Nigeria tops stalled hotel pipeline in W/Africa

Posted: December 4, 2017 in general
Tags: , ,

…10, 000 rooms in 61 projects uncompleted

Hotel pipelineBy VICTOR NZE

From factors revolving around high capital investment, lack of access to adequate financing options, limited access to raw materials and to others like high construction and material costs, the newly-published W Hospitality Group 2017 Hotel Chains Pipeline report has identified 61 stalled projects in Nigeria alone, representing 49.6 per cent or more than 10,000 hotel rooms out of the over 20, 000 uncompleted in the sub-region alone.

Other factors identified by the report for the delay in construction which include; inadequate technical capacity to manage the development programme, as well as a heavy reliance on importation, all form barriers to entry of new investors into the sub-regional hospitality market.

It would be recalled that a Nigerian firm, Eagle Hospitality and Leisure Limited had back in August 2016 signed an agreement with Starwood Hotels announcing a proposed Four Points by Sheraton in Benin City, Edo State.

Since that signing, Starwood has since been acquired by the Marriott International with no indication that the planned 176-room project will go beyond its pipeline stage as it adds to the 61 hotel pipelines registered against the country.

Since that signing, Starwood has since been acquired by the Marriott International with no indication the 176 spacious guest rooms project will go beyond its pipeline stage as it adds to the 61 hotel pipelines registered against the country.

“West Africa has a pipeline of 114 hotels and 20,790 rooms, accounting for 42 per cent of the sub-Saharan African hotel pipeline. However, of these hotel deals signed and planned, only approximately 9,875 rooms, or 48 per cent have moved to construction.

“Of the hotel pipeline for West Africa, Nigeria contributes 49.6 per cent or more than 10,000 hotel rooms (in 61 hotels).  Nigeria is also the top market in Africa for planned rooms,” said the report.

Expressing worry over the poor or inadequate hotel supply, the report pointed out that some hotel pipeline projects signed since 2009 by international hotel chains with Nigerians firms are yet to take off.

“40 per cent of Nigeria’s pipeline was signed between 2009 and 2014, a large portion of these projects is still in the “planning” phase. In Senegal, only approximately 44 per cent of the deals signed have moved to site.

“The other substantial markets in West Africa include Cape Verde with 11 hotels and 3,478 rooms, and Senegal with 14 hotels and 2,164 rooms. These three markets contribute a total of 15,955 hotel rooms, or 77 per cent of the West African hotel pipeline.

“Approximately 57 per cent of the pipeline in these countries has moved to site, however some of these projects have been stalled for some time. In a country, like Nigeria, this can be significant.

The report which though opined that the pipeline of hotels to the sub-region is encouraging and indicative of strong investor interest, however, said the low completion rate of projects could be troubling for the development of the hotel sector.

“It is also difficult for the hotel chains whose expansion plans in these markets rely on partnerships with local and foreign investors to develop these hotels. All the major global hotel chains have strong expansion plans to increase their operating presence on the continent, and in West Africa,” it said.

As a way out for these international chains which had traditionally relied on their development teams signing deals for new build hotels, primarily with their flagship brands, with local owners, the report reveals some of these companies are evolving new business strategies to see to the completion of the projects including; conversions and rebranding of existing properties, acquisition of existing local hotel operators, effecting growth through the franchise model, or developing owned hotels first.

“To overcome this (problem of inadequate hotel supply), we are looking at rolling our focused service brands in key markets with a focus on our Hilton Garden Inn product. We are also pioneering the use of modular construction with a new Hilton Garden Inn in Accra, which is a fast and cost-effective build model for owners and developers,” said Vice President Development Sub-Saharan Africa, Hilton, Mike Collini.

On his part, Carlson Rezidor’s Senior Vice President Africa & Indian Ocean for Development, Andrew McLachlan, said in a direct comment to Estate Intel: “Today we have 17 hotels open or under development in the region and in our new 5-year development strategy we have identified five Tier 1 Cities in West Africa (Lagos, Abuja, Accra, Abidjan and Dakar) where we see scaled growth opportunities…across the luxury to midscale hotel segment.”

McLachlan further explained that the Hilton Group sees an opportunity to adopt this conversion model to reposition the hotel under its management, particularly in cases where the existing hotel may not be performing to its full potential.

It would be recalled that Hilton had recently announced a plan to support the conversion and rebranding of 100 existing hotels through its Hilton Africa Growth Initiative, by committing US$ 50 million to supporting these conversions.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s