Bright future for African hotel industry – analyst

Source: Tourism Update, 15/08/2016

Investors are overcoming doubts about risk and are investing in hotels
in Africa, says Tim Smith, Managing Partner of global hospitality
consultancy, HVS.


The hotel industry in Africa has a lot more potential for growth than
in almost any other part of the world, according to Tim Smith,
Managing Partner of global hospitality consultancy, HVS.


He says Africa is being discovered by new markets almost on a daily
basis and offers a great future for hoteliers and investors. With an
increasing transparency in transactions, more companies and
individuals are overcoming doubts about risk and are investing in
hotels in Africa, while many major brands have signed new
developments. HVS`s research shows that the SADC region offers as much
potential as any other part of the continent and that African hotel
brands are bigger and stronger in Africa than multi-national brands.



Smith says HVS`s annual African Hotel Valuation Index 2016, to be
released in September, will show that Durban and Johannesburg
experienced a 15% fall in property values in US dollar terms last
year, purely because of the South African rand having devalued by more
than 20% during the period, while at the same time hotels in those
cities were nevertheless performing well with operational performance
up 16% in rand terms. In comparison though, Cape Town was performing
exceptionally well, with hotel property and business values in that
city up by 20% in US dollar terms in 2015, mainly due to better
marketing of the city abroad and its resultant strong tourism appeal
He says the South African market has become lucrative for foreign
hotel investors because of the devaluation of the South African rand.


International hotel brands are able to earn foreign
currency-based rates that are deemed good value next to the equivalent
South African rates, while costs are paid in local currency.


However, he believes the current strengthening of the rand will become
problematic if it falls as low as R15 to the British pound, a
situation that would require increased marketing efforts to keep the
tourists coming. "Mitigating the strengthening currency situation,
however, is the concern about security in Europe, which means
Europeans are running out of safe places in the sun, an opportunity
for Southern Africa to gather some ground," he says.