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Africa’s fledgling hotel industry offers investors increasing opportunity, according to new JLL research, which forecasts US$ 7.2 billion investment over the next three years
Africa’s hospitality sector looks set to profit from corporate expansion and an influx of business travellers, which is forcing global investors to take the continent seriously as an investment destination.
An expanding economy, high economic growth, increasing political and social stability and a large, young population are contributing to Africa’s flourishing fortunes. This, in turn, is driving regional trade, cultivating business growth and shoring up hotel demand, which is predicted to rise by of 5 percent a year between now and 2017.
In a market hampered by low supply, new hotel development will meet the requirement for rooms across the continent. Figures from JLL forecast annual supply growth of 1.5 percent in North Africa and an average annual supply growth of 3.5 percent in Sub-Saharan Africa. This could attract as much as 7.2 billion investment over the next three years.
While local and regional players currently dominate the majority of hotel investment and ownership – accounting for at least 75% – global capital is increasingly taking note.
“The next several years will see a significant evolution in the hotel real estate landscape in Africa and we anticipate that global capital will flow into the sector as and when the right opportunities arise,” said Xander Nijnens, Senior Vice President, Sub-Saharan Africa for JLL Hotels & Hospitality Group, the author of JLL’s latest report.
Much of the international capital speculating on Africa will enter the market through hotel specific investment platforms, a number of which are in the process of being raised.
This will serve as a shot in the arm for hotel development, which appeal to many investors; a recent investor survey revealed that 46 percent are pursuing hotel developments, while 17 percent are looking only at acquisitions and 37 percent are interested in both.
Investors aside, opportunity also exists for the world’s major hotel groups to access a large base of business travellers and rising middle class consumers. At present, international brand penetration in Africa currently sits at just 22 percent.
Early entry could deliver reward, says Nijnens: “In the long-term there is little doubt that Africa will be a meaningful player in the global real estate economy and pioneers with Africa specific development and transaction expertise are well placed to reap the benefit of an early entry.”
Find out more about Africa’s hotel sector in ‘Spotlight on Africa: Opportunity on the Horizon’
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