Priorities to facilitate growth in Africa

Posted: May 12, 2015 in general

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Following a Bench Events meeting to discuss hotel development in Africa, industry leaders produced a list of 10 priorities to facilitate the growth of the sector. The Africa Hotel Investment Forum listed the priorities under five headings: long-term planning, finance, development, people and culture.

Make long-term plans

African governments need to make long-term strategic development plans covering wide geographical areas. When they do so, there can be a greater degree of certainty about the local environment for a new (or refurbished) hotel. This reduces the inherent risk of investing in a particular location.

Invest in infrastructure

African governments need to invest in infrastructure with a vision to become a destination in their own right. In doing so, they will attract tourists, businesses and investors who are excited by the vision. One very important element of transport infrastructure is an airport.

Look abroad for finance

Governments and entrepreneurs need to look outside Africa as well as within the locality of their project for finance because many international investors are attracted by the relatively high growth rates of many African countries. Prospective investors are expected to originate from the Middle East, which has good air links, and from China, which already has many established businesses on the continent.

See hotels as an asset class

Hotels have not traditionally been seen as an asset class in their own right, but this is changing. Hotel ownership can be an excellent way to make a long-term bet on the success of a destination, and managed correctly, with reinvestment of profits during the lean years of an economic cycle, can be highly tax-efficient.

Accelerate the development process

The more rapidly an investor can move from the point of signing an agreement to purchasing a property and opening for business, the more commercially successful the venture is likely to be. At present a time horizon of seven years is not unknown in Africa. In response, hotel chains are experimenting with modular construction solutions that would enable them to be up and running from scratch within months.

Open air routes

Develop more air connections as they are essential to the prosperity of a destination. A wide range of research has demonstrated that air transport is a major driver of economic prosperity.

Engage local players

Many investors won’t pursue a new hospitality venture in Africa without strong local partners, so facilitating contact between these two groups must be a strategic priority.

Bring the industry together

Support events that stimulate dialogue about new hotel projects, provide introductions to useful new people and enable investors to walk through the whole process.

Promote stable politics

Political unrest of the type that has been seen in North Africa is extremely detrimental to the hospitality industry and has caused several hotel development projects to be put on hold. Serious international investors will only commit funds where there is a stable political environment.

Build trust

Unfortunately, in certain parts of Africa, there are too many stories about things disappearing and commitments not being honoured. Finding ways to build trust needs to be addressed as a culture change challenge.

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