Africa: a new haven for the hospitality industry

THE hospitality industry is an informal but solid indicator of a country or continent’s economic wellbeing. The days of "build it and they will come" are long gone. In the present global economic climate, if a hotel is going up, it is

probably an indicator that there is substantial economic growth in an area that is sustainable over the long term.

Business travel is the lifeblood of the hospitality industry and the industry globally is looking at Africa with hungry eyes because much of the rest of the world’s economy has gone to hell in a handbasket. Hospitality in Africa is built on business travel. If business is booming, the industry in general is healthy and sustainable, if not expanding. International hotel groups are increasingly looking to Africa because it is one of few regions with true development potential that is not built on futures or artificially bloated economies.

In 2000, The Economist labelled Africa "the hopeless continent". A label like that stings, but it also gives rise to the sort of pioneering spirit on which greatness is built. There is no doubt that we have faced many challenges, including war, corruption, famine and an unsustainable reliance on commodities exports, and there are still many challenges to overcome, but we have started learning our lessons and the Africa of today is very different from 20 years ago.

Economists Ricardo Hausmann and Cesar Hidalgo, researchers at the Harvard Centre for Economic Development, not long ago produced their Atlas of Economic Complexity and, in their global ranking of gross domestic product (GDP) growth to 2020, Uganda comes out number one. It is a shock to many people — a tiny, landlocked African nation leads a list predicting growth.

Even more "insane" is that their prediction includes in the top 10: Kenya, Tanzania, Zimbabwe, Madagascar, Senegal, Malawi, and Zambia. Hausmann and Hidalgo project that these countries will grow faster than most others in the world, including emerging market favourites Brazil and China. In fact, 13 of the top 30 countries on the list for fast growth are in sub-Saharan Africa.

Among the big changes for Africa this millennium have been the hard lessons learnt in the 20 years after the 1970s commodities bubble burst. Africa has become less reliant upon energy and mineral exports and is using investment to grow infrastructure, manufacturing and technology.

A McKinsey Global Institute report on the Progress and Potential of African Economies sets an eight-year prediction of Africa’s collective GDP at $2.6-trillion. If you consider that, along with predictions of African consumer spending rising to about $1.4-trillion by 2020 and 128-million households with discretionary income, it demonstrates a reduced reliance on mineral and energy exports and a greater emerging middle class in countries with healthier, well-rounded economies.

That is something hoteliers venturing into Africa should note; the growing middle class in Africa will travel more and more.

As much as international hospitality groups entering the African market view their potential guests as global business travellers, much of the trade in top hotels is domestic business and leisure, as well as cross-border executive travel stemming from regions forging greater co-operation and trade agreements. This is a different and selective market and outside the service realm of what many international groups consider to be the norm.

What does the future hold for the hospitality industry in Africa? There are about 200 hotels under construction; many are being developed by local entrepreneurs seeking to take advantage of their domestic economic growth nodes, while others are constructs from the larger international hotel companies seeking a foothold on a continent with so much economic potential.

West Africa is booming. Economic growth in Ghana is predicted to be more than 7% this year, and Nigeria is much the same. Nigeria is Africa’s most populous nation and is poised to take over from South Africa as its economic powerhouse, making it attractive to hoteliers.

A number of countries in East Africa are also showing significant growth, despite troubled Somalia and Sudan. Uganda is one of those countries, with a predicated growth rate of about 5% this year.

With so much interest in Africa, what does it say about the future of hospitality on the continent, and by extension of the broader economic wellbeing?

Former United Nations head and Ghanaian Kofi Annan said: "To live is to choose. But to choose well, you must know who you are and what you stand for, where you want to go and why you want to get there."

It is becoming self-evident that, as Africans, we know who we are and what we stand for.

And, for a change, we now have a clear development path to where we want to be.