Commodities slump won't impact long-term hotel development in Africa

©hanohiki via 123RF

“Hotel investment should always be seen as long-term so the re-adjustment of commodity prices is a short-term impact,” he says. “Allowing for development, plus the time to allow the business to ramp-up to full performance, takes over seven years from concept to full operation, plenty of time for commodity prices to change. There are many other factors pushing demand that proves the overall growth is sustainable, perhaps the most important being stable government,” says Smith.

“It is also important to understand the low base from which we start; in the US there is one hotel room for every 95 members of the population. In Europe that rises to 185 people per hotel room and in the Asia Pacific region it climbs to 1,361 people for every hotel room,” he says. “But in Africa it is 4,736 people per hotel room. Given demand is increasingly derived locally, it illustrates the lack of supply. The World Bank Global Economic Prospects Survey shows six of the 12 fastest economies to be in Africa.”

Smith says it’s also important to get the supply growth in context. “In the July Pipeline reports by STR, Africa has approximately 10 times more beds under contract than London and approximately 10% of those under contract in the US,” he says. “In summary, investors should not be deterred by short-term challenges when the overall opportunity is so large.”

THINC Africa

HVS’ inaugural THINC Africa conference takes place on 6-7 September in Cape Town. One of the topics under discussion is Hotels: A Currency Hedge in Emerging Markets, moderated by HVS chairman in London, Russell Kett, with panellists Brian Singer of The Singer Group, Lourie Kruger of Kingdom Hotel Investments and St John Bungey, CEO of Sanlam Africa.

Among the list of speakers are:

• Tim Harris, Wesgro
• Mark Satterfield, Marriott
• Elie Younis, Rezidor
• Portia Tau-Sekati, Property Charter
• Gavin Courtenay, SATIB Trust