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July 13, 2017

The Indian Ocean is emerging as a safe and attractive destination for tourists and investors alike thanks to soaring airlift and high tourism growth.

“We are seeing increasing investor interest in the region due to the high demand growth in the Indian Ocean resort sector and the buoyant hotel trading outlook,” says Xander Nijnens, JLL’s Head of Hotels & Hospitality in Sub-Saharan Africa.

Hotel investment in the Maldives has proven a success so now investors are looking to Mauritius, the Seychelles, and even further afield to markets like Zanzibar and Madagascar.”

The relative safety of the Indian Ocean as a resort destination, coupled with new air routes from Middle Eastern and regional carriers – Air Seychelles, for example, is now part of the Etihad Partner Network while Air AsiaX flies directly to Mauritius – is driving huge tourist growth to the region.

“Whilst the Maldives has been a mainstay on the Asian tourism map for a long time, Mauritius and the Seychelles are now looking to Asia as the long term growth driver for their tourism sectors,” says Nijnens.

A recent agreement between Mauritius and Singapore has opened up a new air corridor, allowing Air Mauritius to access the Asian market and Singapore Airlines to fly to Mauritius. Likewise, a direct route between Beijing and the Seychelles, launched in 2016, has further fuelled tourist arrivals.

And, as a tourism grows, so too does hotel performance

“Occupancy rates have risen from the low-60s to the mid-70s, as demand has drifted from North Africa, Turkey and other destinations into the Indian Ocean,” says Nijnens. “This is boosting the hotel investment environment with new capital entering the market as liquidity and transaction volumes increase.”

“We are also finding that debt for resort transactions is available on reasonable terms, with Mauritian banks particularly liquid at the moment,” he notes.

Most Indian Ocean destinations are trying to find a balance between volume focused resorts and exclusive luxury resorts and, in this respect, the Seychelles has recently announced a moratorium on any new large scale hotel supply to ensure that it remains positioned as a premium resort destination.

And, it’s not just the more developed markets that are benefitting. With thousands of kilometres of pristine beaches, cultural offerings and unique natural settings, lesser-known investment destinations such as Zanzibar, Madagascar and Mozambique are catching the attention of global tourism players. Ritz-Carlton is due to open a property in Zanzibar in 2021, and Anantara has been in Mozambique since 2013.
Meanwhile, Madagascar is on the radar for luxury developers, thanks to improved political stability and better access with the recent announcement of a partnership between Air Madagascar and French carrier, Air Austral and the management of key airports in Madagascar by Aeroports de Paris.

“Regional resort operators are still the strongest players in these markets” says Nijnens, “but the international brands are increasingly looking for entry points into the sector given the potential to achieve scale and to capitalise on the long term growth in the Indian Ocean region.”

Nijnens is optimistic that this increase in demand for hotels provides a strong rate growth outlook. “With new supply relatively limited in most of these markets and longer development periods due to the emerging nature of the real estate sectors, the medium-term profitability outlook in the region is excellent,” he concludes.

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Xander Nijnens

JLL’s Head of Hotels & Hospitality in Sub-Saharan Africa

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