The hotel sector in Sub-Saharan Africa has evolved during the past decade due to high demand growth, entrance of new global brands and increasing supply in major markets.
This was according to the overview presented by Xander Nijnens, executive vice-president, hotels & hospitality group, JLL Sub-Saharan Africa at the 2017 Africa Hotel Investment Forum in Rwanda.
Nijnens said: "This evolution is resulting in increasingly experienced investors developing products that are better suited to address demand, which is providing a clear shift in focus to the domestically driven mid-scale and budget segments."
The report confirmed that hotel operating performance in Sub-Saharan Africa in 2016 and 2017 was challenging. However, supply growth in the sector is continuing, ownership structures are evolving, liquidity is increasing, and many new prospects are becoming apparent in both alternative markets, secondary cities as well as product diversification.
JLL head of Sub-Saharan Africa research Tom Mundy added: "Sub-Sahara Africa economies are far from mature, but some are further down the road to maturity than others and as a region we are turning increasingly optimistic on the outlook for the next 12-18 months. While we acknowledge the lack of homogeneity across the region and that some countries will grow at a faster pace than others, we believe that the region has turned a corner after the recent commodity driven slump.
"Yes, some markets have suffered from fluctuating exchange rates and slumping inward investment, yet others have benefited from more balanced economies, less political intrigue and a lower reliance on commodity cycle than others."
JLL also sees high growth in the budget and mid-scale space which has been overlooked.
The Sub-Saharan African hotel sector continues to be a positive investment prospect. Sensible capital structures, supporting lender relationships and optimal alignment with operators will go a long way in reducing investment risk. "If you can get these fundamentals right, it is a great time to be looking at the final frontier in hotel investment," added Nijnens.
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