Massive opportunity for developers and operators.
Grant Thornton believes there is a gap for mid-range hotel chains on the African continent. Gillian Saunders, the company’s global leader Hospitality and Tourism has said that hotel developers and operators are missing a massive opportunity to serve a large intra-continental business market that is hungry for known brands. “When business travellers go to countries they don’t know very well, they look for reasonably-priced hotels that they recognise, yet these are difficult to find throughout Africa,” said Saunders.
Mid-range establishments are defined as 3-star and budget hotels. “There are some of the upmarket brands on the continent, but in Africa there’s a dearth of hotels serving a budget-conscious yet standards-hungry market.
In Africa only some 14% of hotels are part of branded chains, and when one looks at the mid-market this percentage is a lot lower. Compare this to other developing markets; in the Gulf, 46% of hotels are international brands and in India as many as 50 international mid-market chains have assessed the market and a number are now operating there. Africa really is the last frontier.”
As Africa experiences substantial economic growth, so the opportunity for recognised brands grows. “The huge emerging middle class is travelling more than ever, most often on business. But if you were travelling to Kinshasa, Kampala, Conakry or Cotonou, how would you know where to stay?” Saunders asked. “Wherever you are travelling you’d have to know the local hotels. South Africans travelling closer to home can they find some recognisable local brands in a couple of the southern African countries. In north Africa and a handful of west African cities, the Accor brand Ibis is there. But elsewhere there’s not much?”
The City Lodge group is known to be planning further expansion into sub-Saharan Africa, including Ghana, and Saunders applauds their efforts to become an African brand. “It’s all about cross border expansion.”
The Lonhro Hotel group is also a contender as they are committed to bringing Europe’s easyHotels brand to Africa.
After discussion with participants at September’s Africa Hotel Investment Conference in Nairobi, Saunders has come to the conclusion that while brands should be tweaked for local markets; it’s a mistake to change the brand for one continent or country. “By all means, think global and act local especially on details like menus or decor, but never forget that your market is searching for a known brand and so it is crucial to maintain your brand standards, name and identity. Branded hotels experience higher occupancy rates than independent establishments and you want to capitalise on that.”
About Grant Thornton South Africa
Grant Thornton South Africa is a member firm of Grant Thornton International Ltd (GTIL). Grant Thornton South Africa was founded in 1920 (previously Kessel Feinstein). We are leaders in our chosen market, providing assurance, tax and specialist business advice to dynamic organisations – listed companies, large privately held businesses and private equity backed organisations. In addition, public sector professionals from Grant Thornton are dedicated to providing specialised advisory services to government at all levels.
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