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Ghanas Hotel

Investment Outlook

2013: Threatening

Opportunities

28th

August, 2013

JLC

7/30/2019 Ghana's Hotel Investment Outlook-- Threatening Opportunities [Published-28 Aug 2013]

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Ghanas Hotel Investment Outlook 2013:

Threatening Opportunities

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GHANAS HOTEL INVESTMENT OUTLOOK 2013: THREATENING OPPORTUNITIES

Among the many areas of Ghanas prognosticated economic boom is the Hospitality, Leisure and Tourism

sector that has already cashed in on some of the top international hotel chains and their sub-brands such as

Novotel, Golden Tulip, Holiday Inn, Best Western, Movenpick, Kempinski, Hilton, Marriot, Protea, Amber and

upcoming Swiss International Hotels and Resorts.

Since 2012, economic forecasters have predicted Ghana to be among the top

five emerging economic giants in Sub-Saharan Africa (SSA) in spite of the

political fragility spurred by the contested presidential and parliamentary

elections that has subjected the most resilient countrys democracy to the

acid test.

One would logically think that political fragility would be inimical to hotel real

estate investments but history has not been on this side of the sensationalism

in spite of its accused retrospective determinism. Investors herd mentality of

following secure investments over higher-yielding opportunities in the midst

of uncertainty seem to take a topsy-turvy position when it comes to Sub-

Saharan Africa simply because the excessive demand over supply for quality rooms make Return on

Investments (ROI) unreasonably faster and higher compared to the so-called secure hotel real estate

investment destinations. For over three years in a row Ghana can boast of constant average of about 85%

occupancy for three to five star hotels most of which are Branded International Hotel Chains and with

investment recovery days of below one thousand.

Risk has become a key element of strategic investments and the hospitality sector has not fallen out of favour

in this regard. In fact, strategic risk is what gives rise to scenario planning and the need for investors to be

resilient to risky environments by consciously making the effort of outweighing the opportunities against the

threats. Hotel Mille Collines in Rwanda is a memory of a resilient edifice in the midst of civil war and other

countries bear analogous testimonies to this fact. Even in war-torn Syria as we speak, Hotel Omayad, a partner

of Swiss International Hotels, is busily operating in Damascus hitchless.

Financiers often require feasibility studies in order to justify investment decisions but in an OTUS report,

findings indicate that it is just a bureaucratic effort and prime locations are more of a practical justification for

upscale hotels than what the paperwork makes us believe. Of course, high liquidity, transparency and secure

markets present a good case for an attractive hotel investment destination but investors aversion to risk

exposure or overexposure in SSA has already given way to resilience to risk exposure and overexposure. Some

real estate experts recommend targeting high traffic zones with ageing buildings, a typical description of the

Central Business District (CBD) of Accra. It takes a keen investor eye to identify a precinct and site a hotel there

based on a number of parameters. So the Airport City in Accra, already loaded with Branded International

Chain Hotels gives way to the CBD that is slowly absorbing luxury brands and presently abounds with ageing

buildings. Opportunity abounds while hotel lease formulas and short-term development lifecycles are out of

the hotel investment question in Ghana. Kumasi, the second capital city is taking its share while Takoradi has

now been rechristened the Oil Capital of Ghana.

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In a 2012 buy, build, hold or sell scenario of the Jones Lang LaSalle Hotels Hotel Investor Sentiments Survey,

only Cairo appeared in the sell scenario in the face of political fragility but SSA remains the only region forecast

to have rising Revenue per Available Room (RevPAR). Building new hotels is highly recommended if branded

international chain hotels are serious about standards and identity whether Greenfield or by partnership. Intheir 2013 Hotel Investment Outlook, Jones Lang LaSalle reiterates the need for greater flexibility for investors

and their ability to react to change as the new success indicator embedded in a business model with high

strategic agility. Risks by high impact are well-known to be major global systemic financial failures and

diffusion of weapons of mass destruction that do not emanate from SSA.

In a recent interview with one of STR Globals researchers and contributor to Hotel News Now, David

Grossniklaus, the author hinted on the cultural factor as the greatest risk in Branded International Hotel

Investments in Ghana, a point well-corroborated by Patrick Fares, owner of Holiday Inn, Airport City-Accra.

Some chains keep coming and disappearing off the radar in Ghana for their disrespect for the cultural risk

element and the need to develop high and strong partner relationships, liaisons and alliances with local

hospitality industry consultants and developers. Glocalization, or the combination of globalization and

localization for international hotel companies striving to succeed in new markets and compete with local,

domestic brands has also reared its ugly head in the hotel investment arena in emerging markets such as

Ghana, a tried and tested approach employed by a few Branded International Hotel Chains, according to an

Ernst and Young 2013 Global Hospitality Insights report.

In short, SSA now happens to be in the windward side of the fallout from the BRICS and the government of

Ghana needs more than just PR and adverts by the Ghana Investment Promotion Centre (GIPC) in magazines

seeking to attract hotel investors with ill-advised zonings purported to attract foreign capital and with

incentivized Legislative Instruments (L.I.) that have been illegally withdrawn by same. If Africa has attracted

approximately US$3.2 billion in hospitality real estate transactions in the last six years, this investment in hotel

superstructure can be marred by lack of political will in overcoming the infrastructure challenge if our

governments do not sit up.

This Article is an excerpt from Ghana: Hospitality, Leisure and Tourism Outlook 2013 a report by Jean Lukaz

Consulting (JLC)