ground to a standstill last year after its owner defaulted on payments to his bankers.