Based on August 2017 data from STR, Africa's hotel pipeline has 301 projects in development, accounting for 57,011 guestrooms, or 11 percent of the continent’s existing room supply. But while the pipelines may be steady, the continent's hotels are reporting mixed performance results so far.
Although rates are up in local currencies of several countries, including Egypt, Morocco, and South Africa, exchange rates must be considered to see the full picture. Meanwhile, other markets are already seeing drops in performance due to growing room stock, including Nigeria, Ethiopia and Algeria.
Egypt
As of August, Egypt hotels posted a 70.1-percent increase in ADR to EGP1,185.53. While the country’s ADR has remained above EGP1,000 each month since November 2016, the devaluation of the Egyptian pound has significantly inflated figures. When reported in U.S. dollars, Egypt’s ADR declined 17.2 percent for the January to August 2017 time period, dropping to an actual level of $66.54. Occupancy, on the other hand, rose 17.2 percent to 52.7 percent.
At the market level, Cairo posted an 8.5-percent increase in occupancy and a 72.5-percent increase in ADR (-16.2 percent in U.S. dollars). These increases resulted in 87.2 percent growth in RevPAR to EGP997.58. Although Sharm El Sheikh recorded a 13.9-percent increase in occupancy for the first eight months of the year, the market’s actual occupancy level was only 40.4 percent. According to the report, security concerns continue to hinder Sharm El Sheik’s hotel demand.
Nigeria
The African Hotel Report 2017 named Nigerian hotels the most valuable hotels on the African mainland. With the current pipeline representing over half of the market’s existing hotel guestrooms, the report predicted that supply growth will continue pressuring Nigeria’s occupancy levels in the near future. August year-to-date data shows a 1.2-percent decline in occupancy to 44.3 percent, but a 6.8-percent increase in ADR to NGN47,819.53. When measured in U.S. dollars, however, ADR declined 23.3 percent to $149.58.
The market currently faces several challenges, with security concerns as well as struggles in Lagos due to the low oil prices. These economic problems experienced by the market in recent years have seen values fall by 16.4 percent in the last two years. However, average values are the third highest in all of Africa, behind only the Seychelles and Mauritius, according to David Harper of Hotels Partners Africa.
However, Nigeria remains the most significant hotel market in West Africa, with almost 6,100 branded guestrooms across 41 hotels, with 21 brands and 14 hotel companies represented in 9 cities. With a population of almost 192 million, growing at an estimated 2.6 percent per annum, and with the largest economy on the continent, it is unsurprising that more hotel projects (61) and more branded guestrooms (10,313) are proposed here than in any other country on the continent. "This report shows that the hotel industry in Africa is still a very good investment, despite the cyclical nature of the property market. However, good advice is vital to help ensure you make the most of this very promising investment opportunity and avoid some of the potential pitfalls that can ensnare the less experienced hotel investor,” Harper stated.
Ethiopia
Hotels in Ethiopia have experienced mixed performance levels thus far in 2017, with occupancy down 6.7 percent to 51.6 percent and ADR up 8.0 percent to ETB4,914.13. According to the report, the country’s number of room-nights available increased 4.2 percent, compared with the first eight months of 2016, which has affected occupancy levels.