Hospitality industry drives Africa’s growth

[Edoman]

Hospitality industry drives Africa’s growth
February 11, 2020

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The tourism sector is expected to drive Africa’s economic growth following the African Continental Free Trade Agreement (AfCFTA) through its travel and hospitality sub-sectors.

This can be attributed to the contributions of the two sectors to the continent’s Gross Domestic Product (GDP), from 7.8 per cent in 2016; 8.1 per cent in 2017 to 8.5 per cent (about $194.2 billion) in 2018).

This growth made African region the second fastest growing tourism industry in the world, with a growth rate of 5.6 per cent in 2018.

In 2018, there were 67 million visitors to Africa on business and leisure. This showed a seven per cent increase from 63 million recorded in 2017 and a significant increase from 58 million in 2016.

This figure is expected to rise in astronomical proportions in the coming years when the AfCFTA becomes operational. There are 55 countries on the African continent with about 1.2 billion people, and with a combined GDP of $2.4 trillion, the expectation is that AfCTA would create the world’s largest free trade area. This will hopefully promote intra-African trade that currently stands at a paltry 16 per cent.

The free movement of people and goods within the continent will expectedly open up new vistas in the tourism industry, creating business opportunities for investors.

A few years ago, PricewaterhouseCoopers (PwC) predicted that the hospitality sub-sector would be one of the key drivers of economic growth on the continent. The prediction was premised on the fact that an increase in both domestic and international travels would lead to an expansion of hotel chains on the continent, which would in turn reinforce the growth potential of the sub sector.

The PwC named five African countries where the hotel sector would experience growth, with significant increase in room revenue, namely, South Africa, Nigeria, Mauritius, Tanzania and Kenya.

The company expected Nigeria to be the fastest growing hotel market in Africa over a five year period ending 2022.

Indeed, the forecast is that Nigeria will become the fastest growing tourism market on the continent, with a projected 12 per cent compound annual increase. This forecast is predicated on Nigeria’s growing affluence, which would make consumer tourism a more important sector. Adventure tourism is becoming more popular and the growing interest in experiences is allowing the country to attract visitors interested in the local culture.

International hotel brands have recognised the potential of the African hospitality industry, which explains why some of them are currently embarking on expansion programmes on the continent. In 2017, the Hyatt hotel chain announced plans to double its presence in Africa by 2020. Marriot started an expansion programme that would increase its portfolio on the continent by 50 per cent, by 2023. It is the same year the Hilton group intends to double its presence in Africa, while Radisson will reach the same goal in Francophone countries on the continent by 2022.

Many African hotel brands are establishing strong footholds on the continent, though without the spread of their international counterparts. The spread has started, all the same. The big ones are predominantly South African-owned, like Tsogo Sun, under which are Southern Sun and Sun International, Protea, as well as Laico Hotels and Resorts.

The expected growth of the hospitality sub sector is going to impact on many other sectors in the value chain – the reason it is predicted to be an economic growth driver. Such sectors include agriculture, garment, civil, mechanical and electrical engineering; furniture, manufacturing, etc.

Hotels will rely on local farmers for sources of agricultural produce, including poultry, beef and fish, thereby creating jobs and enhancing those businesses, with the ultimate benefit of improving the quality of lives of people in those sectors. They will also rely on local manufacturers of agro-allied products like fruit juice, dairy, as well as alcoholic and non-alcoholic beverages.

Establishment of more hotels means a boost to the garment sector that provides the source for the supply of curtains, table clothes, bedsheets and staff uniforms. There will be something for interior decorators as well. The economic benefits for producers and suppliers in the entire chain are quite enormous.

Job creation is expected to receive a boost in the coming years, a direct fallout of the growth in the tourism industry. In 2018, the industry provided direct and indirect employment for about 24.3 million people in 2018, accounting for approximately 6.7 per cent of total employment on the continent.

The expected boom in the industry is one that will create a healthy competition, which would enable hotels to bring out their best in terms of service delivery.

This is an opportunity for highly skilled and specialized workers such as managers, chefs, waiters and porters – the category of workers that may also benefit from regular training by hotels intent on maintaining the highest standards. All these will contribute to improving the quality of service delivery.

The emerging scenario is one that holds high hopes for African hotel brands, though it will also task their ingenuity and resourcefulness in the face of stiff competition from international brands.