On the eve of publishing the 13th Annual Hotel Chain Development Pipelines in Africa, Trevor Ward, Managing Director at W Hospitality Group spoke with Matthew Weihs, Managing Director at bench about the report findings.
They discussed what the 2020 hotel development numbers looked like for Africa and what this implied for the industry. They also dived into the key operators across the continent and the markets that are leading development.
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MATTHEW WEIHS: Hello everyone! I'm Matthew Weihs, the Managing Director of Bench and I'm here today with Trevor Ward, the Managing Director of W Hospitality Group. And we're going to talk about the 13th Annual Chain Development Pipeline Survey. Trevor, obviously, welcome and just give us a quick overview as to what this survey does for those who don't know.
TREVOR WARD: Sure thanks. Hello Matt. Hello those who are listening in today. Every year we ask for the chains and we do some research to tell us what they've been up to in terms of signing deals and opening hotels in Africa, which include the Indian Ocean Islands - Seychelles, Mauritius, Madagascar, and Comoros. We put all this data together. This year 447 hotels with 82,000 rooms, and we slice it and dice it and analyze it as much as we can to understand what's going on, what's been going on, and what's likely to happen in the future. And these are signed deals, they are not letters of intent. They're not rumors, they're not thoughts, they are signed deals between the chains on one side and owners, investors, promoters on the other.
MATTHEW WEIHS: So how bad was it?
TREVOR WARD: If you look at the operating landscape, the operating environment, it was a disaster for Africa, with at one time 70% - 80% of hotels closed. We're talking about the signing deals environment though, and it was down only 30%. The number of deals signed in 2020 compared to 2019, only 30%. As I say, compared to the operating landscape that was not that bad. In terms of opening new hotels from the previous pipeline, that wasn't good. We expected something like 90 hotels to open and only about 25% of those hotels, those hotels which were the chains expected to open, when they looked at it at the beginning of 2020, by the end of 2021, they'd only opened about 25% of that pipeline.
MATTHEW WEIHS: That makes some sense, considering the...
TREVOR WARD: For reasons we all know about. Supply chains, lack of demand, government restrictions....
MATTHEW WEIHS: Are you getting any feeling of how that's looking for '21 because I was talking to a few and obviously things are in some countries in a second wave now and so on. So do you get a feeling that that's going to change or just stay the same?
TREVOR WARD: Well, there's a lot of optimism about signing and opening in 2021, and 2022, visibility is virtually zero. We're here in April 2021, we thought it would all be over by now. There have already been a couple of openings. Big hotel in Lagos, where I'm based, 250 room Marriott, they are going to open probably next month. Obviously delayed, but who isn't, but people are still planning to open where they can and where they're ready to do so. But we will be down. Not every hotel that's planned to open will open.
MATTHEW WEIHS: In some way that's positively surprising, the signings, the numbers there. And considering what the industry has been through. What does that sort of tell you? Is that just a pipeline legacy? Or what does it actually sort of intimate to you?
TREVOR WARD: The number of signings last year, 71 I think it was, that's surprising in terms of people being locked down. The vast majority of those deals were done virtually. Unlikely that many new deals were signed last year, they were all in the deal pipeline. In other words, they were on people's tables or had been discussed before the pandemic hit us. But then equally the chains will tell you that there are new projects coming along. I'm dealing with new projects in various countries, where we are still talking to chains about signing those deals in 2021.
MATTHEW WEIHS: What sort of deals are they? Are they new developments? Are they conversions?
TREVOR WARD: Both but whilst there's a lot of talk about conversions, there's very little actually happening, outside of say South Africa where today and in the past various office blocks have been talked about for hotel conversions. I can't put my finger on a single office block conversion in say West Africa. They are new deals but very difficult to finance them.
MATTHEW WEIHS: It's a big question now, isn't it? Financing. I was talking to Fabio from JLL and he was saying that it's getting tougher and it was already tough.
TREVOR WARD: It's a risky business which has got riskier and longer-term and the banks cannot see to the future of getting their money back. Well, we'll see what happens next year.
MATTHEW WEIHS: So from the numbers side of things, where does that leave the race? Who's sort of winning the race in your opinion, firstly, from an operator standpoint?
TREVOR WARD: It's a race which Accor and Marriott, Accor the owner of brands such as Fairmont and Movenpick. and Novotel, and Ibis. It's a race which those two are winning. They are vying neck and neck at numbers one and two. Accor number one and Marriott International, the chain number two. With Hilton and Radisson Hotel Group, they're making the big four. And looking at the chart, those four together account for two-thirds of the total rooms in the pipeline. And that's forty chains. That's how big those four brands, those four chains are. And then when we look at the brands, the top five brands are Hilton, Fairmont, Marriott, Movenpick, and Radisson Blu. Sorry, I can't count. Five brands are Hilton, Fairmont, Marriott, Movenpick, and Radisson Blu. And those five together or a quarter of pipeline rooms, 25%. Yeah! It really is a big lump at the top. And look at Accor, they've got two brands in that top five: Fairmont and Movenpick. Both of which have relatively big boxes, big hotels, as do Hilton and Marriott. Radisson Blu tend to be a bit smaller than the other four in the top five.
MATTHEW WEIHS: What about the African brands. We saw over the last few years a few creeping in. Has this impacted them? Any interesting...?
TREVOR WARD: Not at all. No. I mean, they are too big compared to their competitors, two African brands, that's Azalai and, well the chain in Mangalis. Sorry, three. I'll take on Onomo as well. We've seen a reduction in their pipelines. Mangalis has been going through, let's call it internal restructuring. Closed their office in Spain last year and moved everything to Dakar in Senegal, and seem to be reigning in their activities. Onomo's pipeline is relatively small, as are the other two as well. I suppose a period of consolidation is what we'll call it. And those are the three African chains that have been in the pipeline.
MATTHEW WEIHS: And are you getting any sort of sniffs of any new brands or...?
TREVOR WARD: No. Nobody is bold enough at the moment, quite understandably. Setting up a new hotel chain, it's not just a question of a couple of new hotels and put a name on them. If you look at what the existing chains have put behind them in terms of brand, energy, brand engines, sales and marketing networks, it's a struggle to put together a new hotel chain.
MATTHEW WEIHS: Location wise - country, city, whatever it might be, who is winning that race?
TREVOR WARD: Interestingly, we see the same kind of structure to the charts, if you like. If you look at the five countries out of fifty-four that we cover - Egypt, Nigeria, Morocco, Ethiopia and Cape Verde are the top five. And they are 56% of total rooms in the pipeline. Five countries.
MATTHEW WEIHS: So 10% of the country's...
TREVOR WARD: 10% of countries is 56% of rooms. And Egypt on its own is 24% of total rooms. You know Egypt is an economic powerhouse, it's a tourism powerhouse. Go back in history, it has been since the dawn of history.
MATTHEW WEIHS: It's also in a very good position for investment as well. Obviously having come out of a few troubles.
TREVOR WARD: Yeah. Well the troubles are not necessarily behind them, as in many African countries. But yes, investment has been there - the tour operators, the airline, the Egyptian investors in hotels have been there. And it is just astonishing though, that the size of that pipeline -- And that pipeline is 12% up on last year. The rate of signing just seems to go a pace, particularly again from that number one Accor, who are signing, signing, signing deals. If I can just zero in on cities as well?
MATTHEW WEIHS: Yeah, please.
TREVOR WARD: The top five cities in Africa - Cairo, Addis Ababa, Nairobi, Lagos and Hurghada. Did you hear number one? Cairo, capital of Egypt, and Cairo on its own is 9% of the total pipeline. And those top five, which are top five out of 149 cities, they account for 28% of the total.
MATTHEW WEIHS: Any surprising... I mean, that's obviously surprising in itself the sort of sheer dominance, but any sort of surprising entrance or...?
TREVOR WARD: Yeah. I'm delighted because of personal involvement in the deals and in the country. I'm delighted to see that Djibouti and Somalia have both joined the list of countries with pipeline deals. It's been a while since any countries did join, and we've been tipping those two for a while. Djibouti, where Accor have signed multiple deals with an investor there and Somalia where there's a Louvre deal of a Sarova hotel under construction in Hargeisa, which is the capital of the Somaliland province. So yeah, surprises and delight at those two joining.
MATTHEW WEIHS: Well done to all involved. Please do reach out to either Trevor or myself for information on the report. You know, just finally, Trevor, I'm going to ask you to sort of do a bit of crystal ball gazing. From the 2020 report, what do you think this now sort of intimates for the future, 2021 and beyond? Is there anything that you can draw from it?
TREVOR WARD: I mean, who has a crystal ball anymore? I think they're all shattered out of the window. I am not as positive as I used to be because of the pandemic. But it's also the fact that the pandemic has brought government restrictions. An awful lot of what we can't do anymore is because of the government. And that means opening hotels, staying in hotels, opening air routes landing in these airports or those airports. Some countries are still closed in Africa, I mean totally closed. The difficulty of adhering to government regulations on health, if you travel to some countries, you have to quarantine when you get back home. Kenya, a major economy, a major tourism destination, Kenya is now closed to the UK. The BA has canceled its flights. You cannot travel from Kenya to the UK unless you are a UK citizen or Irish citizen. We have these continuing government restrictions and it's impossible to say when these restrictions will be lifted. Having said that, we're a long-term industry, investors and the chain see it as long term, and those chains that I spoke about earlier, they're still out there, they're still doing what they can to sign deals. So it's not going to stop but seeing the future depends almost entirely on what governments do or doesn't do.
MATTHEW WEIHS: Which is a flip of a coin.
TREVOR WARD: Yes, I'm afraid so.
MATTHEW WEIHS: So on that uncertain note, I suppose I should say thanks Trevor for sharing your views and data today. And thank you for bringing it alongside the Arabian and African Hospitality Investment Conference that we're hosting in September. And thanks for joining today.
MATTHEW WEIHS: Thank you for the invite Matt. I appreciate it.
Published 07 May 2021