Why multi-million rand hotel investment is on the rise in Africa
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The last 16 months has caused much uncertainty in the travel and tourism sector.
Famed attractions closed their doors overnight and many were left unemployed.
During these unprecedented times, you’d think tourism businesses and hotel groups would avoid investing in multimillion-rand projects due to the ever-changing travel landscape during the pandemic. Not a chance.
Leading global hotel groups believe there is no better time than now to invest in Africa. These upcoming establishments target both the leisure and business travel market.
The Motsamayi Tourism Group, for example, have undertaken a series of new projects intended to bolster the South African travel industry and create mass appeal for local and international travellers.
During the height of the pandemic in South Africa, weeks before President Cyril Ramaphosa announced the second wave in December, the group launched the highly anticipated Kruger Shalati: Train on a Bridge luxury hotel and Kruger Station.
Despite the lack of international travellers and the pandemic, these attractions gained strong support from the domestic market.
Jerry Mabena, chief executive of Motsamayi Tourism Group, said they were ready to launch Sanctuary Mandela in Houghton this year.
The luxury hotel will boast nine curated rooms that commemorate the late South African president. The themed hotel will also showcase spaces for reflection, healing and thought-provoking experiences inspired by his life.
Motsamayi Tourism Group will also launch pop-up hotels in Knysna and the Kruger National Park later this year. A skywalk at God’s Window in Mpumalanga will open within the next few years.
“These long-term investments will cater towards the post-Covid-traveller and are geared towards social distancing and celebrating the outdoors.
“One of the challenges in starting these projects during the pandemic is that we rely on funding, which means that we have to constantly be on the ball during developments to find ways to adapt to the ever-changing travel environment.
“With the vaccination process under way in South Africa, we’re confident that the country would be a top destination choice,” he said. According to Mabena, the investments could cost R400 million to R700m in the next two to three years.
Meanwhile, the Radisson Hotel Group expects more than a dozen new African hotel signings and around 2 000 rooms by the end of this year.
Around 50% of these hotels will be in their core focus countries like Morocco, Egypt, Nigeria and South Africa. The remainder will open in cluster markets or new destinations.
Six hotels in Africa are also set to launch this year. These openings include three hotels in Madagascar, Juba in South Sudan and St Denis on Reunion Island. Africa’s second Radisson RED hotel in Johannesburg opens next month.
Ramsay Rankoussi, the vice-president of development in Africa and Turkey at Radisson Hotel Group, said timing and locations were the ingredients of success in any hotel investment.
“At the moment, the timing is right to invest. The buying market opportunities for purchase are more competitive now in terms of pricing. The trading of the assets is progressing upward given the expectations of tourism recovery post-Covid-19, which defines a future capital appreciation and upside,” he explained.
Radisson aims to reach over 150 hotels by 2025.
“On average, every hotel costs over $20 million (about R275m), so the magnitude of the investments we manage across the continent is in excess of $1bn,” said Rankoussi.
He said the group wanted to accelerate its presence across Africa through both new builds and conversions.
“Africa is mainly led by business hotels. We want to further expand on leisure offerings and serviced apartments, which have proven resilient during Covid-19. Our ambitions are driven by creating critical mass in our identified focus markets and ensuring market proximity. These regions are subdivided based on priorities, focus and potential scale,” he added.
Andrew McLachlan, managing director of development, sub-Saharan Africa, at Hilton, said the group had seen more interest from owners and investors.
“While the pandemic has naturally had some impact on the flow of investment into the market compared to previous years, the desire to travel for business or leisure has not stopped.
“We are gradually starting to see more interest from owners and investors looking to create the right hotel products with the right brands in locations which are under-supplied in that specific market segment.
“During more uncertain times, investors tend to favour well-known, international brands.
“As the market starts to recover, we see opportunities to rebrand independent hotels under our Curio Collection by Hilton brand. The brand allows a well-known hotel to keep its unique identity but take advantage of our commercial engine. There is also a demand for our midscale Hilton Garden Inn and economy Hampton by Hilton brands, with these segments of the market expected to recover the quickest,” said McLachlan.