Picture: THINKSTOCK
Picture: THINKSTOCK

WITH limited opportunities for expansion in South Africa, a slew of hospitality players are eyeing the rest of the continent, where an undersupply of quality hotels and upbeat economic growth prospects are fuelling the scramble.

Protea Hospitality Group has signed a deal that will see it moving into its 10th African country, Rwanda, the company said last week.

CEO Arthur Gillis said on Friday the company had hotels under construction in Zambia, Ghana, South Africa, Nigeria and Uganda with a total value well in excess of $100m and it was in the planning stages of expansion into at least three more countries within the next couple of years.

"Africa … currently has far more base development potential than just about anywhere else in the world. Numerous African economies are expanding rapidly and it’s encouraging to see GDP (gross domestic product) projections of between 6% and 8% becoming reality on the back of political stability and a burning desire to create wealth for many rather than just a select few," Mr Gillis said.

According to research by consultancy W Hospitality Group this year, companies leading the way were Hilton Worldwide, with 6,230 rooms in its African pipeline; Carlson Rezidor, with 5,947; Accor, with 5,165; and Marriott, with 3,900.

W Hospitality MD Trevor Ward said there "was a boom in Africa, in all sectors, including hotels". "Global investors are looking at the continent in a much more serious and sophisticated way. We are being contacted by an increasing number of dedicated investment funds seeking to enter the African hotel market," he said.

New brands including Campanile, Dusit, easyHotel, Fairmont, Hyatt Place and W Hotels Worldwide are also diversifying their brand footprint with expansion on the continent.

Jan van der Putten, Hilton Worldwide’s vice-president of operations for Africa and the Indian Ocean, said at the Tourism Indaba last month that the group was targeting key capital cities.

"We have a lot of focus, attention, and dedicated work being done into African growth, and in the months and years to come we will see that come to fruition."

But there is a caveat, Africa is not an easy place to do business. While rich pickings are available, risks can hinder growth. Andrew McLachlan, Carlson Rezidor’s vice-president, business development, said on Friday the biggest challenge in Africa was the time it took to develop a new hotel.

"In South Africa, we expect a new hotel of 200 rooms should open 18 to 24 months after construction commences. In certain parts of sub-Saharan Africa, the construction period can double, which makes the overall cost of the development very expensive. In addition, many items in a new hotel are not sourced locally so they need to be imported and with poor harbour and road infrastructure the logistics presents its own unique challenges," he said.

Carlson Rezidor Hotel Group, whose brands include Radisson Blu and Park Inn by Radisson, established a dedicated Africa office in 2007 in South Africa and since then it has experienced significant growth, increasing its African portfolio from eight hotels open and under development in five countries to 50 hotels open and under development in 21 countries, including Mozambique and Cote d’Ivoire.

In South Africa, most of the activity in the sector has been focused on refurbishments. New hotel developments slowed down following the 2010 Soccer World Cup, which led to occupancies suffering from an oversupply of rooms.

Bucking the broader trend, Hilton Worldwide has introduced two new brands to South Africa since November, with the launch of the Conrad Pezula Resort & Spa in Knysna and DoubleTree by Hilton Cape Town — Upper Eastside.

Mr van der Putten said there was potential for new builds in South Africa, especially in the next few years when occupancies improved to entice investors back.