Presentation is loading. Please wait.

Presentation is loading. Please wait.

HOTEL DEVELOPMENTS IN AFRICA

Similar presentations


Presentation on theme: "HOTEL DEVELOPMENTS IN AFRICA"— Presentation transcript:

1 HOTEL DEVELOPMENTS IN AFRICA
Neels Heunis Head of Sports & Leisure Davis Langdon an AECOM Company AFRICAN ECONOMIC FORECAST 2012

2 Davis Langdon, An AECOM Company
Recognised as one of the world’s leading global construction consultancies, we are focusing on providing managed solutions for clients. Over 90 years experience of delivering construction consultancy services Part of the AECOM family 45,000 employees globally Operating in more than 130 countries Fortune 500 company Our approach:- Manage client expectations Reduce and control risk Manage and control Cost Maximise Value for Money AFRICAN ECONOMIC FORECAST 2012

3 Davis Langdon, An AECOM Company
7 23 12 13 19 43 24 1 6 30 32 3 40 18 11 21 35 17 26 28 25 31 41 22 14 9 37 8 15 36 4 38 29 39 20 42 33 16 10 27 Operating in 43 countries in Africa

4 It’s Time For Africa…

5 AFRICAN ECONOMIC FORECAST 2012

6 Why The Interest In Africa?
54 countries 3 times the size of China 1 billion people Speaking 1,000 languages Exceptional natural resources 26,000 km of coastline The most diversified natural environment Opportunities Labour supply Global focus on Africa Developing consumer economies 100m households > US$5000 pa – 160m

7 The Past, The Present & The Future…
Old Africa New Africa Poverty Civil War World Cup Investable Famine Genocide Nollywood Consumers Disease Piracy GDP Growth Commodities Internet Scams Dictatorships Agriculture Democracies Source: Mara Capital

8 Some Key Statistics

9 Hotels – The Big Picture

10 The Market: global travel industry
Strong correlation between GDP growth and tourism Tourism has more pronounced cycles Hospitality and tourism heavily affected by Consumer discretionary spending Companies’ travel budgets Global travel industry is making an uneven recovery from recession, mirroring world economy Growth returned in 2010 US and Europe sluggish Asia, Latin America and Africa are hotspots. The relationship between GDP growth and travel demand has historically been a robust one. When global economic growth exceeds 4%, tourism arrivals growth tends to be higher, however, when GDP falls below 2% tourism growth tends to be lower. 

11 Shift In Economic Power - East And Horizontal
What is driving future growth? Industrialisation Population growth Domestic consumption Net investment in capital stock Availability of a labour force Increasing quality of ‘human capital’ Increased productivity The World at a turning point EE to grow much faster than AE AE unfavourable population trends and fiscal constraints make it unpopular investment choice EE share of world GDP to grow China will overtake the US as the world’s largest economy by 2025 Championship economies will join BRICs as global engines of growth EE = Emerging Economies AE = Advanced Economies The balance has shifted from West to East and from North to South Labour forces are generally more transient – cheaper labour from eastern geographies willing to travel These labour forces are cost effective and prepared to roam

12 The Market – Global Travel
But where is Africa? Global travel spend projected to double from 2010 to 2020 Global residents outgoing increase from 1bn to 1.66bn Global visitors in increase from 0.9bn to 1.3bn Global residents travel spend $940bn to $1.866bn Global foreign visitor travel spend $1.085bn to $2.16bn Note Africa is missing from this metric

13 Leisure Is One Of The Top 5 Sectors That Will Offer The Greatest Potential
“Nine of the 25 fastest growing economies will be in Africa” Ed Fuller, Marriott International

14 Markets in transition leading to Emerging Market status, currently termed by many developers as PRE-EMERGING Attractive - ability to grow exponentially NOT the traditional Hotel Investment model High tolerance for risk Long term horizons (ten years for an investment) Commitment to active local participation Commitment to sustainable ecology model 2011 Branded Pipeline Update Most international brands are increasing activity on the continent despite challenges: Limited access to Capital (Debt vs Equity) for hotel developments Availability of experienced owners and institutional real estate investors A global economic crisis that has brought hotel development to a halt. The Big Picture

15 The Big Picture Most dynamic economies in Africa have sustained a higher level of GDP growth and demand is based on strong fundamentals Low return in the US and European real estate and private equity markets is directing capital towards emerging markets, which generates a major opportunity for African countries African trade with Asian countries is increasing and capital flow from Asia should be directed towards hotel real estate Emerging professional real estate vehicles and hospitality dedicated funds in some African countries are encouraging new capital flow into hospitality.

16 African Leisure Market Eco- Tourism Business Travel
Resort / Leisure Destinations Medical Tourism Sport / Extreme Tourism

17 The Market – Urban Hotels
Flight to brand by banks – funding is still challenging Continuation of operators moving to being “asset light” Re-emergence of business travel Sporting and major world events Sustainable development; Green Star certification Corporate travel to green locations increasing Number of outbound visitors from BRIC economies – major western cities need to be ready to receive Gap in budget end of market for BRIC economies North America & Europe will see a focus on conversion. Flight to Brand Funding is one of the key issues facing the industry Banks will find it easier to lend where a brand operator is in place – gives credence to proposition Asset Light For the time being the owner occupier / operator is becoming rarer with more reliance on developers and leases / franchise / management contract arrangements Business Travel Re-emergence 28% of business could be lost without in-person meetings 40% of prospective customers converted following in person meetings compared to 16% without Every $ invested in business travel realises $12.50 in incremental revenue Average US business would forfeit 17% profit in year 1 if business travel was to be eliminated Brands looking to maximise global teams and efficiencies Sporting & Major World Events Act as catalyst for urban regeneration of major and second tier cities globally Careful consideration going forward of the capacities of remaining markets post event eg Yas Island Hotel – 100% occupation for 1 week a year – minimal occupation remainder of year What is the sustainable approach in its holistic sense – is there a market for temporary, but quality, accommodation for such events? Sustainable Development Certification and accreditation is important Ritz Carlton in Charlotte was US first LEED Gold hotel; developed as a green conference centre; became highest grossing Ritz Carlton globally; positioned close to a major hub (US Air based close by) How many other international hub locations could develop a similar approach? Opportunities for tie up / deals with airlines / major corporations at conference / major city venues? How many hotel rooms do AECOM use in major cities globally? Do we have one deal with one operator? In major cities were large numbers of keys required could we take a floor and have it branded?? BRIC Economies Rising middle classes and numbers of outbound visitors Destinations will be European major cities, US major cities Large proportion of BRIC economy will travel within region – rising demand for budget / mid market stock – luxury end already approaching saturation Chinese and Indian domestic travel far outnumber international travel – local budget brands in China plan to open upto 500 hotels; domestic brands in India relatively undeveloped Conversion Rather than new build – the next period will see marked shift to conversion of existing hotels to new brands / operators or conversion of existing non hotel buildings

18 The Market – Resorts Flight to brand by banks – funding is still challenging Continuation of operators moving to being “asset light” Sporting and major world events Sustainable development; LEED certification Number of outbound visitors from BRIC economies – major western cities need to be ready to receive Emergence of medical tourism, eco tourism, sports tourism. Flight to Brand Funding is one of the key issues facing the industry Banks will find it easier to lend where a brand operator is in place – gives credence to proposition Asset Light For the time being the owner occupier / operator is becoming rarer with more reliance on developers and leases / franchise / management contract arrangements Sporting & Major World Events Such events demand infrastructure improvements which in turn open up new locations which become attractive to resort operators Sustainable Development Certification and accreditation is important Ritz Carlton in Charlotte was US first LEED Gold hotel; developed as a green conference centre; became highest grossing Ritz Carlton globally; positioned close to a major hub (US Air based close by) How many other international hub locations could develop a similar approach? Opportunities for tie up / deals with airlines / major corporations at conference / major city venues? How many hotel rooms do AECOM use in major cities globally? Do we have one deal with one operator? In major cities were large numbers of keys required could we take a floor and have it branded?? BRIC Economies Rising middle classes and numbers of outbound visitors Destinations will be European major cities, US major cities Large proportion of BRIC economy will travel within region – rising demand for budget / mid market stock – luxury end already approaching saturation Chinese and Indian domestic travel far outnumber international travel – local budget brands in China plan to open upto 500 hotels; domestic brands in India relatively undeveloped

19 14% of African hotels are internationally branded vs 46% in Middle East

20 Hotel Brands And Strategies In Africa
Regional International Passive

21 Hotel Development in Africa 2011
Hotel Developments in Africa 2011 Current data shows average of 150 new planned hotel developments per annum Globally numbers have decreased substantially. Hotel Development in Africa 2011 Regional Summary 2011 2010 2009 Hotels Rooms North Africa 75 17,038 72 16,909 61 15,611 Sub-Saharan Africa 81 14,101 80 15,223 90 15,753 TOTAL 156 31,139 152 32,132 151 31,364 Source: W Hospitality

22 Top 10 Brands by Number of Planned Hotels and Rooms
Hotel Development in Africa 2011 Top 10 Brands by Number of Planned Hotels and Rooms Rank by Hotels Rank by Rooms 1 Radisson Blu 16 3,327 2 Ibis 14 Hilton 2,807 3 Novotel 11 2,150 4 10 Mövenpick 2,053 5 Etap 9 1,955 6 Park Inn 7 Holiday Inn 1,900 InterContinental 1,532 Lonrho 8 1,294 Kempinski 1,000 Sofitel Le Meridien 965 Source: W Hospitality

23 Top 10 countries of Hotel development in Africa
Top Countries for 2011 Added Sierra Leone due to it currently being a ‘hot’ market

24 Key Trends & SWOT Analysis of the market

25 Key Drivers And Trends – Follow The Oil
Exploration and discovery of oil and natural resources Influx of expats into Africa Need arises for accommodation Will the Russian oil reserves bring balance and fuel growth Already mentioned shift from North to South and from West to East Financial houses are already scenario planning for $175 per barrel

26 Key Drivers & Trends – Aerotropolis Concept
“52% of companies consider transport links the vital factor in deciding where to locate their business.” survey of 500 of Europe’s top companies “Access to markets and ease of international travel are often more important than availability of skilled labour and overall business climate.” survey from Think London Examples of this trend: Ghana Free Town Nairobi Cairo Commercial Recreation Residential Exhibition Aviation Related Logistics / Light Industry Urban Land Institute Airport Major hub city centres tend to be within 1 hour travel of airports Issue of airlift & open skies agreements is key for new and emerging markets – Morocco is good example which is benefiting from such an agreement from a tourism perspective

27 Key Drivers & Trends – Urban Regeneration
Revitalisation of inner cities Cape Town Maputo Accra Bespoke mixed use developments Uganda Zambia South Africa Nigeria Melrose Arch, Johannesburg South Arfrica Levy Junction Mixed Use Development Lusaka Zambia

28 Investment Challenges in Africa
Most Hotels are owner-operated and few international brands Gray economy, cash economy and limited banking Limited financing for hotel projects High interest rates Confusing, conflicting and ever changing governmental regulations with so much grey area in terms of interpretation of laws as well the mix of government agencies with jurisdiction Slow legal system with limited protection of  property rights No reliable market  research Limited destination marketing Accessibility and airlift challenges No guaranteed construction period – most projects have major overruns (7 yrs) Education of alternative procurement routes for construction - reducing risk to the operator and developer.

29 SWOT Analysis For Hotels In Africa
STRENGTHS WEAKNESSES Very strong GDP growth Pre-emerging continent Minerals and resources Natural beauty Lack of experience & expertise Client education – hotels not their core business Air lift into key destinations Currency stability Debt funding and limitations OPPORTUNITIES THREATS Untapped business market (lack of competition) Needs and desirability (Liberia - not one recognised hotel in the country) Growing economy (demand outweighing supply) Pioneering business opportunities Political instability Impact of global economy on Africa Health issues Land ownership – regulations Natural disasters (drought, floods)

30 DESIGN & COST PARAMETERS
Location is KEY Star Rating (Size of rooms) Size of the hotel Shape of the hotel Service offerings of the hotel Infrastructure requirement to the hotel Operator Selection Specific design issues:- Servicing strategy Type of facade system Space / area utilisation Radisson Maputo

31 Typical Investment (Source Grant Thornton)
Finance typically structured 7-11% Typical total construction cost: 3* Hotel - $130,000 - $165,000 / key 4* Hotel - $175,000 - $200,000 / key 5* Hotel - $260,000 - $350,000 / key Still high risk 2 percentage points more – debt/equity returns Returns decreasing IRR’s were 20% - 25% Now accept 14 – 18% Certain developers would even accept 10% Structured over time? Construction First 1- 3 years operation Ongoing operations Hilton Windhoek 150 Keys

32 Experiences in Africa

33 Transportation

34 Accommodation

35 Africa’s Delicacies

36 The Real Picture

37 The Fastest Hotel Ever Constructed

38 Questions ?? neels.heunis@davislangdon.co.za Tel: +27(0) 11 666 2000
Citi Bank Building 145 West Street Sandton South Africa


Download ppt "HOTEL DEVELOPMENTS IN AFRICA"

Similar presentations


Ads by Google