2016 was a memorable year for the world as a whole – the deaths of so many greats, the rise of populism in the West – and for us in Africa, elections, economic challenges and headwinds. Economic recession in many of the continent’s bigger markets framed the story for their hotel and travel industries…depressed commodity values, foreign exchange woes, the cancellation of certain international routes, reduced business travel, and so on. However, we would be remiss not to highlight the good, particularly – the announcement of growth plans on the continent by the major global hotel chains. This serves as a small testament to the resilience of the African growth story. Africa is rising, maybe at a slower pace than we want, but it is rising.
In March, W Hospitality Group released its annual ‘Hotel Chain Development Pipelines in Africa‘ report, the eighth report since it launched in 2009. The reported number of rooms in the pipeline this year was up almost 30% from 2015. In comparison, growth in the hotel development pipeline, on a global scale, was up 10% from 2015. In the US, the pipeline grew by 13.6% for the same period. However, the report underscores that over 30 per cent of the hotel deals reported were signed between 2006 and 2013 and are yet to open. The more common reason being a lack of adequate financing. An exception though is the 2015 Accor deal, that was signed with AAA Activos LDA in Angola. All 50 hotels are underway, with all of them on-site and under construction.
United Airlines cancelled its only flight to the continent. The US carrier halted its daily route from Houston to Lagos citing the weaknening energy sector and difficulties in collecting revenues from ticket sales. After the United Airline’s last flight on June 30, Delta Air Lines became the only American carrier with direct flights to Africa. Jonathan Guerin, the spokesman for United said, “Repatriation has been a significant issue, as has been the downturn in the energy sector.” Nigeria placed restrictions on money that could leave the country, a policy stemming from the fallout after declining oil prices and dwindling foreign currency reserves.
Sun International, the South African hotel group with a 49% ownership stake in the Federal Palace Hotel in Nigeria, announced plans to exit the country. The company reached the decision, citing factors such as low oil price, Boko Haram and a weakening Naira. The ownership entity of the hotel, The Tourist Company of Nigeria, also reported a loss for its second consecutive year, with the hotel profits down 11.8% from the previous year.
Fastjet was borne of a dream to become the first low-cost, pan-African airline. It looked to solve the myriad issues around flight connectivity on the continent. However, this dream may be dying a slow, painful death. When the carrier published its financial results for the first-half of the year, the company was at an operating loss of $31 million. The airline’s load factor – a measure of how much plane capacity is being used – was at 48%, down from 70 per cent in the previous year. The recent appointment of a new Chief Executive might help turn things around.
In October, Marriott opened its first hotel in Kigali, Rwanda. We published the news here. The US-based hotel group, now the largest in the world (by number of rooms) after its Starwood acquisition cemented itself as a true international player. The Kigali Marriott has 254 rooms, 30,000 square feet of events space, spa, indoor heated pool, and will serve as a major meetings and events destination in Kigali. The opening of this hotel was expected to drive home the “open for business’ message to foreign investors, about the potential of the Rwandan market. The hotel will create more than 500 jobs, partnering with Kigali-based Akilah Institute to recruit and train potential candidate.
On the global scale, the Marriott-Starwood acquisition deal closing was probably one of the biggest hospitality news of the year. Also the Starwood acquisition immediately made Marriott the largest hotel group in Africa.
The Africa Hotel Investment Forum (AHIF) was overall positive for African hotel development, despite economic challenges in many of the key markets. Long and medium term outlook was strong and positive, with demand growth forecasts between 3% and 5% annually in the next three years. Rwanda also got an opportunity to shine, as the host of the event.
Marriott continued its expansion into sub-Saharan Africa with the announcement of the Sheraton Grand brand in Guinea. The hotel group announced the opening of the Sheraton Grand Conakry, joining a portfolio of more than 35 Sheraton Grand hotels worldwide. The hotel is located in the up-and-coming Kipe district, on an ocean-front property, and within easy reach of the airport. All 269 guestrooms will have ocean views. The hotel will also have a Mediterranean all-day dining restaurant, a coffee shop and bakery, a poolside bar, lobby bar, and 1,300 square meters of meeting space. Guinea is largely dependent on mineral production and is the second largest producer of bauxite in the world. Rio Tinto is one of the global miners active in the country’s exploitation of minerals.
Hilton, announced the signing of three new hotels at the AHIF. The hotels will be developed in Lagos, Accra and Nairobi.
Nigeria announced plans to shut down the Abuja International Airport to repair the runway for six weeks in February and March, 2017. The Minister of State for Aviation, Senator Hadi Sirika, also announced that Julius Berger Nigeria Plc had been approved as the contractor for the project. The renovation programme at the airport is expected to run for six months, however, except for the six week closure the airport will remain operational. The government plan to have Kaduna Airport serving as an alternative during the period of the closure, with secured buses conveying passengers between the cities.
2016 was certainly a year of mixed signals for hotel development and travel on the continent. Growth was slow in many markets, as a direct result of a deceleration in many of Africa’s resource-rich economies. Yet, there were many events that point to resilience, infrastructure growth and cautious investment interest. We continue to watch this space for more encouraging events in 2017.