Hotel development in Africa to be affected by COVID-19 – report

AFRICA – The Covid-19 pandemic will impact the development of new hotel properties in Africa, reveals a new survey by the W Hospitality Group – shattering the dreams of Africa’s hotel industry.

According to the survey, the African hotel development had returned to growth at the start of 2020, with more than 78,000 rooms in 408 hotels in the pipeline.

“The growth of the chains’ presence in Africa has been a very positive story since we started this analysis in 2009. It is quite clear from the numbers that the chains, the developers, the investors – and all of us at W Hospitality Group! – continue to believe in the opportunities that Africa presents in the hotel and tourism industry,” W Hospitality Group’s Managing Director, Trevor Ward, said.

“However, our industry has been devastated by the impact of COVID-19, possibly more so than most other economic sectors, mainly because of the almost total shutdown of borders and of the aviation sector – no flights means no guests.”

This year’s African Hotel Chain Development Pipeline survey covers 35 international and regional hotel contributors across the 54 countries in north and sub-Saharan Africa, and in the Indian Ocean islands. It reveals a 3.6% increase on the 2019 pipeline.

Most encouraging was a record 68 chain hotels opening last year, fully 75% of those which were scheduled to open, with 11,000 rooms. That performance was substantially up from the 39% of those scheduled to open in 2018 actually doing so.

According to the report, the Accor hotel chain performed particularly well; it opened 18 hotels in 2019 with almost 3,500 rooms in its various brands, ranging from Ibis to Fairmont.

“With that background, we see a slowdown in pipeline growth in 2020, as we all get to grips with the new reality. With so many of the players locked down, fewer deals will be signed, and it is inevitable that some of the planned openings in 2020 will be delayed, due to closed or slower-paced construction sites, restrictions on funding and a lack of market demand,” said Trevor.

“According to our latest data, there are 90 hotels with 17,000 rooms scheduled to open in 2020, but we estimate that at least half of these will be delayed, bringing the actualisation rate down to no more than 40%.”

Marriott, the world’s largest hotel chain, has the largest pipeline in Africa, 22 per cent more hotels and 6 per cent more rooms than second-placed Accor, but Accor has been catching up fast, signing 25 new deals last year, compared to Marriott’s 17 new projects.

The report notes that if Accor can open its hotels in 2020 at the same rate that it did in 2019, it is likely the company will overtake Marriott and position itself as the largest operator in Africa. 

“We have to wait and see what will happen in the second half of 2020, and in 2021, as we emerge from lockdown and other restrictions. Tourism is such an important industry in Africa, because of the direct and indirect jobs that it creates and sustains, as well as its strong foreign currency earnings. We are anxious to see hotels reopen and get back to contributing to the African growth story,” Trevor Ward said.

“Right now, we are facing the biggest recession in history. For those seeking to operate hotels, it is a dreadful time. However, for the savvy investors, this is actually a moment of opportunity because hotels are a long-term investment and one of the secrets of success is to spend money during the bottom of the economic cycle in order to capitalise on the upturn as soon as it comes,” Matthew Weihs, Managing Director of Bench Events, said.

Plans for more than 70% growth in rooms

According to the report, big brand hotel chains have planned significant growth in properties and rooms in Africa to take advantage of rising demand in the continent, with the chains set to grow their hotel rooms by 70% from 64,216 rooms to 91,767 rooms, boosting their hotel properties from only 310 to 463 across Africa.

The Marriott International group of hotels have in their pipeline plans to add 90 properties to its existing 139 properties – ending up with 229 proprieties in Africa – with plans to grow its rooms from 24,567 rooms to 42,469 rooms, an increase of 73%.

The Accor Hotels group plans for 16,868 new hotel rooms from the existing 25,688 rooms, a 66% growth to 42,556 rooms, making the operator the largest hotel chain in Africa – if its plans remain as envisaged – and add 74 new properties from its existing 155 hotels, resulting in 229 total hotel properties in Africa.

The third biggest player, Hilton Hotels & Resorts plans to grow its properties from 48 to 101 in Africa – while increasing its hotel rooms from 13,344 rooms to 23,437 rooms, an increase of 76%.

The Radisson Blue Group plans to boost its hotel rooms by 89% from 8,254 rooms to 15,639 rooms, nearly doubling its capacity, while increasing its properties from 41 to a total of 79 properties in the continent.

The top five player InterContinental Hotels Group has a strategy to increase its rooms by 42% from 6,329 to 8,971 rooms. It will also grow its hotels from 27 to 40.

Other top hotel players who are also on a spending spree in the continent include Barceló Hotels & Resorts, Meliá Hotels & Resorts, Hyatt International, Mangalis Hotel Group and the Deutsche Hospitality.

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