Africa’s Hotel Pipeline with Trevor Ward

Here's one of the clearest conversations you'll hear on why Africa is not a single hotel market, but 54 radically different ones.

W Hospitality's Trevor Ward breaks down the realities behind the continent's booming hotel pipeline, and why local capital, not foreign money, is driving most development. Infrastructure, aviation, politics, and risk perception shape hospitality growth in an environment where optimism and operational reality coexist (and collide).

Trevor is an expert on hotel development, investment appraisals, and operator selection who understands the systems behind the systems behind the systems. Hospitality in those 54 markets is transforming in an unexpected, and impossibly fast, way.

Transcript

Welcome And Trevor Ward’s Work

Matt Brown 0:08

Hi everybody at Nojo with Matt Brown and Jeff Forman. We're at varied points on the globe today, which is perfect for our guest, Trevor Ward, who is a consultant in hospitality and leisure industries and is the principal of the W Hospitality Group. He's a leading expert on hotel development, investment appraisals, and operator selection for over 40 years. He's worked on projects in over 90 countries and publishes the definitive Hotel Chain Development in Africa pipeline report, which highlights trends in hotel development for the continent. He spent his days advising developers on where the next hotel should arise, what brand should thrive where, and why patients will always, always upbeat speed. This is a person who understands flow, bottlenecks, resources, pain points, opportunities sitting in plain sight, what runs out first and why, the systems behind the systems behind the systems, and that is one of our favorite topics. He is almost always on a plane. You know, whenever you look up in the sky, you'll see him shuttling from his home base in Istanbul to points known and unknown across Africa and beyond. And he does all this without ever checking a bag. Today's episode will be an exceptionally well-packed carry-on. Trevor Ward, welcome to No Show.

Trevor Ward 1:25

Thanks so much, and great to be here.

Jeff Borman 1:28

26 is going to be a huge year for African hotel development with a packed pipeline. 675 hotels, 124,000 rooms, massive 19% growth year over year. Africa is still in the early cycle of growth with accelerating institutional capital investment, a pipeline that's outpacing global hotel chain growth in the rest of the world. But from reading your reports, Trevor, and your research, this is not a continent-wide strategy or story. The top 10 countries have 75% of its growth. Egypt alone almost 40% of the pipeline. North Africa is a scale towards the Sub-Saharan Africa remains more of a frontier growth pretty fragmented. And there's extreme market concentration Egypt. But Morocco, Nigeria, and Kenya, if you add that, you're kind of looking at the whole situation in Africa. So uh your reporting and your research to me was really eye-opening. And as uh a globetrotting westerner, uh it was a reminder to me that there is really hardly such a thing as a market called Africa, so much as a reminder that there are so many individual markets that make up what we all like to lump together as Africa.

Why “Africa” Is Not One Market

Trevor Ward 2:46

Well, I'm I'm so pleased, Jeff, to hear that you're not generalizing about Africa. It's one of my mantras, it has been for decades that never generalize about Africa. And, you know, people always say, you know, someone said, Well, what's the hotel market like in Africa? I say, well, hang on a minute. If I asked you what's the hotel market like in Europe, am I asking you about Iceland or am I asking you about Cyprus? Completely, completely different. So Africa is 54 countries. Some of them are very close to Europe, you know, the North African countries. Morocco is something like eight kilometers, isn't it? And then they're talking about a uh a tunnel. And then you've got South Africa, which is a long way from Europe, you know, a 10, 12-hour flight. You've got the the tourism hotspots of uh uh South Africa and of East Africa, and you've got the oil countries of West and Central Africa, DRC, uh, Gabon, Equatorial Guinea, Nigeria. So they're all so different. And then you've got some very large countries. Nigeria is one I know best. I moved there over 20 years ago. Uh set up shop, set up home, still have a shop, still have home there uh in Nigeria. It's it's two, three hours flight from one corner to the other. So what what what I prefer to do is look at markets, uh, individual markets, whether they be cities or or or resorts. They're all terribly, terribly different um different. And scale. Scale's another big thing. And this is um this is going to the fragmentation and going to the uh distribution. Some of the countries in Africa are very, very small. I mean, they are in Europe as well, but but uh Africa's no different. And um, you know, countries like Lesotho, Iswatini, Togo Benin, they're never going to have as much development as the big boys like um uh Nigeria with 230 million people, 36 state capitals plus Abuja. There are so many ways to differentiate between countries in Africa. So again, thank you for not generalizing about Africa.

Matt Brown 5:25

Trevor, is it what's going on? Is this just historical bias? Like what I'm sure it's a complicated cocktail that goes into why we treat the continent as one block versus individually. But you'd think that with all the investment that's coming in, that there would be um an easing of that and a remediation of that as far as the the European and US hotel entities?

Trevor Ward 5:48

Well, there's not a huge amount of foreign capital coming into hotel development or acquisitions. An awful lot of capital in the industry is local. Of course, there are exceptions. You have some Gulf investors, uh you you um there's a fund set up by Qatar uh with ACOR as a joint venture, uh, and they've been very active. They have something like 22, 23 hotels now in their portfolio. I'll I'll I'll I'll keep referring to Nigeria because it's big, it's important, and it's a country I know bet, probably know best. I would point maybe to two hotels out of goodness knows how how many hotels in the whole of Nigeria, which are foreign-owned. Okay, it it may be diaspora, it might be Nigerians who who who brought money home to build small hotels, but generally speaking, it's all local capital. And that is the case, I I would say, of 90%.

Local Capital Versus Foreign Money

Jeff Borman 6:56

Your report mentions the risk officer veto. Uh essentially that development deals are killed internally before it even starts because someone with a risk or a compliance function says, even if the deal looks profitable, we're not allowed to do it because the risk profile is so high. And this could be possible unrest and coups and conflict zones, weak rule of law and sanctions, and money laundering concerns, right? You can't get money out of a country. There's FX volatility. There's a million reasons why, or it seems that way, a risk uh compliance person outside of Africa could say, no, we're not doing business in Libya or Eritrea, uh where your report against says there are zero development deals underway anyway. So there are countries that have zero pipeline. And not because demand doesn't exist for hotels, but because large global companies refuse to enter. Is that changing? Is there a time frame when you would expect those places to be viable for global investment?

Risk Vetoes And No-Pipeline Countries

Trevor Ward 7:59

Yeah, it's a very good point, Jeff. I I'm going to answer in two ways on that one. One is that if you look at the macro uh economic, socioeconomic metrics for so many countries, they don't score terribly well in terms of uh education, uh, in terms of political risk, democratic index, these things. And this is what the um the risk officers in the hotel chains, and it tends to be mostly the American quoted stocks that uh are the villains of the piece here. Not only, because I I've had I've had experience with European uh quoted stocks as well. They're looking at the macro, but at the same time, if you look at the micro, once again, take Nigeria, it doesn't score very well, but but at the moment, hotels are doing extremely well. There's very high demand, there's very good profitability, uh, under pressure, but then the globe, everybody's under pressure with um wage rises, with with energy prices because of the Gulf War. Everybody's under pressure in some way in terms of the cost structure. But but hotels in Nigeria can be very profitable, but that's looking at the micro, the risk profile is looked at on a on a macro basis. Let's go back to those countries where risk is considered too high, or and or there are not too many opportunities. And we we got 12 countries out of 54 where there is no pipeline. And you can divide them, those 12 countries, into three, three categories, and there is crossover. So, for example, you you you've got countries where the conflict situation is just impossible. Libya and Sudan are the are the two that fall into that category. Certainly, I I mean there's sanctions on both countries, so American companies are having issues uh going in there, and if they're EU sanctions, then equally European countries have issues. So, and then you have very small countries, I mentioned before, where they're just very small countries, they're small economies, they're small populations, they're small area. You know, you can't do that much. So into that category, I put Iswatini, Lesotho, Burundi, Sao Tome, and Equatorial Guinea. Don't get me wrong, because I had a conversation with a hotel chain not long ago who said they're very keen on getting a deal in Sao Tome. And then my third category, uh, and as I say, there's crossover here, is bad politics. And without putting my foot in it too much, I got what's called the coup belt. The coup belt which stretches across kind of western central Africa all the way over to um uh uh the the Red Sea. Uh and I got Burkina Faso, Guinea-Bissau, Mali, Eritrea, and the Central African Republic. Burkina Faso, Guinea-Bissau, Mali all had coups. But Eritrea, I read just today, the US is talking about lifting sanctions. Eritrea is an interesting one, isn't it? I mean, it's got a Red Sea coast, it's got tourism resort possibilities there, but it still falls into bad politics, I'm afraid. Uh people put it in the same category as North Korea. But anyway, uh I'm I'm just making the point, uh, never say never um regarding hotel development continent-wide.

Jeff Borman 12:09

Since last year's report, uh, you focus more on the trouble of actualization of properties. Uh it was a tone that indicates how uniquely African the scale of this issue is. So uh you essentially show that pipelines may look very good, but a much smaller percentage ever becomes a real open uh hotel. Uh uh and it's uh really just pushing a lot of paper. 54% of the pipelines under construction uh but that means that the rest have just installed. And uh you give the example of Egypt had 23 hotels scheduled to open, but only seven did. A 70% miss in a single year is a massive uh underperformance, uh, but it seems to be a common theme in your reporting. Uh what's the issue?

Why Projects Stall Before Opening

Trevor Ward 12:56

There are many factors at play here that um the opening years are the expectation of the hotel chain that it will open in a certain year. I know that some of those expectations are completely wrong. I'm not gonna name names, but I look at it and say, how can that 250-room hotel that's not yet under construction open this year? It's it's impossible, but it's not for me to question that data point. I I I would never finish if if if if I did. And I don't think the chain would thank me very much for questioning their data. So that's one point on a few hotels where you where you see this, it it is not just all. I mean, then maybe maybe the others are still not yet under construction. And if if you look at Egypt, some something in the order of uh 50% of the Egypt uh pipeline is currently under construction. And it's a very young pipeline in Egypt. The activity by the hotel chains in terms of signing, about half of the pipeline, and it's 185 hotels and resorts in the Egypt pipeline. About half of those were signed 2023, 24, 25. So it's a young pipeline, and therefore one wouldn't expect it yet to be actually under construction. 50% ain't bad uh of a pipeline being under construction. I think it's more than the global figure uh which gets reported, which is about 40% under construction globally. Uh, but then but beware averages. It's very, very often it's money. Oh, we'll hope the money is, we'll start building and we hope the money comes. Uh and and then when it doesn't come, that compounds the problem because the contractor falls off site, prices go up, the contractor wants to be remobilized, and that's a cost, etc. etc. And inflation doesn't help. Currency issues in many countries in Africa have have really, really stymied uh hotel development, where in Nigeria, where the currency collapsed by about 75% against the dollar, that that that means that your cost in local currency quadrupled in the space of uh a year or so. So that that that has been a big issue. But I will bring up another big problem, which which has has been has been the problem in many projects, and and it's more in some countries than others, is a lack of professionalism in the in the ownership and in the in the design team. That's all too often, well, my my my uh architect, well, my brother's an architect, and he did me a lovely hotel, home, lovely house in my village. He he can design my 200-room hotel. Well, yeah, sure, he he can design it, but it won't work. You know, the MEP, well, well, we'll have split air conditioning. You know, but you're not going to get Hilton Marion Radison to accept that. Oh, well, we can't afford anything more than that, etc., etc.

Matt Brown 16:35

The report also mentions that I think to what you're saying, that you know, you have these kind of pipeline deals that have been sitting around in some cases for like two decades. I we were wondering, God, who's keeping these alive? Is is it the brand, is it the owner, is the investor, does everybody just kind of want to keep a footprint to see when the everything clears and there's a moment?

Jeff Borman 16:55

Or I love Matt, I I loved his line. Uh under construction simply means someone's been seen wearing a hard hat on site, but it doesn't mean they're doing anything. Totally. Totally. Welcome to welcome to Brooklyn. Yeah, for sure.

Trevor Ward 17:10

I I I I I'm fond, I I I never believe a hotel is under construction unless I go to the site and see trains moving and people doing things. Otherwise, people say, Oh, that's under construction. Well, it was, but it stalled. And that and that a lot of those are you know because the money just ran out.

Jeff Borman 17:34

In most of the world, hotels are built where the capital flows, regardless of policy. But across many of these African markets, capital and policy have to come together. If your economy is waiting for the policy to come together, you're going to be waiting a very long time. That's not uniquely African, but it seems to hamstring Africa in a unique way.

Infrastructure, Airlift, And High Fares

Trevor Ward 17:56

I mean, you're absolutely right. Um what does a hotel or resort need first and foremost is access. Sure. If you can't get there. So what are we talking about now? We're talking about highways, we're we're talking to some ex to some extent railways, and of course, we're talking about airports and airlifts. Some countries have tracked that. Ethiopia has invested so heavily in its airline, Ethiopian Airlines, which is one of the world's leading airlines. Uh it has a huge network, not just in Africa, but but uh to America's and uh and and into China. That that is a success story. Uh, and the airport, and they're they're building a new airport. The government understands what the airlift is required because the the the scale of the continent means it's air travel. The scale of the countries means it's air it's air travel. I I'm no expert on aviation policy, but but open skies hasn't arrived. Single aviation market hasn't arrived yet. Airfares are just extraordinary, that it it it'll cost me as much to fly from Lagos to Accra return, and that's a 40-minute flight each way, as to fly seven hours each way from a European city to Lagos. Ghana has just increased its airport taxes by $100 per flight. And on the other hand, they're talking about tourism, tourism, tourism. And going back to the whole infrastructure. You you you you you can single out the countries in Africa that understand tourism and what their role in tourism is. And Morocco always stands out. I mean, look at the high-speed railway, the the airport upgrades in in various cities, the highways. Egypt obviously gets tourism, Gambia, Kenya, Tanzania, South Africa. They are success stories because government understands its role uh in infrastructure and in an enabling environment and also destination marketing.

Jeff Borman 20:28

China's impact on African economies is not a new story. Uh the narrative on Africa from business journals is heavily about China's investment there. I think I recently read 12 African countries are expected to be among the world's top 20 fastest economy growing economies in 26. But in 25, last year, uh Chinese four direct investment in manufacturing, specifically in Africa, was at $12 billion, the highest in a decade. Uh and over the last three years, China has invested more than America and Europe combined. But it seems like the China state is less inclined than it used to be to bankrupt huge infrastructure projects. And that surge uh has shifted to private capital in African steel mills and textile factories and EV assembly plants. How is this influencing African hotel development?

Trevor Ward 21:25

No question. That um, sure, China, China is no longer growing at 8-10% a year. Their target is 5% or thereabouts, and they've realized that their domestic economy is not growing like it used to be. Therefore, they're not providing the the loans, the the the soft loans that they used to provide to countries in Africa and and Asia and Latin America and the Caribbean and and and elsewhere. they then reining reining that back in. But historically, yeah, China, China uh and Chinese infrastructure, they've done marvels for Africa. Yes, there's a lot of criticism, and I'm not I'm not ignoring that and and the and the deficits. But we wouldn't have the seaports, the airports, the bridges, the highways that we have if it wasn't for Chinese money. That kind of infrastructure contributes to BDP growth.

China’s Role And Where To Travel

Matt Brown 22:35

It's time for the mystery question. Trevor I've only been to Morocco and I want to explore more of the continent. And I want to go somewhere that is different. I want to go somewhere that is not necessarily a tourist destination, not necessarily a luxury destination. I want to go somewhere that is up and coming, interesting, maybe off the beaten path, trying to do something different. Where should I go?

Trevor Ward 23:04

Well I have I have to ask what are you into? Are you looking for uh a secluded beach or are you looking for a a national park which isn't full of Toyota land um whatever you call it cruisers uh what what or are you into culture? What what ticks the boxes for you?

Matt Brown 23:27

I'd probably go Natural Beauty National Park first. I don't want to go on the standard tour necessarily. I'm okay with the tour. I'm okay with the guide obviously but I want something that's maybe a little bit different you know one that hasn't been overmarketed.

Trevor Ward 23:43

Okay I think I'm gonna choose Uganda for you Uganda's not massive in terms of tourism it's not massive in terms of new development but it does have a a safari product uh Lake Victoria is is is absolutely wonderful if you want beach Zanzibar but Zanzibar is getting quite um quite crowded these days oh here's another one Sao Tome uh Sao Tomei a Principe it's uh it's a couple of islands in the um in the in the um Atlantic ocean um off the coast of Nigeria and the coast of uh Gabon I suppose it is absolutely beautiful everything is unbelievably green there are beaches there there's a course culture there's music very much off the beaten track it's not that easy to get to but go through uh Lisbon Portugal a couple of nice places to to stay uh lots of hiking not too many animals that I'm aware of but if you're into echotourism Sao Tome Trevor thank you for thank you so much for doing this this is fantastic well you're very very welcome I've enjoyed it when are you watching Sao Tome? I can't wait I can't wait now