CAPE TOWN, South Africa — The monumental shift in global economic uncertainty is likely to continue to have major ramifications for hotel investors, leading to creativity in how capital is allocated.
This creativity is a bit more pronounced in Africa, where investors have complained about or come up against hurdles when deciding where to place their money.
During a panel discussion at the Future Hospitality Summit Africa, Wayne Godwin, CEO at business advisory JLL Africa, said global investment sentiment has fallen due to political noise over policy, conflict and tariffs imposed by the U.S.
“We do not know what that really means in terms of investment, but it will lead to creativity in how capital is allocated,” he said.
But that does not mean there will be fewer investors investing less capital. Godwin said in Africa there is a growing number of bidders who have entered the market.
“The bid-ask spread has narrowed. Make no mistake about it, we are in a new cycle,” he said. “The former [cycle] was low cost of capital, so now maybe we will see a more level playing field for Africa, which did not have that low-interest-rate environment to begin with.”
Panelists mulled over where that playing field in Africa will still be level enough. And politics from halfway around the world have a major impact on Africa, said Ram Lokan, partner at Johannesburg-based Kasada Capital Management.
“The big story is Trump, even in Africa,” he said. “There is a net positive in that the (U.S.) dollar has not been strong, and there is the realization that governments need to band together and perhaps away from the U.S. That can be painful.”
To take advantage of that level playing field, hotels in Africa need “fantastic destinations and the right management teams,” Lokan added.
Folaseto Akin-Olugbade, investment manager at London-based Actis, said operators should ensure African hotels and resorts stabilize as quickly as possible. Finding the correct management partner is the first step for hotel owners, she added.
But perhaps a bigger concern is the labor pool for the hospitality industry in Africa is not deep enough. Akin-Olugbade said the development of hotel talent is critical.
“There are not enough hospitality schools in the continent. Brands have done training, but that needs to be increased. Also needed are standardization and data transparency, which leads to more informed investment decisions,” she said.
Better asset management will also protect Africa's hotel industry as much as possible from periods of inflation and foreign currency fluctuation, Lokan said.
“The asset management of yield and cash flow has not always been the focus of stakeholders in Africa, but we see that as a focus. Having the right team definitely pushes yield forward,” he said.
More data and benchmarking strategies are making their way into African hotels and resorts, and certain markets will benefit more than others, Godwin said.
“Expect to see more liquidity growth in 2025 and 2026, especially in South Africa, the Indian Ocean and Morocco. The development pipeline has slowed but arguably with a stronger realization rate,” he said. “In our JLL Global Transparency Index, most African countries are to the lower end [of transparency data]. That does not mean investment is not profitable there. It is just the opaqueness. Only South Africa is in the top 30, and at 29th.”
Among hotel markets to watch, Abidjan in Ivory Coast could be poised to grow significantly in the years ahead, Akin-Olugbade said.
“It has only two international brands, and that is not enough,” she said, adding Abidjan is a market with a full suite of events and an atmosphere of political stability.
“Also, Casablanca and Cairo, for the size of those markets,” she said.
The number of investor-grade hotels with measurable performance needs to grow in some African markets, which promotes confidence for future investment, Godwin said. Sustainability milestones must also be a part of hotel development in Africa going forward, he added.
Lokan said there are two ways at looking at fundamentals that have a pronounced effect as to what African locations would attract his firm’s capital.
“Top down and bottom up. For top down, what is the revenue per available room growth, arrivals, the connectivity and the sentiment as to whether a market is going in the right direction?” he said. “For bottom up, can we take our profits out? I think the most interesting markets are where we can grow scale, and in Africa this will matter more and more because we see on a micro level some hotels performing so much better than others.”
For example, not many resorts across Africa can count on long-term booking trends. But in some markets such as Mauritius, certain properties have guests booking stays as long as 18 months out. Godwin said that's more than long enough to provide meaningful traveler trends to local operators and better inform potential investors.