Investment Opportunities in Africa's Booming Tourism & Hotel Sectors

Africa is fast emerging as a hot tourist destination for travellers from across the world as air connectivity and new road networks improve accessibility to the continent's remote natural tourist spots and attract visitors from all across the globe. Clearly, improved air and ground connectivity has resulted in an increase in the number of travellers visiting the African continent for leisure and tourism.

A record 67 million tourists visited Africa in 2018, up from 58 million in 2016, the African continent is ranked as the second fastest growing region for tourists. According to a recent report by World Tourism Organisation, the number of tourist arrivals in Africa will more than double to 134 million by 2030.

As the number of airlines flying into Africa continues to grow, Africa is sure to attract a growing number of both leisure and business visitors in the coming years.  As a result, new hotels are coming up in all parts of Africa in anticipation to accommodate these visitors.

Not surprising then that many multinational hotel chains are beginning to recognise the huge potential and investment opportunities opening up in Africa, specially in the tourism and hotel sectors. The Radisson Hotel Group, for example, has signed 11 new hotel deals in Africa during the first nine months of 2019, increasing its African real estate to almost 100 properties. According to industry experts, the Radisson Hotel Group is expected to reach more than 130 hotels and 23,000 rooms in Africa by 2022.

Investment Opportunities in Africa

Looking at the immense opportunities opening up in Africa's hotel sector, a new trend is emerging where multinational hotel chains are buying and rebranding existing hotels or acquiring smaller hotel groups in Africa. Marriott International, for example, acquired Protea Hotels in 2014 to expand their network in the African continent.

However, the growth and expansion of the hotel industry in Africa is not balanced across the continent – developed, fast-growing and stable cities in Africa are outperforming less prominent locations. Consider this: almost 30% of hotel chains in Africa are in South Africa, predominantly in Cape Town and Johannesburg, with over half of African capital cities having fewer than five chain hotels each.

Even Airbnb is reporting increased numbers in Africa. The popular accommodation online marketplace has over 130,000 listings in Africa and more that 3.5 million people have used the platform to book accommodation in Africa over the past five years.

• The majority of foreign visitors to Africa were holiday-makers with 71% of tourist spending across the continent spent on leisure activities.
• Africa’s tourism industry grew at a rate of 5.6% in 2018, second only to Asia Pacific. This compares to a global growth rate of  3.9% annually.
• Travel and tourism emerged as an important contributor to the African economy in 2018, accounting to 8.1% of GDP and contributing $194.2 billion to the continent’s economy.
• Around 67 million tourists flocked to Africa in 2018, a record 7% increase from 63 million arrivals in 2017 and 58 million in 2016.
• More relaxed visa rules in Ethiopia coupled with improved transport infrastructure gave the country's tourist industry a staggering 48.6% boost in 2018, raking in a total of $7.4 billion.
• The top African tourist spots were Morocco and South Africa, with around 10 and 11 million arrivals per year.

Visa Rules

Many African governments have also relaxed their visa formalities in order to attract more tourists. Initiatives such as the creation of the East Africa Visa programme which allows visitors to apply for a single visa online before visiting Uganda, Rwanda and Kenya are making these places evermore attractive to tourists.

Zimbabwe, for instance, has also simplified its visa rules to facilitate its tourism sector. "We have simplified the visa processing mechanism and offer visa on arrival for most nationalities," says Givemore Chidzidzi, Zimbabwe Tourism Authority Acting Chief Executive during an interview with Holiday Guide magazine. "China has emerged as an important source market for Zimbabwe and we are keen to attract more tourists from China in the coming years," he said.

With more 142 million travellers, China is the world’s biggest outbound market and is growing faster than most traditional source markets. The market is characterised by high spenders and Zimbabwe is pulling out all the stops to attract a larger share of this market. in 2018, China was moved from category C to category B (visa at port of entry) of the current visa regulations in a bid to ease travel from China to Zimbabwe.

"The 35% growth in Chinese tourist arrivals to Zimbabwe is a reflection of the market's potential," said Givemore Chidzidzi.

Attracting Investments

African governments are also wooing international entrepreneurs to invest in their country's booming tourism and hotel sectors. In The Gambia, the government is offering investors free land if developers build hotels in designed areas, and gives investors a 10-year tax holiday if  they invest above a $250,000 threshold.