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19 Aug 2014
Hotel rooms in Seychelles have highest value per room across Africa: research index
By Helen Andrews
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Co-author of the report Tim Smith said the challenge is to understand where and when to open hotels in Africa
Photo: Shutterstock / Patryk Kosmider
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Hotels in the Seychelles have the highest value per room across Africa, according to the inaugural African Hotel Valuation Index (HVI) that compares internationally-branded properties across 14 African markets.
Undertaken by global hotel consultancy HVS, the HVI ranks each market relative to an African average – monitoring annual percentage changes in the values of four and five-star hotels, reporting the average value per room in each region in US dollars.
The 14 markets include African nations such as Nigeria, Ghana, Egypt, South Africa, Morocco, Angola and Zambia.
Hotels in the Seychelles demonstrated the highest value per room (US$522,000 (€390,000, £312,000) on the index and the authors of the study believe this is due to the high quality of properties on the islands and high barriers to entry, along with its reputation as a luxury leisure destination. Occupancy in the Seychelles is around 65 per cent, although visits to the region have grown by 8 per cent from 2008 to 2013.
The Nigerian capital of Abuja, built in the 1980s, has seen a rapid rise in hotel value growth from US$450,000 (€336,000, £269,000) in 2012 to US$492,000 (€368,000, £294,000) in 2013 – ranking second in the HVI. The report’s authors expect Nigeria to retain its position as one of the top hotel value performers because hotel supply is limited.
Another Nigerian city, Lagos, has an average hotel room value of US$380,300 (€284,000, £227,000) and it has more than 4,000 more in the pipeline for development. Occupancy is nearly 70 per cent.
Lack of supply was one of the reasons provided by the researchers for the fact that hotels in the Angolan capital city of Luanda reached third place at US$471,000 (€353,000, £282,000). Despite having high levels of poverty, the city is acknowledged – by the researchers – to be one of the most expensive in the world with accommodation in short supply and the oil industry employing a high level of foreigners. Value increases of 15 per cent in 2013 meant that Luanda hotels have seen the highest room in room value of the 14 markets surveyed.
The index researchers noted that hotel values in Nairobi have been among the most turbulent over the past few years, largely because of political problems and terrorism. Despite these problems, values per room have remained relatively unchanged, at US$160,000 (€120,000, £96,000) from 2009 to 2013, according to the authors.
“Recent events in Kenya and Nigeria remind us of the unique challenges hotel investors to this continent face,” said HVS director Tim Smith, co-author of the report. “It is not for the faint-hearted, but returns available can compensate for the risks.”
“The African continent is one of fastest growing emerging markets in the world with rapidly evolving economies and developing local wealth, which is leading to an increased demand for hotels that is not satisfied by current stock,” Smith Added.
HVS has recently increased its interest in Africa as a result of investor demand for local knowledge across the continent. A new HVS office will open later this year in Cape Town, reflecting the push for investment expertise.
“There is enormous demand from operators and investors to add to hotel supply across the African continent, but the challenge is to understand where and when to open these hotels,” Smith continued. “HVS has now developed a comprehensive understanding of hotel supply and demand across Africa and we are now well placed to advise on development opportunities.”
“We are hugely excited about the launch of the inaugural African HVI,” commented report co-author and HVS director Sophie Perret. “We look forward to expanding the survey into new markets as more data becomes available in future years.”
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