2014 wasn't a great year for Africa's travel and hotel industries, with the ebola epidemic in a few countries driving down visitor numbers across the continent.
That was then, and 2015 was better for both visitor numbers and for hotel deals. As the year drew to a close, a report from consultancy firm JLL noted that Africa's hotel sector could safely expect an investment increase of $2.7 billion by 2018. Sub-Saharan Africa expects an average growth of 9,000 new rooms per year, with supply expected to grow to 4 percent annually by 2017. This compares to a relative slow-down in the north, where 5,000 new rooms are anticipated between 2015 and 2017.
One factor behind the surge in demand is a resurgent tourism industry, expected to increase 5.7 percent yearly between now and 2030, significantly higher than the 3.6 percent anticipated globally. This, and more diversified economies, is attracting global hotel brands, whose presence accounts for 22 percent of total rooms. Such hotels are mostly operated via franchises and management contracts with very few leases, according to JLL.
The continent's industry got a significant jolt early in the year when South African hotel chain Sun International announced plans to take over casino resort group Peermont for nearly $775 million. (The deal hit a "regulatory hurdle" by the end of the year, and the sale has not yet been officially completed.)
By mid-year, the Lagos, Nigeria-based W Hospitality Group advisory released its Hotel Chain Development Pipeline Survey, based on data from 37 international hotel chains with 80 brands among them. The results showed that the continent had seen a jump in the development pipeline to 270 hotels and nearly 50,000 rooms, with sub-Saharan Africa exceeding North Africa by almost 70 percent.
Significantly, the data revealed a modest recovery in North Africa and stronger confidence in SSA. This is significant given that just two years prior, the number of rooms in the North African pipeline was the same as that in sub-Saharan Africa.
In April, Tsogo Sun reached an agreement with the owners of the site of Cape Town's former Tulip hotel for the construction of a three-star, 500-room hotel complex at a total investment of R680 million. The new hotel will consist of two products in one complex: a 200-room SunSquare hotel and a 300-room StayEasy hotel. The project is expected to be completed by September 2017. In Johannesburg's Fourways neighborhood, Tsogo Sun is also planning to open another three- or four-star hotel.
In July, AccorHotels announced plans in July to open 50 hotels across Angola by 2017. By the fall, branded hotels were planning to open 3,611 new hotel rooms in Lagos, Nigeria’s commercial capital. Cairo followed with 2,704 rooms; Abuja, Nigeria’s political capital, was poised to get 2,177 rooms; and Marrakesh would get 1,994 rooms.
At the same time, GoldenPeaks Capital Holdings, a UK-based investment firm, signed a contract to spend $1.2 billion toward the construction of 170 hotels in oil-rich Angola, which reportedly also has one of the most expensive hotel room rates in all of Africa.
Just a few days later, Marriott International signed deals for two new properties in South Africa, in partnership with The Amdec Group. Expected to open by February 2018, the 150-room Johannesburg Marriott Hotel Melrose Arch and 200-unit Marriott Executive Apartments Johannesburg Melrose Arch will be located in the Melrose Arch precinct in Johannesburg.
Marriott became the largest hotel operator in Africa following its acquisition of South Africa’s Protea Hotels in 2014. Over the next five years, the company expects the Marriott International brands, including the Protea brand, to expand from 10 African countries to 18, involving the development of an additional 38 properties across seven brands. “Africa is important to Marriott International’s growth strategy because of its rapid economic growth, growing middle class and youth population, as well as the expansion of international flights onto the continent,” Alex Kyriakidis, president and managing director, Middle East and Africa for Marriott International, said at the time. “With over 850 million people in sub-Saharan Africa, there are enormous opportunities there.”
Two weeks later, global hotel consulting company HVS echoed the optimistic view of Africa's hotel sector in a report, but cautioned that growth had reached "a new level of maturity with less reliance on foreign visitors and increased demand from local businesses."
Mövenpick Hotels & Resorts announced plans to open 685 rooms in key cities across the Sub-Saharan region by 2019, adding three new upscale hotels to its portfolio in Kenya, Nigeria and Cote d’Ivoire and taking its total number of African properties to 28. "Sub-Saharan Africa is forecast to be the fastest growing region in the world over the next five years with a projected GDP growth rate of 4.8 percent from 2014 to 2018, according to research by Deloitte," Mövenpick Hotels & Resorts senior vice president Africa Alan O’Dea said in a statement. "It is therefore crucial we get a strong foothold in this market, which is undergoing a trade and investment boom right now."
Not every deal was positive, however. According to Tsogo Sun's Chairman’s and Chief Executive Officer’s review from August, the company's last fiscal year saw a downturn due to the overall recession affecting Southern Africa in the wake of last year's ebola scare. A deal to acquire a 40 percent stake in the GrandWest and Worcester casinos in the Cape province was cancelled in July 2015 "as it became clear that we would be unable to conclude the regulatory process before the deadline for the transaction," Chairman John Copelyn said in the review statement.
Late in the year, African Sun terminated its lease agreement for its Ghana hotel. In the group’s unaudited financial results for the year ending September 30, chairman Herbert Nkala said the hotel's losses were due to high fixed-costs structure and a slow revenue upturn and reached $1.97 million from a loss position of $1.64 million.