The Face of Resilience: Hotel Chains on the Hunt for Properties in Africa
It seems there is no end to the pandemic talk when it comes to the travel and hospitality business this year. Hotels around the world suffer from both the current lack of demand and the uncertain future perspectives as some experts predict for things to take up till 2024 to get back to 2019 levels. While this might be true, one region seems to stay relatively on track when it comes to the expanding supply.
According to the World Travel and Tourism Council estimates, Africa is predicted to lose 10.9 million, or 44%, of its tourism sector jobs and $75 billion, or 45%, of its tourism income this year. Such a forecast is worse than the one for Asia Pacific or the Americas, in percentage terms, but still better than for Europe. Nevertheless, the international chain activity on the continent seems to be as burgeoning as ever. Big brands are rushing to leverage the collapse of many independent hotels and scoop up the distressed assets, rebranding them and thus growing their presence at almost unprecedented rates. Such a quick expansion is possible due to the low costs and risks associated with property conversions compared to a more traditionally acquired portfolio. This trend is also giving a rise to the franchise model whereby the mother brand just collects associated fees without actually running the property.
The independent hotel conversions are especially popular in Sub-Saharan Africa due to a lack of hotels for business travelers in hubs like Abuja, Nigeria and Addis Ababa, Ethiopia. In general, industry leaders seem to converge on the idea that the continent is severely underserved in terms of the lodging options and is in dire need of development for the future spike in demand. According to Patrick Scholes, a managing director of lodging and leisure equity research at Truist Securities, there is one hotel room per every 92 people in North America, while in MENA the ratio stands at 1:1496.
While the nearest future for the hospitality industry on the continent is just as uncertain as in other regions, the long-term perspective seems to be quite reassuring. With the development of intra-continental infrastructure, a trend on political transparency and a generally improving outlook of Africa as a place to do business in, the long, pandemic-induced winter might end up into a rather pleasant and invigorating spring some time in the future.