Africa - HVS/STR Hotel Valuation Index

Welcome to the fourth edition of the African Hotel Valuation Index (HVI). HVI publications assist investors to make investment decisions and to promote hotel investments throughout Africa. In spite of the very uneven level of stability throughout the continent, Africa is one of the most attractive regions for hotel development worldwide.

Africa does not have a good reputation around the world: insecurity, poverty and health crisis are all that one sees in the news. Many African countries have not yet realized the importance of good marketing strategies: the “Brand Africa” still needs to be created and promoted around the world. But it takes just a nail’s scratch to unveil the real potential of this fast-developing continent. Africa offers rich natural resources, strong cultures, untouched landscapes, attractive business opportunities; an increasing number of international tourists are now seeing Africa as a new business or leisure destination. African governments are also playing an enormous role in investing in tourism and many of them (Ethiopia, Togo, Mozambique…) have started implementing long-term strategic plans to promote tourism to international tourists. Hotel brands are signing new developments and are not backing down from the opportunities the continent presents, viewing Africa with a long-term perspective.

The gap between the Top and Bottom three markets in Africa gives a perspective of the situation in the continent in 2016. While some markets remain ahead of the game, such as Maputo and the Indian Islands, others, including Sharm el-Sheikh, Harare and Marrakech, have to cope with terrorism or political instability. In the past year, Africa experienced slow economic expansion constrained by the impact of oil prices as well as the economic downgrades in South Africa. However, Africa remains positive and resilient and is striving to overcome its challenges and endeavours to be the best. In 2015, 10 markets out of 21 cities were growing; in 2016, we are delighted to see 14 markets on the rise and impressive recovery in, amongst others, Maputo, Windhoek and Casablanca. ‘Africa Rising’ appears over: double-digit GDP growth faded away and tourism prospects may not be as positive as previously thought. The time of unrealistic economic forecast and biased excitement is over. However, isn’t it for the best? Most African countries now have a steady but realistic growth that investors can rely on when making investment decisions. Despite a more conservative outlook, GDP is much higher than many global economies.

New supply, terrorism and the long-term consequences of the Ebola crisis had a negative impact on occupancy rates and RevPAR in many markets. However, hotels generally still performed well last year. Accessibility is key for hotels’ performance. Africa faces a challenge of lengthy and expensive flights to and from Africa and the lack of competition pushes air fares up significantly. On a positive note, Air France, Emirates and Lufthansa have increased routes to Africa in 2016, launching direct flights to an increasing number of African countries. Kenya has taken a step forward, there are now direct flights to the USA this will enhance the tourism sector in Kenya. In addition, the rising success of local cheap carriers is likely to boost competition and open many tourism opportunities throughout the continent. We need to applaud low-cost airlines such as Kulula.com, Mango Airlines and Flysafair in South Africa or Jambo-Jet in Kenya for improving access to regional cities within the African countries.

Although air accessibility is an ongoing challenge to be overcome, African countries increasingly facilitate the access to their land. Restrictive visa conditions have broad economic consequences for the tourism sector. However, the African Union (AU) launched the Africa Visa Openness Index acknowledging the importance of the movement of people within Africa, marking an encouraging step forward for African economies. Many countries such as Mozambique, Senegal and Uganda now offer visa on arrival opening their borders to a broader range of tourists.

Currency fluctuations make the game even more challenging. Countries have to adapt to constant ups and downs of their local currency, creating significant changes in ADR in local currency and gaps between performances in US$ and local currencies. The Hotel Valuation Index reports REVPAR and hotel values in US$ terms for consistency and comparison but in reality, it makes some comparison difficult. It may not reflect the actual situation in some African markets. In 2016, 17 markets out of 23 are growing in local currency vs. 14 in US$ terms. That, again, points a finger on one of the biggest challenges African markets have to overcome. In South Africa, for example, hotel values are booming in Cape Town in South African Rand but the return looks far less exciting when converted back in US$ terms. That all comes down to currency; the Rand weakened by 15% in 2016 vs. 2015 and is now up by 10% against the US$ 2016.

Although 2016 was a tough year for most markets in the HVI, 2017 looks promising, Hotel markets are expanding despite challenges. Government is taking initiative investing in the tourism industry, boosting the economic status of the African countries. The time of unrealistic growth prospects mingling with security and health crises seems to be over, leaving hope and space for a steady tourism growth. Most numbers look better for 2017 and the predictions are very positive across the board.

The number of markets included in the study continues to grow each year, exemplifying the ever-increasing interest in the African hotel market. In the first edition, we had 14 cities. That grew to 18 in the second edition, third edition featured 21 cities, and we are now delighted to include 23 cities in the 2017 edition of the HVI. Unfortunately, Cape Verde is omitted in this year’s publication due to insufficient data. Hopefully, it will return in 2018.

Market Value Change

Market 2016 2017
Botswana - Gaborone
Stable values
Significant value decline
Cape Verde
Significant value increase
Egypt - Cairo
Moderate value increase
Moderate value decline
Egypt - Sharm el Sheikh
Significant value decline
Ethiopia - Addis Ababa
Significant value increase
Significant value decline
Ghana - Accra
Moderate value decline
Significant value increase
Ivory Coast - Abidjan
Stable values
Moderate value decline
Kenya - Nairobi
Moderate value decline
Stable values
Mauritius
Stable values
Stable values
Morocco - Casablanca
Stable values
Significant value increase
Morocco - Marrakech
Moderate value decline
Significant value increase
Mozambique - Maputo
Significant value increase
Significant value decline
Namibia - Windhoek
Moderate value increase
Significant value increase
Nigeria - Abuja
Stable values
Nigeria - Lagos
Stable values
Moderate value increase
Senegal - Dakar
Moderate value increase
Significant value increase
Seychelles
Moderate value increase
Moderate value increase
South Africa - Cape Town
Moderate value increase
Moderate value increase
South Africa - Durban
Significant value increase
Moderate value increase
South Africa - Johannesburg
Significant value increase
Significant value increase
Tanzania - Dar es Salaam
Moderate value increase
Significant value decline
Togo - Lome
Moderate value increase
Moderate value increase
Uganda - Kampala
Moderate value increase
Moderate value increase
Zambia - Lusaka
Significant value increase
Moderate value decline
Zimbabwe - Harare
Significant value decline
Significant value decline

Top 10 Previous Year

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Bottom 10 Previous Year

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Top 10 Current Year

Rank Market Value Change

Bottom 10 Current Year

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Top 10 Next Three Years

Rank Market Value Change

Bottom 10 Next Three Years

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