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HVS In-Depth Africa Hotel Valuation Index:
Tanzania has experienced a healthy GDP growth rate for half a decade (over 7% for five years starting 2013). Estimates suggest GDP expanded by 6.8% last year, but the forecast for 2019 and 2020 was lowered to around 4% by the IMF for unpredictable economy policies and unreliable statistics. The IMF report was blocked from publication in April by President John Magufuli’s government. International investors are alarmed by the refusal to release the report and fears the government is hiding the true state of the economy. According to the World Bank, the “National Bureau of Statistics did not release any quarterly GDP data for 2018 due to a rebasing exercise. But available data suggests signs of softening of growth.” Foreign direct investment has declined and export growth has stagnated.
The Tanzanian government forecasts the economy to grow by 7.3% in 2019, helped by public infrastructure investments. Consumer Price Inflation will remain fairly low at 3.5% this year and is forecast to near 4.5% in 2020, according to Reuters.
On the positive side, Air Tanzania, the state-owned airline, has recently bought six new planes, including a Boeing 787 Dreamliner. About 30 infrastructure projects are in the works including: high speed trains, Africa’s largest stadium in Dodoma and a hydroelectric dam in the south.
The president seems serious about lifting Tanzania’s economy by 2025, but these mega-projects are also potential vote winners. Donors and investors are less enthusiastic, they worry that these projects are badly planned and implemented and don’t make financial sense with problems in the starting phase.
Dar es Salaam as a hotel market has suffered due to the consequences of a slowing economy and weak investor sentiment in 2018 and 2019. A number of projects have been stalled and business is declining in certain sectors. Further, the shifting of the country’s capital from Dar es Salaam to Dodoma earlier this year has had a major impact on the hotel demand as various governmental and non-governmental organizations have moved base to Dodoma. The presidential base is also in Dodoma now.
Dodoma, which was elevated to city status last year, was designated as the capital city by the country’s founding president, Mwalimu Julius Nyerere in 1973. It was considered ideal for bringing government services closer to the people due to its central location, compared to the coastal Dar es Salaam. However, the shift has only materialized over the last two years rendering a blow to hotels in the former capital.
On the projects front, a mega residential project called Royal Glory Residence is going to be constructed in Mikocheni and will feature 14 villas and 156 apartments. The project is worth more than US$43m and is being developed by China Civil Engineering Construction Corporation and is planned to be completed in November next year. The new airport terminal at Julius Nyerere International Airport (JNIA) in Dar es Salaam is nearing completion which should also boost visitor numbers to the country. The new terminal has capacity for 24 large aircraft and to handle 6 million passengers each year. A metropolitan development project is aiming to improve urban services and institutional capacity in Dar es Salaam’s metropolitan area. It is expected to be completed by the end of 2021.
On the supply side, the City Lodge Hotel Dar es Salaam opened its doors with the first batch of rooms in November last year and will have 148 rooms in total. Marriott International announced the opening of its second Four Points by Sheraton in Tanzania early June this year. The Four Points by Sheraton Dar es Salaam, New Africa Hotel, opened with 174 rooms. Rotana’s first property in East Africa, Johari Rotana will be ready for business later this year with 256 rooms at Mwalimu Nyerere Foundation Square. Element Hotels is set to launch its first property in Africa with the opening of Element Dar es Salaam in Tanzania.