Hotel Development on the Rise in Africa

Hotel development in Africa is attracting the attention of global media: This week, the Wall Street Journal had an excellent article about recent investment south of the Sahara, and what it may mean for the continent.

The story noted that Marriott International will open a hotel in the Rwandan capital of Kigali late next year, its first in sub-Saharan Africa. The company has at least eight more properties planned for the region over five years, targeting fast-growing economies such as Ghana and Ethiopia. The chain is joining competitors racing to expand in the region, including Hilton Worldwide and Carlson Rezidor Hotel Group, owner of the Radisson Blu brand.

Africa's minerals, oil and natural gas are attracting business travelers, the story continues, noting that economic growth in sub-Saharan Africa is expected to reach 5.4 percent this year, higher than any region except developing Asia, according to the International Monetary Fund. And airlines are starting to offer direct flights between African cities, instead of through Europe: Air travel in Africa is up 9.8 percent this year, outpacing global growth of 6.8 percent, according to the International Air Transport Association trade group.

"There's a disconnect between the facilities available to people and the demand for them," says Ian Goldin, a professor of globalization and development at the University of Oxford in England. And major brands can use that disconnect, charging a premium for comfort in African markets described as "poor [and] isolated." A business traveler used to paying $150 a night in the U.S. or Europe can pay $300 or more for the same level of service in some African cities, says Philippe Doizelet, general manager at Horwath HTL, a hospitality consulting firm. "The more underdeveloped a country is, the more you can expect people to pay."

Poor infrastructure and "Byzantine" customs procedures are partly to blame for the gap between supply and demand, the article continues, but also notes that international brands from China, India and South Africa are rising in some of the larger cities. For example, South Africa's Protea Hospitality Group plans to add nine hotels by 2014 to its 36 African properties outside its home market. Overall, international chains are planning 208 new hotels across Africa, according to W Hospitality Group, a research company, up from 159 in development last year.

In the past, the world's best-known hotel companies confined their Africa presence mostly to popular tourist destinations such as Egypt and South Africa. Some of Marriott's competitors, such as Sheraton and Hilton, have had light presences in sub-Saharan Africa for decades but now are stepping up growth. Hilton has had a franchise in Ethiopia since 1969, while Starwood Hotels and Resorts' Sheraton has been in Lagos, Nigeria, since 1985. France's Accor, owner of brands including Sofitel and Mercure, has 26 hotels in 14 countries on the continent outside of North Africa and South Africa.

Read more about Rwanda's growth and challenges...


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