A survey of prices of international grade hotels in selected major African cities was recently produced by hospitality research firm STR Global (https://www.strglobal.com), ahead of the Africa Hotel Investment Forum (AHIF) (http://www.Africa-Conference.com), which this year is once again taking place at the end of September.
The surprise results revealed that Addis Ababa is the most expensive place for a good night’s sleep.
(The Sheraton Hotel Addis Ababa, Club Room)
The average rate expressed in US$ for a hotel room in the first six months of this year in Addis Ababa was $231.78 per night. This compares with $215.75 for a room in Lagos, a lowly $144.76 in Nairobi, even less with $122.30 in Cape Town, $105.73 in Casablanca, $103.54 in Cairo, $72.90 in Johannesburg and $70.70 in Sharm El Sheikh.
Download table 1: http://www.photos.apo-opa.com/plog-content/images/apo/photos/150904t1.png
When one notes that the price of a hotel room in Nairobi is almost double that in Jo’berg and the room rate in Addis is 60% more expensive than Nairobi, one is tempted to ask how prices can be so different and what makes Addis such a special case.
Thomas Emanuel, Director of Business Development, STR Global tries to explain it when he wrote: ‘A great deal of the reason for the difference in rates across major African cities is simply supply and demand‘. Addis Ababa, seat of the African Union and capital of Ethiopia, clearly has a shortage of top quality hotels. However, with the Ethiopian economy growing at a rapid rate of more than 10% per annum for the whole of the last decade and with more conferences coming to the city by virtue of its status as the seat of the African Union and especially with Ethiopian Airways on a similar growth trajectory as the entire country, thanks to new routes and increased passenger numbers, there is a sustained and fast growing high demand for premium hotel rooms. In comparison, Johannesburg is a long-established, sophisticated international city, with a large number of 5* hotels and a competitive market for accommodation and yet, due to different circumstances, commands a significantly lower average room rate for similar hotels
Looking at how hotel prices have changed over the past year (year to date June 2014 to 2015), there have been substantial rate rises in Sharm El Sheikh, up 42.5%, Addis Ababa, up 14.9%, Johannesburg, up 11.0% Cape Town, up 10.8% and Cairo, up 10.6%. While there here has been a recovery of sorts in Lagos where room rates are up 5.8% has Nairobi remained broadly on the same level while Casablanca has suffered a 4.0% decline.
Download table 2: http://www.photos.apo-opa.com/plog-content/images/apo/photos/150904t2.png
The increases in Sharm El Sheikh and Cairo can be explained by the ongoing recovery of tourism to Egypt, following several years of political unrest which led to sharp drops in rooms rates through mega discounting and rebating offers to attract any business at all. Cape Town’s improvement is due predominantly to increased demand and no recent increases in supply since the 2010 World Cup. In the face of the recent terrorism incidents in Kenya, Nairobi’s hoteliers have chosen to maintain rates even though they have suffered notable lower occupancies.
The rise in room rates in Lagos cannot be explained simply by supply and demand because there has been a combination of factors that would normally be expected to exert a downward pressure on price. First, there is a hotel development boom in Lagos with 3,611 new hotel rooms in the pipeline, according to the W Hospitality Group, second, there has been a collapse in the oil price, which is damaging Nigeria’s heavily oil-dependent economy and third, occupancy has fallen below 50%. The rate decline in Casablanca is due in part to economic weakness in France, its major source market and in part to currency fluctuations.
At AHIF, Thomas will be reporting on year-on-year hotel performance in some of Africa’s key markets and adding further interpretation and analysis of the main trends. Matthew Weihs, the Managing Director of Bench Events, the company which organises AHIF, an event which attracts all the major international hotel investors in Africa, where this information will be discussed in detail, concluded: ‘The wide disparity in room rates with exceptional prices being achieved in places where there is a shortage of supply, make it clear that there are parts of Africa that offer very attractive prospects for hotel investors. The best way to gain a deeper understanding of this industry is to come to Addis and meet the people who are driving it forward’.
AHIF is the preeminent gathering of international investors in hotels in Africa. It takes place in Addis Ababa between Sept 30th and the 01st of October. For 2016 will this key hospitality event for Africa move to Rwanda’s capital Kigali. For more information click on www.Africa-Conference.com.
