Why are global hotel chains rushing to Africa?

Leading global hospitality company Hilton has plans to more than double its size in the next five years with the opening of Legend Hotel Lagos Airport, Curio Collection by Hilton. This is Hilton’s first hotel in Lagos and its second in Nigeria, with an additional seven hotels in its development pipeline for the country. Other hotel chains such as Marriot, Radisson and Hyatt Hotels have also revealed their Africa expansion plans.

The new hotel located at Murtala Muhammed International Airport, Lagos is Hilton’s first Curio Collection by Hilton hotel in Africa. Curio Collection by Hilton is an upper upscale, global portfolio of more than 60 one-of-a-kind hotels and resorts handpicked for their unique character.

The stylish hotel, adjacent to the airport’s private jet terminal has an exclusive immigrations and customs desk in the hotel for private jet passengers.

“We continue to innovate in Africa with new brands and products, and we are pleased to introduce our Curio Collection brand here with the opening of Legend Hotel Lagos Airport,” Hilton’s President and CEO, Chris Nassetta said ahead of the Africa Hotel Investment Forum (AHIF) holding in Nairobi from 2 – 4 October, 2018. “As the continent continues to undergo rapid urbanization, with the UN forecasting that the world’s 10 fastest-growing cities will all be in Africa by 2035, this hotel is a part of our strategy to connect guests to key cities and airport locations across the region.”

Hilton is seeing strong demand for its brands across the continent and expects to open eight hotels in total across Africa this year, three of which will fly under the Hilton Garden Inn flag. This brand appeals to the rising tide of middle class travelers into and across Africa and the company expects to open at least 16 Hilton Garden Inn hotels in the coming five years, including brand entries in Kampala, Ghana, Malawi, eSwatini (formerly Swaziland) and many other strategic locations across sub-Saharan Africa.

Hotel Conversions

Last year, Hilton launched the Hilton Africa Growth Initiative, which will support the conversion of existing hotels to Hilton brands with an investment of $50 million over five years. During that period, Hilton expects to secure 100 conversion opportunities with some 15-20,000 rooms added to its portfolio to meet the growing need for quality branded hotels across the continent.

Just days ago, Marriot International announced its Africa expansion plans which will consolidate its presence in major African countries such as South Africa and Kenya, and also see it enter Mozambique. The new expansion plan, as well as recent ones have been made possible by a growing trend of hotel conversions. This is becoming commonplace as large hotel chains seek to avoid long periods of development and construction delays associated with building a new hotel. This has made it easier for global hotel chains to expand in Africa.

Prof. Chekitan Dev in a 2015 paper titled Hotel Brand Conversions: What Works and What Doesn’t noted that two factors seemed to drive the financial results for converted hotels which he analysed. The first is the relative strength of the brand and the fit between the brand and the property.

Radisson Hospitality is also investing in ten new hotels across the continent. “We are thrilled to be announcing 10 new hotel deals in just nine months, which equates to a new signing every month,” said Andrew McLachlan, senior vice president for development in sub-Saharan Africa at Radisson.

McLachan said the deals will include a luxury hotel in Nigeria, an upscale lifestyle hotel in Ivory Coast and a Radisson Blu in Morocco.

Destination Africa

“So far this year, we will be adding 1,300 plus rooms to our portfolio in Africa and plan to continue this accelerated growth through further expansion in key markets across this flourishing continent,” McLachlan said in a statement.

Big international hotel groups, including Radisson and Kempinski, are estimated to have about a third of the available room capacity on the continent, giving global operators an opportunity to strike conversion deals with local owners as they increase their investments in Africa, a continent with some of the world’s fastest rising middle class, whose spending estimates put at $2.1 trillion by 2025. More so, Africa’s tourism grew at 8 percent in 2017, more than any other region in the world. Who wouldn’t want to invest in Africa’s hospitality sector?