Hospitality Market Snapshot 2015 - Oil Economies - Accra, Lagos and Luanda: HTI Consulting (Report)

Table of Contents

  • Introduction
  • Luanda
  • Economic Overview
  • Current Room Supply
  • Future Room Supply
  • Market Performance & Outlook
  • Accra
  • Economic Overview
  • Current Room Supply
  • Future Room Supply
  • Market Performance & Outlook
  • Lagos
  • Economic Overview
  • Current Room Supply
  • Future Room Supply
  • Market Performance & Outlook

Read the full report below.

Introduction

Between 2011 and 2012, the price of oil was at its highest levels in recent times, at close to $110 per barrel. By the end of 2014, an oversupply of oil saw the price of oil drop to below $100 per barrel. In 2015, prices dropped as low as $49. In 2016, prices have dipped as low as $30 and currently stand at about $40 per barrel.

“The impact of current oil prices on hospitality in African economies will be dependent on various factors,” said Wayne Troughton, CEO of HTI Consulting. “The level of economic diversity, the future pipeline for new hotel development and the length of time oil prices remain depressed all have a role to play in driving hospitality trends.”

HTI Consulting’s study focused on the capital cities of Accra, Lagos and Luanda. “Of the three, Luanda has been the most affected,” says Troughton. “Oil drives 90% of Angola’s exports and 80% of its tax revenue; and the significant cut in both government and oil-related corporate spend has resulted in an annual occupancy decline of 20 percentage points; and a reduction in Revenue Per Available Room of almost 52% between 2014 and 2015.”

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Troughton added that properties offering quality international standards were likely to maintain strong performance, despite the expected reduction in investment opportunities in the short term.

Regarding Africa’s largest economy, Nigeria, the CEO noted that oil prices alone were not responsible for the dip in performance in the Lagos market. “New, quality, internationally-branded supply; Ebola; and the failure of the government to appoint a cabinet immediately after the elections in 2015 saw [occupancy rates] decrease by 15 percentage points over a two year period. Occupancy growth in the short term is possible,” said Troughton. “The removal of the Ebola threat and increased government spend, due to cabinet appointments, should drive a rebound in demand in 2016.” However, without a parallel rebound in oil prices, Troughton emphasized that the market’s ability to absorb new supply planned was questionable.

“Accra represents the greatest short-term investment [opportunity] amongst oil economies,” says Troughton. “Despite its recent economic challenges, a doubling in quality supply in the last five years and the impact of Ebola, both occupancy and Average Daily Rates (ADRs) have remained strong.”

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Although Ghana is weathering the oil crisis better than other oil markets, largely due to the greater diversity of its economy and its limited reliance on oil, Troughton is insistent that opportunities in Luanda and Lagos should not be discounted. “Within Lagos, a healthy development pipeline does exist. However, given the trend for projects to be delayed or cancelled in the city, not all projects planned will be realized, creating opportunities for committed investors.”

Hospitality Market Snapshot 2015 – Oil Economies – Accra, Lagos and Luanda: HTI Consulting

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