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Chasing the returns: does Africa hold good prospects for the hospitality investors?

2020 was poised to be a good year for the African hospitality. The RevPAR was pleasing owners and operators with its reassuringly upward performance for 87 consecutive months by the end of 2019. Backed by strong GDP growth prospects, expanding middle class with increasing disposable income and the general course on higher political transparency and openness, nothing was pointing at the change in this trend. Alas, soon enough it became apparent that 2020 had other plans. Confined to their offices and homes, investors around the world are now left wondering what opportunities await them once the pandemic is over. Should they turn their eyes to Africa?

What does the future hold?

According to Mark Havercroft, Regional Director for Africa at Minor Hotels, the answer to that question is certainly yes. Being the planet’s youngest and fastest-urbanizing continent, Africa is predicted to experience a 24-million people increase in its city populations annually, overtaking India and China combined by year 2045. By 2034, the continent will have a larger working population than either of these countries. Such an expansion constitutes a massive demand driver, that, coupled with constantly developing infrastructure, easing visa and travel document requirements and burgeoning intra-African business activity, presents a great opportunity for investors, both domestic and international, to leverage.

However, according to Havercroft, once the COVID-19 threats are in the past, it is the small to middle-size brands that will get their moment to shine, thanks to having a higher adaptation capacity and flexibility as compared to the big, established businesses. Moreover, he suggests paying close attention to the affordable sector, as PwC predicts three-star hotels to experience a growth boom in the years to come. Business properties will also be of interest, as they would serve to satisfy the intensifying demand from corporate travel sector.

Overall, Havercroft reckons that, given the ability to adapt to the local setting and a certain will to focus on specific areas of engagement, businesses stand to gain above-average returns on investment in the hospitality sector in Africa.

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