Tuesday, 4 October 2016

Cautious Optimism for Investors in Sub-Saharan Africa Hotel Sector

Investor sentiment for hotels in Sub-Saharan Africa remains positive despite economic headwinds in key markets, according to the latest JLL research into the sector.

The long-term outlook continues to be strong and is driven by positive economic, demographic and tourism trends, with all indicators pointing to continued hotel demand growth as the region’s economy and hotel sector continue to mature.

Speaking at the Africa Hotel Investment Forum in Kigali, Rwanda, Xander Nijnens, Senior Vice-President, Hotels and Hospitality Group, JLL Sub-Saharan Africa (www.JLL.com), said: “Our medium-term outlook for the hotel sector is positive and JLL forecasts demand growth of 3% to 5% per annum during the coming three years. From an investment perspective, we forecast USD1.7 billion to be invested in hotels in Sub-Saharan Africa in 2017 and a further USD1.9 billion in 2018. The new supply pipeline continues to grow with greater efficiency in realising new developments as the sector matures”.

Nijnens added, “The hotel sector is not, however, without its challenges and we are seeing an increasing divergence of the performance and outlook for key markets. The region offers a broad range of challenges and opportunities, as well as risk and reward. From the perspective of global capital searching for investment opportunities, the region can be a challenging one to navigate.


Investors and lenders alike are recognising this and, while regional players continue to leverage their first mover advantage to entrench their presence in the sector, global capital will increasingly flow into the region as markets mature and transparency increases.”

Hotel developers and operators are increasingly understanding how to tap into this demand and are offering a broader hospitality offering best suited for each market and client base. This demand growth, paired with more effective matching of supply to demand, sets a good foundation for investment.

Nijnens noted that, “Long-term investment fundamentals for the region remain positive despite the short-term challenges that have impacted the hotel sector in Sub-Saharan Africa in the past two years. Macro-economic development and government policy towards tourism, investment and economic growth remain critical in a corporate demand-led sector.”

The main barrier to entry in Sub-Saharan Africa, according to the research, is finding projects that meet the minimum return threshold. The capital is available, but investors are seeking the right leveraging to achieve their equity returns.

Lack of foreign currency ranked higher this year as investors struggle to deal with various currency factors. Improvements in political, economic and currency stability will see a reduction in the risk premium placed on hotel investment in the region, which will in turn increase capital flows. 

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