Seizing Opportunities

by Wayne Godwin, Senior Consultant at Pam Golding Lodges & Guesthouses

“You know you are truly alive when you’re living among lions.” A quote made famous by the 1985 Academy Award winning film, Out of Africa. And whilst its original context was in the literal sense, we find ourselves drawing reference to it in a business sense today, as the “African Lion” economies look to emulate the “Asian Tigers” successes of the 20th Century.

Atlantic Seaboard Properties - Pam Golding Hospitality PartnersThe African Continent holds significant opportunities for the Hospitality Sector. There are no defined formulas for “Seizing the opportunity”, as Africa is a multifaceted continent with each country’s hotel industry expressing its own nuances that need to be unpacked before the opportunities can be understood.  There are however a number of broader macro trends that are driving demand for hotels across Africa, namely:

Rapid Urbanization, Sustained Economic Growth and “Working Demographic”

Africa’s population now stands at one billion people, and in the next 25 years, a little more than the average length of a hotel management agreement being signed today, its population will double. With 70% of Africans currently below the age of 30, it is expected that in 25 years time, the working age population in Africa will be greater than that of China. This bourgeoning population will underpin hotel demand across the continent, as coupled with sustained economic growth we will see a vast expansion of the middle class.

Global Hospitality Trend forecasts point to the emergence and importance of the Y-Generation for the industry. Africa sits on the cusp of a Y-Generation population explosion and African hoteliers would do well to heed the advice that in a decade from now your market will be younger than it is today, seize that opportunity and adapt your offering.

Mineral and resource

Africa’s abundant natural resources continue to be the focus of hotel growth on the continent. Nigeria, Angola and Algeria are significant oil and gas exporters, whilst the Rovuma basin in Northern Mozambique and Southern Tanzania has natural gas reserves that are sizable enough, with multiple LNG Plant opportunities, to transform their economies. Other highlights are too many to mention, however the often-isolated location of mineral and energy rich areas, has meant a huge undersupply of hotels in these nodes. The isolation however does bring with it challenges relating to the construction of hotels, as costs are exponentially higher in these areas, skilled labour harder to come by and supplies difficult to source once the hotel is open. The strategy to date has been to target the “next largest town”, i.e. a town within a few hours drive that has some infrastructure and less challenges for operating a hotel. This strategy is assisted by the fact that a number of mining and oil and gas companies implore the same strategy with regards to a regional supply base typically in the same town. However, often it is the major economic center, i.e. the capital city that benefits most from this activity due to the conducting of meetings and the presence of corporate headquarters in these cities.

Regional perspective


The hotel market in Angola is well placed to mature on the back of high economic growth, an improving business environment, and a curbed inflationary outlook. Luanda, notwithstanding a sizeable existing Hotel Industry, remains undersupplied and acutely lacking in globally branded quality hotels. The opening of the new airport in Luanda is arguably the most significant development for the Angolan hotel market as airlift has to date been a primary constraint for the industry. Existing Hotel Rates in Luanda, and in Angola generally, remain amongst the highest in the World, with general product quality below Global Contemporary Standards. While Luanda continues to afford new hotels and redevelopment opportunities, markets such as Huambo, the political capital, and Soyo, the newest oil and gas generating region, are becoming the expanded focus of potential hotel investments in Angola as the same conditions that have fuelled growth in Luanda are now evident in these markets, with strong government support for the development of these into economic nodes.

Côte d’Ivoire

The Oil and Gas industry in Côte d’Ivoire could potentially be a game changer for the hotel sector in the country, as currently only half of the countries fifty exploration blocks have been awarded. The government also plans to boost production levels to the extent that it will rival Ghana at around 200,000 barrels a day in the next 5 years. The economy of the world’s largest cocoa producer has expanded at a faster pace than its sub-Saharan counterparts since GDP contracted in 2011 following post-election violence. The Ivory Coast also contains reserves of gold, diamonds, nickel, manganese and iron ore and with the government set to endorse a new mining code, there will be increased activity in the sector. Hotels will undoubtedly benefit from this mineral and energy activity.

Opportunities in the Hotel sector will be focused in Abidjan, with the refurbishment, and branding of existing hotels arguably offering the best opportunity for investors.


One cannot discuss hotel development opportunities in Africa without touching on Lagos.  The recent opening of the 356 room InterContinental Lagos is further evidence that Global Management Companies and investors continue to see Lagos as a long-term strategic market.

Lagos is certainly not without its challenges. The South African food and clothing retailer Woolworths recently closed its Nigerian stores citing the high rental costs, import duties and supply chain constraints. Hoteliers need to be cognizant of these constraints, however investor returns are more affected by high land and construction costs in Nigeria. Developers are urged to use innovative construction techniques in mitigation of these high costs, the result of which can exponentially enhance the return that can be expected from the development.

Improving infrastructure such as the Lekki-Ikoyi Bridge has opened up new areas for hotel investment in Lagos, due to them now being more accessible. These areas will see land costs increasing rapidly and Investors will benefit from moving quickly in this regard.


With a GDP growth rate of 10% and a high level of political stability, it is little wonder why Accra is one of the primary focus areas for hotel investment in Africa. However with Occupancies of around 70%, the market looks poised to receive a number of additional hotels, which granted will dilute occupancy levels marginally. RevPAR however will continue to be driven by rate growth, which has no sign of abating.

Like almost all major African markets, growth in room supply is having the duel impact of improving hotel quality whilst increasing the supply of rooms, thus lower quality, unbranded hotels tend to lose traction in the market relative to their newer counterparts.


The focus of hospitality investment in Mozambique has unsurprisingly shifted from leisure and donor community focused properties to corporate centric hotels. The country has an acute need for these business-focused hotels and Maputo has been enjoying high occupancies driven by Mining and, Oil and Gas companies demand. Although these companies are active in the rest of the country, their corporate headquarters have been established in Maputo’s newer business nodes such as the JAT complex for example, and hence the impact on the Maputo hotel market.

The Maputo market remains lacking of globally branded midmarket supply, and herein lies an opportunity for investors with occupancies of circa 80%. That being said, the popularity of the new Radisson Blu Hotel and the expansion and comprehensive refurbishment of Southern Sun Maputo, has proven that quality, corporate centric hotels at an upmarket level can gain traction in the market. Maputo also suffers from a large shortage of long-stay focused accommodation, and developers should look to a model whereby a serviced apartment component is included. Radisson are specifically looking to address this with their Radisson Residence development currently at an advanced stage.

Pemba, Palma and Nancala are nodes that contain opportunities for corporate centric midmarket hotel’s, whilst markets such as Tete and even Beira require investors to take a longer term perspective and possibly begin identifying and planning developments that coincide with the alleviation of the coal export constraints.


Tanzania’s hotel sector, although emerging off a more mature base, looks set to follow a similar developmental path to Mozambique. Large Natural Gas deposits have been discovered off the Southern Coast, and the government recently announced the development of a 30 Billion Dollar LNG Plant in Lindi. Whilst the majority of corporates involved with the construction process will remain based in Dar es Salaam, benefiting the hotel sector in the capital, there will be significant demand for hotels in towns such as Mtwara, Lindi and even as far North as Kilwa. Dar es Salaam, with its prevailing high demand levels, will continue to see further demand growth through oil and gas operations in the Country, affording further hotel development opportunities.

South Africa

The Hospitality sector in South Africa has seen a strong revival in the last 18 months, driven by improved performance on the back of a better balance between supply and demand in the sector. It’s been well documented that in the favorable economic and lending environment prior to the 2010 FIFA World cup, there was a supply boom that combined with the contraction in the economy, saw the hotel industry as one of the worst affected sectors in the economy.

The recovery in the sector began in 2012, and has improved significantly over the last 24 months. We now see the sector trading at occupancy levels above 60% compared to around 50% in 2011.

The South African market as a whole is far more exposed to the corporate traveler than the leisure tourist, both international and local. For this reason, the recovery has been more pronounced in major metropolitan areas. The increase in foreign visitors has been in part led by an increase in business travellers to South Africa for events, meetings, exhibitions and conferences. South Africa has become a popular destination for large conferences and there are more than 200 major conferences scheduled in the country over the next five years.

The South African market has improving opportunities, particularly for globally branded larger hotels in the major metropolitan nodes. Consideration need however also be given to strategic high growth secondary nodes around the country that have an undersupply of quality hotel inventory.

The industry is a fast changing one – the strong need for hotel growth on the African continent has ushered in a wave of global Management Company interest such as Rezidor, Starwood, Hilton, and now Marriot through their acquisition of Protea Hotels, amongst others. South Africa has proven to be an important gateway to the African continent for these global players and their presence will fuel the appetite for investment from global investment players into the sector.

Within the next 12 months we will well see the 65% occupancy mark breached in South Africa, and this is often the point at which we see concrete planning for additional supply. However, the majority of supply that is in the pipeline currently remains speculative, subject to finance raising, and development approvals. As occupancies continue to rise beyond the 65% mark, we will invariably see more supply growth than is on the current horizon.

The fact that South Africa is poised for an increase in hotel development activity, considering the current outlook, is undoubted. However, what is important is that this needs to be done circumspectly with the adequate strategic guidance and understanding of the market, and positioning of the respective hotel.

wayne godwin - Pam Golding Hospitality Partners
Wayne Godwin

Senior Consultant at Pam Golding Lodges & Guesthouses