Tourism in Africa driven by business

JOHANNESBURG – The demand for hotel accommodation in sub-Saharan Africa remains robust in spite of problems like Ebola and the destabilising effects of groups like Boko Haram and Al-Shabaab, Victor Kgomoeswana, author and African business specialist told the annual Hotel Investment Conference Africa (Hica) in Sandton on Sunday.

Kgomoeswana said that every country has its issues, but travel in Africa is business driven and therefore less affected than would have been the case if leisure was the big driver.

South African Airways recently introduced an additional flight per week to Lagos and the demand from Nairobi is growing, in spite of security and other risks, he adds.

Some multinational companies have instituted travel bans to East Africa, since their insurance won’t allow travel to the region, he said. Africans, however continue to travel as do Asians. “People from India and China are also from emerging markets and they assess risk in a different way from Europe and the US, where the largest number of cancellations came from, Andrew McClachlan said.

As such, he says reports about Chinese visitors cancelling trips to Africa following the outbreak of Ebola should not be of great concern, because those travellers are still considering trips to the continent. The Chinese that matter to Africa are already here, Kgomoeswana said. “The Chinese commitment to Africa is too well established to be affected by such issues”, he said.

McLachlan, VP Development of the Carlson Rezidor Hotel Group, said the group saw many cancellations early in July in Lagos, following some confirmed Ebola cases in Nigeria. He told Moneyweb the group’s hotels in Sierra Leonne have also been impacted, but not in Senegal and Mali.

He said the group, a leading international hotel operator in Africa, sees cancellations relating to specific issues from time to time, but business travellers always come back. They may postpone their travel temporarily, but the business imperative remains.

It is not clear how long it will be before Ebola is contained. The World Health Organisation said it may take six to nine months for conditions to normalise after it has been contained, McClachlan said.

He said intercontinental travel is still dominant to the major cities, but regional travellers to smaller cities consists almost only of Africans.

Growth plans

The Rezidor is executing an accelerated growth plan in Africa with more than 20 hotels planned in each of Nigeria and South Africa by 2020 and more than five each in Ethiopia, Kenya, Mozambique and Angola.

Gillian Saunders, Grant Thornton Head of Advisory Service said the United Nations World Tourism Organisation (UNWTO) projects 6.1 percent growth in inbound tourists to the region between 2013 and 2020 and 4.7 percent from 2020 to 2030. The region’s market share is expected to grow from three percent to seven percent by 2030.

The fastest growth in outbound tourism is expected to be from Asia and the Pacific. Nevertheless the most travelled market is still Europe, with 89 out of 100 Europeans expected to travel internationally by 2030.

Philip Wooler, Area Director Middle East and Africa of STR Global said occupancy rates in sub-Saharan Africa for the year up to the end of July stood at 59 percent. The average daily rated (ADR) increased by 6.5 percent to $123 (M1 340) and the revenue per available room (RevPAR) increased by 6.3 percent to $73.

She said the hotel pipeline in sub-Saharan Africa currently consists of 142 hotels with 23 283 rooms. 55 percent of these hotels are already in construction. Nine of these hotels with 1 293 rooms are planned in South Africa, with 59 percent in construction.

The top three hotel groups developing the most hotels and most rooms are Carlson Redizon, Marriot and Hilton, Saunders said.

McClachlan said the biggest challenge in developing a new hotel on the continent is the time it takes from signing the deal to opening. Outside South Africa it takes on average four years and in South Africa half of that, he said.

The reasons for the delays are linked to funding and the challenges to get skilled contractors. He said until recently funding was limited to local currency over a four- or five-year term. It often happened that repayment was due before opening. “That’s why there are so many cacasses,” he said, referring to many projects being abandoned before completion.

The funding situation is rapidly improving with dollar-based funding over eight to nine years currently available.

In comparison with other regions the RevPAR in Africa is higher and profitability reached sooner, he said. – Moneyweb


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