Africa Opens Arms to Global Hotel Brands… and Tourism
The ‘Africa rising’ narrative might have become more complex recently, and taken a few knocks, but there’s no doubt the continent is open for business where hotel development and tourism is concerned, writes Tim Smith
By Tim P. Smith, Managing Partner, HVS Cape Town
The strengthening of the rand against the pound and the dollar is unlikely to deter visitors to South Africa. Initial concerns that Brexit would stop Europeans from making long-haul trips have proved incorrect.
Tourists from the UK, the USA, Germany, the Netherlands, France, China, Italy, Australia, India and Spain (that showed a 51.5% rise in numbers to South Africa) comprised 75.2% of all tourists from overseas countries. That the United Kingdom had the smallest increase, with 10%, is probably down to the nervousness around Brexit.
Over the past few months we have highlighted how important it was for the South African government to change its Draconian visa requirements, especially for Chinese visitors, and are delighted that with conditions eased, there has been a whopping 66% year-on-year increase in the number of visitors to South Africa from China.
The South African visa regulations definitely caused problems that cost the country a small fortune. We have had clients from India, with the visas in their passports, having to wait four hours at OR Tambo; there were on average 11 people not allowed to board each flight from the United Kingdom to South Africa (including film star Idris Alba, who played Nelson Mandela in Long Walk to Freedom) last summer and with the introduction of new regulations in China, the number of visitors to SA dropped 40%.
However fantastic the destination may be, if you can't get there, tourists won't come. South Africa has so much to offer leisure and business tourists, but if it is easier to enter Kenya for a safari (which it now is) then potential travellers will choose Kenya over South Africa.
The Trump effect on tourism
Looking ahead, and putting aside his influence on the United States, how will a Donald Trump presidency impact on tourism in Africa?
Investors like certainty and as his will be a unique style of leadership, until we know what to expect from him, there is likely to be short-term uncertainty. This may well deter tourists from taking long haul trips and, as such, the number of high-spending American guests may fall. In the longer term, if he sticks with the policy of tax cuts he mentioned during his campaign, that could well increase the number of potential US visitors to the continent.
Hotel brands buoyant about Africa
The big hotel brands are demonstrating their confidence in the future of tourism in Africa. Rezidor announced at the recent THINC Africa Conference that they were on track to have 23 000 new rooms across the continent by 2020. They are opening five new hotels in Angola within the next 18 months.
THINC Africa also saw Marriott acknowledge the need for more hotels in Cape Town and they have announced the development of a 189-bedroom AC Hotel at The Yacht Club, Roggebaai as well as a 200-bedroom Marriott Hotel and a 150-bedroom Residence Inn by Marriott at Culemborg, which will be re-named Harbour Arch.
Tinley Manor, an exceptional location on the KZN North Coast, will be developed to create a world class beach resort destination, in close proximity to the King Shaka International Airport and only two hours from Big 5 game reserves. Two operators are close to agreeing terms and the developers are currently looking for investor partners.
While tour operators are cancelling trips to Ethiopia, where the tourism industry is under serious threat due to political unrest, there are other markets on the African continent that are now opening up and starting to develop their tourism potential.
There are seven countries in Africa without any branded hotels, including Burundi, Central African Republic, Comoros, Eritrea, Liberia, Mauritania, Niger and Somalia. This is now starting to change, which is good news for Africa generally, as we are moving away from the typical 10 markets that everyone goes to and talks about.
Eritrea has huge tourism potential and HVS has been commissioned to prepare a feasibility study for Eritrea's first internationally branded hotel. With strong existing demand from commercial travellers and diaspora, and the potential to develop a prosperous tourism industry in this beautiful yet undiscovered country, the prospects for the hotel industry are exciting.
Currently tourism to Eritrea is mainly around mining and business, but the future of tourism there will be leisure-based. It offers beautiful Red Sea islands around the coast and great diving locations. Inaccessibility is still a problem and US-led sanctions will need to be dropped, but nevertheless the potential exists and is starting to develop.
The Mozambique Tourism Authority sent delegates to THINC Africa in Cape Town earlier this year, after which they invited me to speak at their conference in Maputo. Their government is now focused on tourism development. Mozambique is a popular destination for South Africans, although accessibility is still an issue that needs addressing. It offers stunning beaches with warm water and great diving. The joy of it being mostly inaccessible and remote means that the coral reefs are untouched and unspoilt.
Accessibility the issue
The accessibility issue is a chicken and egg situation – hotel brands need to be there to convince the government that it's worth spending the money, but the government needs to spend the money to convince them to come there, so it's an on-going challenge.
While tourism to Nigeria has fallen dramatically, Ghana recently introduced a policy of lower tax on aircraft fuel to incentivise long-haul flights to refuel in Accra. SAA and Ethiopian airlines are now stopping there to refuel on their way to the US and business tourism to Ghana is on the increase.
Tourism in Kenya is due to be the second largest producer of foreign revenue for 2016. There have been no reports of expected violence around the upcoming presidential election next year, which bodes well for tourism.
If the upcoming elections in both Ghana and Kenya take place peacefully, this will give business and the tourism industry the confidence to invest.
There is no shortage of opportunities and resources for development on the continent, but finding the right investor partners is crucial. I recently returned from the AHIF Rwanda (Africa Hotel Investment Forum) where I moderated two panel discussions.
The first was on Understanding the Criteria of Development Banks and the key message from this is they are open for business and ready to lend, but need partners who understand the hotel sector and have sufficient equity to invest and operate the hotel. The development banks have created knowledgeable teams so can identify good opportunities very quickly.
The second panel was on Owner/Operator Relationships. Again the key message was they are open to look at new opportunities across the continent, but need well-funded partners who understand the risks and roles of everyone in hotel development and ownership.
Quality of service
One of the challenges for tourism in Africa is the quality of service.
We are delighted that the South Africa's tourism department has committed to creating an enabling environment for skills transfer and capacity building. The language skills in South Africa give South Africans a head start over some of the other African countries, which, coupled with training and service skills, will deliver a great customer experience.
This is the reason we are launching HVS Executive Search in Africa, to provide general managers and fill corporate positions in the hospitality industry across the continent.
Despite some short-term challenges hoteliers of all sizes, both international and regional brands, are continuing their expansion and the long-term climate for hotel development and investment in both new and traditional markets remains sunny across Africa as a whole.