The hotel industry in Nairobi has over the past 24 months, had an addition of more than 2000 rooms to the existing stock. This is according to JLL’s East Africa Hotel Market Overview released a few days ago. As a result, there has been a 23% increase in hotel supply in the East African City which is estimated to have a total stock of 8500 units with about 1000 rooms in the pipeline due over the next two to three years.
In the report, JLL says the hotel market performance in Nairobi is expected to come under pressure over the near to medium term. However, fundamentals are strong in the long-term due to improvements in the tourism sector, corporate expansion and new airline deals by the national carrier, Kenya Airways.
The report further gives an outlook of the market in Dar-es-salaam, Addis Ababa, Kampala and Kigali.
Addis Ababa is ripe for supply growth as up to 4000 rooms are anticipated to enter the market, much of them branded. However, it is estimated that only 30% to 40% of the rooms in the pipeline will be realised owing to limits imposed by lack of access to financial leveraging and hard currency lending. Best Western and Sapphire recently completed new hotels in the Ethiopian capital.
In Dar-es-Salaam, 700 new branded hotel rooms are expected to enter the market between 2018 and 2020. The country has greatly benefited from an improved tourism sector, however, investment has in recent months been hit by negative sentiment due to certain government restrictions.
In Kampala, expectations are an addition of between 150 to 250 rooms between 2018 and 2020 while between 200 and 300 rooms are expected in Kigali over the same period. Recent additions in Kigali include Radisson Blue as well as Marriot Kigali with demand being driven majorly by conferences and events.
According to the report, the East African hotel industry has in the past been driven by local private investors with access to prime land and financial leverage to match. With the increasing presence of international hotel players, owners will increasingly seek to embrace international standards.
In October 2017, the Annual Hotel Pipeline study by W Hospitality Group highlighted that there was a chronic under supply of branded hotel rooms in West and East Africa. The research also found that 9 countries in Africa had no branded hotels at all while 8 had only one branded hotel and almost half of the continent (25 countries) had two or fewer brands existing.
Only 10 countries had more than 10 branded hotels while just 28 countries had branded hotels outside of the capital. Most Hotel investments, the study noted, went to Southern Africa (59%) followed by Northern Africa (41%), West Africa (33%) and East Africa (11%).
The gaps, in the hotel industry in Sub-Saharan Africa offer enormous investment opportunities across many African destinations.