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posted: 10/7/2012 7:00 AM

Africa in the middle of a hotel building boom

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  • A receptionist takes a call at the front desk of the Sankara Nairobi hotel in Nairobi, Kenya. International hotel developers are planning nearly 40,000 new rooms across Africa in the coming years, the continent's business travel is increasing, and Africa's middle class will soon begin leisure travel en masse.

      A receptionist takes a call at the front desk of the Sankara Nairobi hotel in Nairobi, Kenya. International hotel developers are planning nearly 40,000 new rooms across Africa in the coming years, the continent's business travel is increasing, and Africa's middle class will soon begin leisure travel en masse.
    Associated Press/September 2012

  • A member of staff wheels drinks at the rooftop pool of the Sankara Nairobi hotel in Nairobi, Kenya. International hotel developers are planning nearly 40,000 new rooms across Africa in the coming years, the continent's business travel is increasing, and Africa's middle class will soon begin leisure travel en masse.

      A member of staff wheels drinks at the rooftop pool of the Sankara Nairobi hotel in Nairobi, Kenya. International hotel developers are planning nearly 40,000 new rooms across Africa in the coming years, the continent's business travel is increasing, and Africa's middle class will soon begin leisure travel en masse.
    Associated Press/September 2012

 
Associated Press

NAIROBI, Kenya -- The rooftop pool at Nairobi's newest high-rise hotel juts out over the edge so swimmers can peer through the glass bottom eight stories down. A new champagne bar sits nearby. iPads with detailed wine descriptions serve as menus.

This is the face of new, high-end hotels in Africa. Nairobi has seen the construction of several upscale properties in recent years, as developers eye an increase in business travel to a continent with rising business prospects.

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International hotel developers are planning nearly 40,000 new rooms across Africa in the coming years.

Travel and tourism in Africa generates about $164 billion a year, 9 percent of the continent's total GDP, said David Scowsill, president and chief executive of World Travel & Tourism Council. He said tourism generates almost 19 million jobs in Africa, 7.1 percent of all employment. And that business is expected to grow.

Africa's middle class is expected to soon begin leisure travel en masse, and an international forum held in Nairobi last week was packed with hotel executives because of this fact alone: Africa's middle class today numbers 300 million people but by 2050 will number 1 billion.

"Africa is the only region of the world where birthrates are above (population) replacement rates," Ian Goldin, a professor at Oxford, told the forum. "Its population is the fastest growing of all the continents and it has the youngest labor force. Notably, inequality on the continent is going down even as it rises in the rest of the world."

But hotel owners beware: The continent is still a maze of business challenges. Slow land acquisition. Slow government approval. Slow construction.

Christian Karaoglanian, chief development officer for French hotel group Accor, said one project has been under construction in Ethiopia for five years. Another property in Nigeria took three years longer than it should have.

"There is a lack of professional expertise. They don't necessarily have the expert people," Karaoglanian said.

Despite the challenges, Accor has 5,000 rooms under development or construction across Africa, but Karaoglanian said that for now Accor sees Asia as its more important growth market.

Moshi Perera, the general manager of the Sankara, the hotel with the rooftop pool, said that for a long time there was more demand than supply for high-end hotels in Nairobi. But hotels can become potential targets, and the Sankara has anti-ram blocks and high security walls. Business risks in Africa include terrorism and political instability.

"Security is key," said Alex Kyriakidis, Marriott's president and managing director for the Middle East and Africa, who noted business challenges amid the Arab Spring. "Egypt occupancy has crashed. This is the test that Kenya has to confront."

Kenya's last presidential election resulted in more than 1,000 violent deaths. The country's tourism minister, Danson Mwazo, told The Associated Press there is "absolutely zero chance" of violence during its next election in March.

The greatest prize in Africa for Marriott is domestic tourism, said Kyriakidis. Southern Africa will be the fastest growing region in the world for Marriott in the coming years.

It has room to grow on the continent. Of its 420,000 hotel rooms worldwide, only 4,000 -- 1 percent -- are in Africa, said Trevor Ward the managing director of W Hospitality Group.

More are coming. Ward said Hilton now has nine hotels and 3,380 rooms in the pipeline across Africa; Movenpick has 12 and 2,182; Radisson Blue has 14 and 3,429; Ibis has 19 and 2,632. Many of those developments are in North Africa.

Nigeria has the most hotels under development at 43, but those projects often take longer than they should to finish. An undersupply of hotels in Lagos has led to sky-high prices. A couple traveling with their daughter -- Dave and Arina McCarthy -- recently stayed at the Federal Palace Hotel in Lagos.

"It's not cheap," Dave McCarthy said. "The pegged rate seems to be about $420 a night."

"If you're flying in for a couple of nights, $800 for a multinational company isn't a lot of money," he said. "As a tourist destination, $400 a night is a lot. ... People aren't going to choose to come here."

The delays caused by corruption and lack of construction skills in Nigeria makes the country unattractive to hotel investors who can build properties anywhere in the world, said Nick van Marken, an analyst in the travel sector at Deloitte.

"The potential (for Africa) is evident. The emerging middle class, rising GDP, all the numbers point in the right direction. The problem is there's a lack of transparency, and there's corruption," he said.

Kenya's Rift Valley and the country's 35,000 elephants are attractions no other country can offer, van Marken said.

"I think the good news is the mood is optimistic," he said. "If you're investing in Africa you're going to be pragmatic. Some investors might be worn down because of the difficulties, but most are upbeat."

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