HVS' first annual African Hotel Valuation Index has some interesting findings on the value of different regions across the continent for hotel development.
The survey of internationally branded properties covers 14 African markets, including Nigeria, Ghana, Egypt, South Africa, Morocco, Angola and Zambia. The HVI ranks each market relative to an African average and monitors annual percentage changes in the values of four- and five-star hotels, reporting the average value per room in each region in US dollars.
Hotels in the Seychelles demonstrated the highest value per room ($522,000), largely because of the high quality of properties on the islands and high barriers to entry, along with its reputation as a luxury leisure destination. Occupancy in the Seychelles is around 65 percent, although visitation to the region has grown by 8 percent from 2008 to 2013.
In terms of value-growth, hotels in the Nigerian capital of Abuja have seen a rapid rise in value from $450,200 in 2012 to $492,000 in 2013, ranking it second in the HVI. Hotels in Nigeria are expected to retain their position as one of the top performers because hotel supply is limited.
With an average hotel rooms value of $380,300, Lagos, the hub of Nigeria’s modern economy, is a top spot for Africa’s hotel development. The city already has a number of internationally branded hotels, including a new 352-room InterContinental. More than 4,000 rooms are in the pipeline for development and occupancy is in the high 60s.
Lack of supply was the reason hotels in the Angolan capital city of Luanda reached third place in the valuation index at $471,000 per room. The city, despite having high levels of poverty, is acknowledged to be one of the most expensive in the world with accommodation in short supply and the oil industry employing high numbers of foreigners. Value increases of 15 percent in 2013 meant that Luandan hotels have seen the highest rise in room value of the 14 markets surveyed for the African HVI.
Hotels in Nairobi have been among the most turbulent over the past few years, largely because of the country’s political problems and terrorist attacks. However, values per room have remained virtually unchanged from 2009 to 2013 at around US$160,000, with last year being another year of recovery.
“The African continent is one of fastest-growing emerging markets in the world with rapidly evolving economies and developing local wealth which is leading to an increased demand for hotels that is not satisfied by current stock,” HVS director Tim Smith, co-author of the report, said in a statement. “There is enormous demand from operators and investors to add to hotel supply across the African continent, but the challenge is to understand where and when to open these hotels. HVS has now developed a comprehensive understanding of hotel supply and demand across Africa and we are now well placed to advise on development opportunities,” Smith added.
HVS has recently increased its interest in Africa as a result of investor demand for local knowledge across the continent. A new HVS office will open later this year in Cape Town, reflecting the demand for investment expertise.
Read more about the 2014 African Hotel Valuation Index, by Tim Smith and Sophie Perret, here.