Southern Africa: A diamond mine for hotel investors?

The World Travel Organisation recently forecast that in-bound tourism to Africa will increase over 50% from 2010 to 2020

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Africa’s future is bright. Africa is moving decisively out of recession, and looks set to renew its pre-recession average growth rate of 6% (African Economic Outlook 2010 and Travel & Tourism Competitiveness Report 2011) due to a move towards market friendly economic framework conditions that have helped to nurture growth (InsightGroup 2011). Africa’s tourism industry has profited through this period, and moreover is now perceived to be “on the path to recovery” (Jones Lang LaSalle Hotels' hotel Investment Survey 2011). 

The World Travel Organisation recently forecast that in-bound tourism to Africa will increase over 50% from 2010 to 2020 while Africa’s combined consumer spending (currently $860b USD) is also set to continue its growth.  

Economic data indicates a decade of sustained growth and development for the continent. By 2020, Africa’s collective GDP will be $2.6 trillion USD and by 2040 it will have workforce of 1.1 billion (McKinsey Global Institute 2010). In the decade to March 2010, the International Finance Corporation (IFC) saw a return of almost 22% a year on its African private equity portfolio, higher than any other emerging market. 

At the Hotel Investment Conference Africa (HICA) on September 26th and 27th in Casablanca, Morocco, the hotel community and those who finance its development will convene to discuss the African hotel investment opportunity. High on the agenda is the role Southern Africa can play in energising hotel investment for the continent.

“Over the last 10 years, six of the world’s ten fastest-growing economies were in sub-Saharan Africa and the IMF forecasts sub-Saharan Africa will grab seven of the top ten places over the next five years. Building on our unparalleled success in Europe and the Middle East we are taking our development plans in Africa to new heights with a focus on both business and leisure destinations. In the last 48 months we have added 33 hotels to our African portfolio growing from 8 hotels in 5 countries to 42 hotels in 16 countries” comments Kurt Ritter President & CEO of The Rezidor Hotel Group. 

Ed Fuller, President and Managing Director of Marriott International (which has 4,000 hotels worldwide), also considers this the ideal time for expansion into Southern Africa. Marriott are “very excited” about investing in one of the world’s fastest growing regional economies, which needs more hotels to service the WTO’s expected 50% increase in  in-bound tourism. 

Zambia is widely considered one of Africa’s true success stories. After years of political (0.4% chance of government instability/coup, Travel & Tourism Competitiveness Report 2011) and economic stability (forecast annual growth rate of 7.1% (BMI)) the country has continually confounded many expectations and has used its massive natural resources base to further its tourism aspirations (It is the world’s 4th largest copper producer and holds 6% of the worlds copper reserves). Additionally, bordering 8 countries (Democratic Republic of Congo, Malawi, Zimbabwe, Tanzania, Mozambique, Botswana, Namibia and Angola), Zambia is strategically placed to feed off existing infrastructure such as roads and railways. 

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