National infrastructure is a central ingredient in the pursuit of long-term sustainable economic growth. Global business hubs such as Dubai and Singapore placed infrastructure at the heart of their approach to nation building, turning them into world-class cities and a haven for investors.
Whilst roads and logistics are crucial, high-quality accommodation and hospitality facilities are critical. Investors, policy-makers, and business travelers will always need somewhere to sleep – so hospitality is as much a practical necessity as it is a fast-growing industry sector and investment opportunity.
The scale of growth in Africa’s hospitality market is most noticeable in sub-Saharan Africa. In April 2016, figures from W. Hospitality Group’s Hotel Chain Development Pipeline Survey showed that 365 new hotels were under construction – adding 64,000 new rooms. In the same month, Traveller 24 magazine stated that the hospitality sector grew by 42.1% in sub-Saharan Africa in 2015 – compared to just 7.5% in north Africa. In Angola, growth has been particularly striking – it pushed Egypt out of 2nd place in 2016 for the top 10 countries by number of rooms.
This growth represents rich pickings for global hotel chains (Ibis Styles has 28 planned hotels, Radisson Blu plans 25, Mercure 24 and Hilton 16) – and major opportunities for companies in the supply chain. With this growth comes the double-edged sword of human capital development: thousands of new jobs coupled with an under-skilled workforce.
Creating jobs and driving social mobility
With 40% of its 25 million people of working age, Angola has a huge workforce. Recognising this, the country’s sovereign wealth fund, FSDEA, has invested in the College of Hospitality Management (CHM) in Benguela. Its mission is to deliver quality hospitality education to young aspiring, Angolans. Since opening in 2016, 37 Angolan students have enrolled with varying degrees of experience (some with none, some with many years) – each selected by CHM’s global hospitality education partner, Ecole Hoteliere de Lausanne (EHL) in Switzerland.
Developing a skilled local workforce means that employee earnings remain in the country and contribute to multiplier industries and GDP growth. It also means that employees can build better futures for themselves and their children and spend money on non-oil goods and services. In the current climate, this goal is front and centre.
Authenticity and uniqueness
There is an intriguing authenticity for foreigners when they interact with local workers. Across most of the Gulf (with the exception of Bahrain), visiting executives almost always interface with expat workers in the hospitality sector. It gets the job done but can create a distance between locals and foreign businessmen. In Bahrain, taxi drivers and hospitality employees are almost always nationals – a source of pride for the nation and infinitely more interesting for visitors.
In Africa, countries that utilise their own workforce and showcase their cultural uniqueness (as opposed to imposing a bland and standardised ‘global’ hospitality experience), stand to gain a competitive advantage. Almost every aspect of the hotel experience is a potential opportunity – F&B that reflects local tastes and traditions, art and music in communal areas, local entertainment and cultural excursions turn a business trip into something memorable.
As growth continues, we are seeing more opportunities emerge for private equity and institutional investors. High ambitions for the sector were the subject of conversation at the Africa Hotel Investment Forum in June 2016, where there was a consensus that optimism in hospitality across sub-Saharan Africa remains high. In March 2016, the Mauritius-based private equity fund, QG Africa Hotel LP (managed by QG Investments Africa), acquired a 100% interest in the InterContinental Hotel in Lusaka from Kingdom Hotel Investments. Purchasing the 244-room landmark hotel, which is situated in a prime location in Zambia’s capital. The acquisition is a prime example of how private equity investors can take advantage of Africa’s burgeoning hospitality sector.
Whilst Angola has yet to develop a tourism sector that attracts many international holiday-makers; the country’s internal tourism sector is thriving and the country is already equipped with what it takes – stunning beaches, wildlife safaris, the Trans-Kalahari Reserve (the world’s largest game reserve), vast natural rainforests and an extraordinary breadth of wildlife. Angola has a national master plan for its tourism industry, which includes the greenfield development of a 250-room luxury five-star hotel in the city centre of Luanda. A three-star hotel is also being built next to the future Port of Caio in the province of Cabinda; which is an important strategic location for what is set to become one of the biggest ports on the continent. The African Development Bank released figures in January 2016 that show that whilst Africa has 15% of the world population, it only receives 3% of world tourism. Given the region’s incredible natural environment, there is enormous scope for growth: major opportunities for investors, careers for locals and a skilled workforce.
The hospitality sector and its role in the value-chain is not merely a necessary accompaniment to economic growth or an afterthought to infrastructure development. It is absolutely critical to both – and a category that offers potentially life-changing opportunities for thousands of Africans. Without education, however, none of that can be realised. Graduates of CHM will receive an internationally recognised qualification with European accreditation. The quality of education means that over the medium term, graduates will lead and develop teams of professionals who are all trained to global standards, significantly building capacity in the national hospitality workforce.
These future leaders now also have an opportunity at CHM to build upon their core skills in fields such as game reserve or safari lodge management. This is how African professionals can add value to the hospitality and tourism experience and carve out a niche that reflects national character, tradition, and culture. This is how Africa’s hospitality sector should mature and where it has the capacity to add great value to wider socio-economic growth. Specifically, in terms of diversification and to those private equity investors taking advantage of this most exciting and important industry sector.
Adrian Leuenberger is group head of Asset Management at Quantum Global. This article was originally published on Ventures Africa.